Matt MacInnis (COO of Rippling, ex Apple)

Hey everyone, this is Erik Torenberg and you're listening to Execs by On Deck. Execs is a show for founders, operators, and leaders who want to understand the playbooks, frameworks, and tactics that leading tech companies today have used to scale. Our guests are tech execs in key roles at top tech companies who share their hard-won, earned secrets on how to scale faster.

Matt McInnis is the COO of Rippling. He was also founder and CEO of Inkling for 9 years after working at Apple for 7 years. In this conversation, we discuss the role of the COO, how to set culture, and other lessons learned scaling Rippling. Matt, in another podcast you went on, you talked about how before you joined Rippling, you were deeply skeptical, and you wrote Parker a long email, and he refuted you point by point, and you realized that Rippling was a narrative violation. Relative to other attempts or other startups in the space or what VCs were saying about it. I want to get into your CEO experience during this episode and what you believe about company building. But before we do, talk about what the narrative violation was around Rippling that differentiated it from either the Zenefits attempt or other sort of attempts in the space. What was the real insight or set of insights?

I think the headline is that you can in fact hit 2 balls with one swing. There's this adage in Silicon Valley, and if you want, we can get into my sort of perspective on how this sort of incentive structures of Silicon Valley disincentivize this kind of behavior, but we are building many products all at the same time. We do go to market and sell to customers multiple products at the same time. We do go after multiple market segments at the same time. When I was looking at Rippling from the outside, even just as an investor and a friend of Parker's, I saw sort of the giant mouthful that the company was taking very early on in its existence. I sort of implored Parker to kind of get focused and think about the one or two things that were really going to move the needle initially and then go from there. As with any great success, there has to be some accurate contrarian perspective as to why your business is going to succeed in the face of all the incumbents and all the market friction. This happened to be what, at least, I'll say that happened to be a symptom of the underlying differentiation of this company was its ability to go after many different things at once. So I was wrong. I was like dead fucking wrong. And I still have that email. I sort of stash it away as an example of why a trope or an adage that's been sort of beaten into your head might be the very thing holding you back.

2 follow-ups. One is talk about why the going after everything at once is a structural advantage in some capacity? And are there other areas outside of this space where going after multiple things are an advantage, or is there something unique about this space where it's an advantage?

In any startup where there is a narrative violation, where you stray away from the tropes, you got to do so with some real understanding of why you're different. There has to be some underlying reason that you can fly in the face of the common wisdom and do better than just following the common wisdom. And so in Rippling's case, there is a really clear reason that we can do what we do, and it is that we have this deeply nuanced understanding of the dimensions of employee data and how that drives the most important and the most common workflows in a business. And I mean, I don't want to like I'm not going to use podcast time to sit here and bore everybody with the underlying strategy of Rippling, but I will give you an analogy that I think is pretty accessible to someone who doesn't understand our business as deeply as we do. If you look at the car industry, you've got Toyota, and BMW, and Ford, and Chrysler, and Kia, and Hyundai. I can go down a huge list of car brands that we're all familiar with. And yet somehow Tesla, at least until the market corrected recently, you know, had a trillion-dollar market cap and was— its market cap was greater than the sum of the next 20 car companies combined. And there's a very simple reason for that, which is batteries. You know, the underlying technology of what Tesla does, they understand the chemistry, they understand the manufacture, they understand the software that sits on top of this battery technology that they've deeply invested in for 10 years. You may recall that it wasn't obvious when Tesla started that battery technology was gonna be the winning approach to non-gasoline cars. At the time, Governor Schwarzenegger said they were going to build a hydrogen highway and put hydrogen fueling stations. Didn't happen. All that time, Elon and the team at Tesla were learning about battery technology. So they've got this superpower that sits at the core of what they do. It's not that they can then build better motorcycles and a minivan and that kind of thing, although they're going to do that. They also have grid-scale storage. They also have solar roofs because they're an energy company. They're not a car company. They're an energy company that happens to make cars. Rippling, from the outside, looks to many people like a payroll company, a benefits company, maybe an IT company, but we're not. We're really a data company that happens to make payroll. And at the core of what we do is this underlying technology, the understanding of the employee data, the system that is structured around that data, where we— it's sort of dripping with nuanced understanding of how that drives business process. And I think it's deeply differentiated, and it allows us to go out and build build many different products on top of that core differentiation, but it's unique to us. You know, you're not like— I see a lot of people picking up on Parker's language around the compound startup, and that's cool because I think there is a trend toward rebundling in SaaS software. But to blindly run in and say, well, we're going to do a compound startup too, but not understand that there's got to be something that enables you to violate the common wisdom of focus is— pretty dangerous. And I don't recommend it.

Yeah, no, that's a helpful analogy. You alluded to it, but yeah, let's get into it. Why are VCs maybe disincentivized to recommend that? Or are there other tropes that you think are not serving founders because there's some misalignment there?

Well, I think so. A conversation about the incentive structures of Silicon Valley is also a pretty long one. The first rule of Silicon Valley incentive structures is we don't talk about Silicon Valley incentive structures. This comes back to sort of human behavior. If you want to change someone's behavior, change their incentives. I like to think that I can mostly ban the word training at work. Like, oh, we're going to do training. It's like, oh, you're going to sit someone in a room and give a bunch of slides and they're going to change their behavior? What's their incentive to actually even pay attention, let alone change their behavior. In Silicon Valley, what the venture capital industry does, what each individual venture capitalist does, what each individual founder does is a byproduct of this incentive structure that's been developed over the course of 30 or 40 years of the game being played over and over and over again. If you're a venture investor and you put some money in early in a business and it gets some traction, you've got a pony, let's ride it. That's a phrase literally that was said to me by one of my board members at my previous company, there's an incentive to then try to get to the billion-dollar outcome. Let's not risk a sort of bird in hand with a 20x or a 50x return in pursuit of this super, super long odds of a 1,000x return. It's just not economically rational from a venture capitalist perspective to pursue the long tail. If you've got an opportunity to get a really solid outcome with regular frequency. There are some venture investors, notably all of the tier 1 investors, who really understand the long-tail statistics, who really understand that it is worth betting the entire house on the odds of a once-in-a-decade 1,000x+ return. But the vast majority of venture capitalists are not tier 1 venture capitalists. The vast majority of venture capitalists have an incentive to to protect their fees, to protect the cushy life that they have. So they will encourage, not knowing that this is the connection, but the incentive structures, again, influence their thinking and cause them to want to get the company to go for the billion-dollar outcome and to actually forswear the long odds of the $100 billion outcome. So I think everybody likes to talk about risk appetite. I think there's actually a relatively tiny number of investors in Silicon Valley that have true risk appetite because they know how to play the odds to their advantage. I could go on about that, but, you know, it's like there is a reason. There is a reason in Silicon Valley that the founders all drive Honda Fits and the investors are all driving BMWs and Teslas.

And what is that reason?

If you look at the way that this sort of founder ethos is set up in Silicon Valley, Particularly if you're a 25-year-old founder coming in, you sort of get the impression that you are the most important person in the room. The venture industry sort of worships at the feet of the founder. That's how it feels if you're a founder. The events are set up to get you introduced to venture capitalists, and the blogs that venture capitalists write sort of go on about how hard it is. Read the Twitter feeds. It's like— It's just all pandering. And, you know, whether the people who write these things believe them or not, most of them have not experienced it firsthand. Todd Terry's a DJ. A quote that I love from him is like, you know, the best DJs can dance. And I have an opinion that while not exclusively true, many of the best venture capitalists can operate. But the, you know, the founders are made to feel like they're the most important people in the room. The problem is, and this is something I learned sort of late in my entrepreneurship career was like, once the founders leave the room, man, the tone changes. And you sort of recognize that the founders in this incentive structure are really just pawns. They get traded around. The odds of success are so low that of course venture capitalists, you know, are looking for optionality. They're looking to preserve the option to access the next deal that might actually be the one that generates returns. And so they don't give you direct feedback. They don't say no. They sort of dance around anything uncomfortable because why would they be direct? Why would they give you information you don't want to hear? if it might close the door or tarnish their reputation with somebody who's not ready to hear it. I get it. Do I blame a venture capitalist for behaving that way? Of course not. Absolutely not. It's like absolutely built into the incentive structure that they should not make, uh, you know, enemies or, or, uh, say unpopular things to someone who may down the road be able to close the door on them. Uh, but it, it does give a very, very skewed perspective, particularly to the young naive entrepreneur who thinks that they who thinks that they are the most important person in the room but aren't. These incentive structures play out in the form of how people are compensated. It always irks me when I hear venture capitalists and other people in the circle of the VCs sort of arbitrarily praising frugality. There's a really fun set of memes that went around on Twitter recently about the king sitting among his piles of gold telling everyone to save money. And, you know, that sort of thing plays out a ton too. I could go on about sort of whether there's real thought under the hood of these recommendations that are given to entrepreneurs or whether these are just the sort of standard things you pull off the shelf at any given moment so that you can sound smart on Twitter. I sound a little more cynical than I really am because I will say, like, we have an awesome relationship with our investors. I've always had terrific direct relationships with investors. So I don't want this to be construed as sort of just dissing on venture capital as an industry. It's actually dissing on the unfortunate side effect of the incentive structures that drive these behaviors.

And don't worry, Parker Conrad came on a few years ago and he was not shy. Yeah, this is very nicely comparison. It's interesting because the opposite critique is also true in some ways, which is that a founder often has a basket of one And VC has a basket of several dozen sometimes. And so VCs sometimes encourage founders to go for the biggest possible outcome or bust in some capacities, whereas for a founder, a $100 million outcome could be life-saving or life-changing in a way that for VC, it won't move the needle at all. So in some ways, they're misaligned in the opposite direction on the cases where founders can't Can't get that big outcome.

Yeah, I mean, on the downside case, my experience of the downside case is that the investors that I've worked with in my life directly have been pretty forgiving of sort of my desire to live a life. And in reality, the best investors in Silicon Valley roll with it. And so if the founder's out, the investors are out, and it's sort of it sort of is what it is. Because I think there's a huge distinction between the direct appeal to an individual with respect to a specific circumstance and the more abstract concept of the incentive structures that drive broader behaviours in the Valley. There's a bell curve. I think there's an optimisation curve that emerges that maximises returns and maybe even maximises fees and carry for the people who are very deeply incentivised to get to a certain outcome for themselves. Again, not maliciously, just in terms of what's in their contract. That gets you to a certain point. So on the downside, there are misaligned incentives, and sadly on the upside, there are misaligned incentives in the way many of these guys behave. Again, look, I kind of exempt the very, very best firms and individual investors in the Valley from this because they have a deep nuanced understanding from first principles of all of the different mechanics of how the money flows. around these companies and they make good individual decisions. It's just, you know, there's still a steady stream of 25-year-olds rolling into Silicon Valley starting companies and going in and pitching a venture capitalist for the first time in their lives. The receiving side of that, having done this 150 times, 250 times over the last couple of years, and guess what? There's an imbalance of understanding the rules of the game.

Yeah.

Yeah, well said. I want to transition into the role of the COO that you play at Rippling. And a few high-level questions. I want you to go into each one of them in your preference. Basically, how should we think about the COO role? Is it just another executive? What is the right interplay between the CEO and COO? And I know it's going to be— or what are the different models? What should a CEO look for in their COO? And you're an interesting example because you were a CEO converted to a COO. And so, you know, what types of CEOs are right to— you know, we were talking to someone recently who is making that same jump and we're like, are you actually just a CEO who wants a little bit of a break from being CEO? Not that COO is any, you know, cakewalk, of course. Obviously, it's just as hard. Yeah. Why don't you take that anywhere you want to go?

Yeah, I would say that the COO job is not just as hard as the CEO job. The CEO job is uniquely difficult for a variety of reasons, but the COO job, what is it? It's, well, it's idiosyncratic to any given company, and in particular, I think it's idiosyncratic to any given founder. My Sequoia partner at my previous company once said, you know, I think at some point I may have raised the specter of a COO, And he said, COOs are for CEOs who don't want to do their jobs anymore. And I thought, OK, got it, message received. Just sort of keep trucking. Again, there may have been an incentive misalignment in that response, but great. I think COOs, at their very best, maximize the complementary nature of the individual in the COO role. you know, with the CEO. So, you know, worst-case scenario, COO and CEO have really highly overlapping strengths. Best-case scenario, the CEO and the COO have very complementary strengths. And I think that's what works for Parker and me is that he and I have certainly like really high degree of overlap in values, really high degree of overlap in the things we hold true and dear about the way a company should be built and run. And then we have quite divergent skills in terms of, you know, what we show up to work every day and enjoy doing. I think that's like a critical factor for success. I think those 2 things actually are critical factors for success, overlapping values and complementary skills. And then there has to be enough, you know, there has to be enough work to do. And, you know, at a company like Rippling where we're growing like crazy, we've got over 1,000 employees, we're going to double the business again this year. There's no shortage of work for Parker to go off and do and for me to go off and do independently. But I don't think that any CEO-COO relationship, any 2 of those, are really at all alike. I've, you know, I've seen it, you know, in every permutation.

And so, in terms of what to look for, is it finding the best complement to what you're missing basically as a CEO?

So, if you're going to go look for a COO, I think it's tricky. So, One thing I didn't— I mentioned 2 critical success factors, one being overlapping values, the other being complementary skill sets. But there's a 3rd, which is a deep well of trust. And human beings don't build deep wells of trust on command. It's not something you can sort of will into existence. So in the case of my relationship with Parker, he and I have known each other since we were both 18 years old. We went to college together. Parker and I were both leaders of the daily newspaper at the college where we were. We've just been friends ever since. He started a company, I started a company. We were parallel in that respect and sort of in touch with each other constantly about the experience. His wife went to school with my husband. It's sort of like when I showed up to work on the first day, there wasn't this sort of awkward calibration. Well, actually, there was. There was an awkward calibration period because I hadn't worked with Parker before. We did have to feel each other out and learn about one another in that new context, but critically, there was never any doubt in Parker's mind that I was there for the good of the company. There was never any doubt in my mind that Parker was there to win, right? For the good of the company. That deep well of trust allows us to have— and this is true, by the way, of the earliest stage company and the co-founders. Why do you invest in companies with co-founders that have a deep well of working history? There's really high bandwidth between 2 people when they have trust. What do I mean by high bandwidth? You, you do work with other people on the foundation of a relationship. So the strength of that relationship becomes the foundation for, for, you know, the quality of the work that you do. And then each relationship is built on the foundation of the strength of each individual. So like, if you're really self-confident, you know who you are, you know what you want, it's much easier to build relationships with people who are like that too. those relationships are super strong, then it's really easy to go to somebody and say, hey, look, the work you just did sucked. It totally didn't meet the bar. We gotta go, we gotta go do it over again. You don't have to pussyfoot. You don't have to dilly-dally around it. You can just be super direct and not worry that they're gonna take it personally, you know, or think that you're an asshole. And so it's, you know, in the CEO-COO relationship, as in any really high-performance relationship, you've gotta have trust. And so when you say, Somebody goes out and looks for a COO, I think one of the most common failure scenarios is the one where the trust never gets built, and therefore the tasks that need to be executed don't have a solid foundation on which to lie, you know. And, and if you've had Parker on before, you know that he's sort of Exhibit A in how that can go wrong.

Totally.

Totally.

When should a founder be thinking about bringing on a COO? Like, when is the right time?

The answer is somewhere between like right away and never, you know, because I do think that the— your question sort of presupposes that a COO ought to exist, and I don't think that's the case. I think, you know, I can tell you, you know, from my experience why it works for us as like an illustrative example. Parker is uniquely skilled at product. He understands a market. He understands the interplay between the technology and that market, and he's just got a very uncanny ability to spot a hole in the universe and then build a product that is exactly the shape of that hole. That's his great strength. He's a little less interested in sort of the day-to-day minutiae of running a staff meeting or worrying about the quarterly planning cycle. He cares deeply about the people. He gets very involved in performance reviews. He cares about a lot of the stuff to do with the culture and the behavioral standards that we set in the company. He cares deeply about that and is good at it. But I love process. I actually think it's fun to design process. I think it's fun to set things up for scale. I like operations. I like the data. I sort of geek out on optimizing the engine and designing the operating system of the company. And that's not something that, you know, gets Parker out of bed in the morning. And so for us, you know, there are areas where we overlap a bit. I think we're both very good storytellers. I think we both like talking to the company about where we're headed, and we split the bill on that. But the moment that was appropriate, you know, you asked about kind of when you need a COO. The moment that it seemed that this company was going to do not just kind of well, but like really, really well, and it would be massively beneficial for the CEO to have a complementary copilot in the cockpit with him, that was the moment that made sense for us. I frankly wish I had joined, to say nothing of the equity value, kind of wish I had joined maybe like 6 months earlier. in the company's evolution. When I joined, we were like a little over $4 million in ARR and about 75 employees. And I wish I had been sort of employee number like 40, just kind of given what I know now, because I had, you know, I had to come from behind on a lot of functions that it would have been nice to get a head start on.

Yeah, totally. Hindsight's always 20/20.

Isn't it?

I want to talk about some of the approaches you have to To organizational health, one of the things you swear by is clarity and alignment. Talk about what that means and what's important in order to get that right.

Yeah, I mean, hat tip to Pat Lencioni on the concept of clarity and alignment. But, you know, number one is you got to know what it is that you've got to do. You've got to like— and he's got this whole framework for creating clarity called the 6 Questions. So if you've not heard it, the 6 Questions are, why do we exist, which is your mission statement. How do we behave? Which is really a way to describe the culture and values of your company. What do we do? Which is a sort of, you know, sounds simple but can be actually pretty hairy to answer, the basic business description. How will we win? He's got a whole framework for how, you know, sort of how to articulate a strategy. What's most important right now? Which is the question of priorities. And then who will do what? Which is about your team. And it's like a whole book and blah, blah, blah. But if you sort of have clear answers to those 6 questions, he asserts that you've got a degree of clarity. And then you've got to drive alignment, which is where everybody in the business understands the answers to those questions and how they impact the day-to-day decisions that people make in the business. I think, I mean, you know, the concept of organizational health can be distilled to the point of like abstract uselessness if you really just sort of stick to this framework. You got a whole bunch—

how did—

like, when you think about it the way a company works, right? You got a whole bunch of managers out there who are making decisions every single day. And the question is, if you give 3 people in your business exactly the same inputs, what are the odds that those 3 people will come to the same conclusions as one another, and perhaps most importantly, as with you, about what they should do next? To me, that's like, that's the litmus test, because, you know, if they all come to the same conclusions, then they're all working from the same principles. They're all judging the data using the same basic principles. The idea of good scalable management in a company is to ensure that every decision maker in your company is operating from a common set of principles. The job of good senior executives in a company is to install that software, is to make sure that each manager in the business has a common set of principles with which to work so that when the data flows The decisions are consistent with what you'd expect, and then you have a predictable engine that can scale. So again, abstract, but we do this at Rippling, I think, sort of reasonably well for a company that's as chaotic and mid-scale as we are. We use the quarterly planning process to do this. We're doing for the first time kind of a leadership retreat in the fall to get sort of top leaders in the business together and to explicitly address and talk about these things. And then I have a really talented VP of operations who works with me who is my protégé in sort of the active design of the operating system of the company, looking for the rituals and processes that we're going to use to inculcate each decision maker in the company with the principles that matter. So that's how we think about it.

Yeah, that's helpful. I want to talk about resource allocation with you. There's always this tension of what's the right amount, what's the right time. What is your framework around that?

Resource allocation.

Too much, too little, too early, too late.

Oh yeah, right. You can frame this challenge as resource allocation, but it's like Every business has to make a decision about, or actually every manager has to make a decision about, you know, how much time they're going to put into something, how many people they're going to put against something, how much budget or money they're going to put against something. And there's a tendency to try to get it right, you know, and like when you're building a forecast for something, yeah, like you're trying to forecast your support ticket volume, you know, you should try to get it as right as possible. But then you have to make a decision. You're going to build a forecast for your revenue, a forecast for your headcount, whatever it is, and then you're going to have to make a decision about, okay, now what are we going to do with that? Are we going to hire? Are we going to do this project or not? And here there's a really important, simple, powerful thing that I think every executive should understand, which is that because you're never going to get it right, you're never going to get it exactly right, there's another question you have to answer about every forecast that's going to be used to make decisions, which is, would it be better for me to overdo it or underdo it, to be early or to be late, to be big or to be small, to overinvest or to underinvest, and then deliberately steer hard in the direction of the less evil evil. So like, take for example, you know, staffing. If you are coming into the busy season for your business, you know, as Rippling does, we have a, you know, we have a busy season in Q4 because it's tax season. A lot of people switch to us as a payroll provider as of December 31st. We've got to do all of our filings for the year beginning in January. And so our Q4, which is November, December, January, is sort of crazy crunch season for our support team. And so the question is, okay, we forecast how much volume we're going to get, and then we try to staff against it. And should we overstaff or should we understaff? Because we're definitely, definitely, definitely not going to staff to the level of like every ticket gets answered exactly right and everybody goes home at 5 PM. Like, that's just not going to happen. And the answer in that case is like, yeah, we should probably slightly overstaff. Like, let's overstaff to make sure we hire we deliver a higher standard of service to our customers. And then coming out of Q1, we'll have maybe a few extra people who can be promoted. Some of our senior people can be promoted into implementation or into other roles in the company. Or even more simply, it's like you're going to a meeting. You know you're not going to arrive at the meeting exactly at 9:00 AM. So do you want to arrive at 8:55, or do you want to arrive at 9:05? The answer is you want to arrive at 8:55. So go early and literally just intend to be there early. If you adopt this mindset and decision-making in the business, you'll find it massively— like, it drains anxiety from you because, like, embracing that you're not going to get it right and then deliberately steering in the least evil direction means that you're going to probably end up in the best available situation. So, like, I know it's a super simple framework, but I probably apply it, like, 3 or 4 times a day to help people stop kvetching over getting it right and just let them execute because that's the name of the game, I think, is to unblock people and just let them execute.

Yeah. Speaking of letting people execute and anxiety, one thing that brings people anxiety is politics. What is the difference between environments that don't have politics and environments that do in terms of if you're trying to reduce or prevent politics in your company, which should you do?

So, like, I think it's important when you talk about corporate politics, you know, politics in the work environment, to define it because It's, you know, we all hate politics. We'd say, oh man, it's a political place to work, whatever. We say things like, that person is political. And yeah, it sort of evokes like an icky sense in your gut. But what precisely is it? My definition of politics is people who put themselves before their team or put themselves before their company. You can call a team political. Like, hey, that's a really political team. And to me, it means that the team puts itself collectively before the company. And this is pretty familiar territory. The person who puts himself before the team won't accept responsibility for their role in negative outcomes. They advocate for their interests first. They go and try to politic their way to, let's say, a raise or to getting the most exciting project, even though they're not the person most qualified to go execute on that project. Many, many examples of what politics can look like. But fundamentally, it's about, you know, basically, are you willing to sacrifice yourself for the good of the team or not? And people who are political, there's lots of root causes, I think, of being a political person in the workplace, but it is fundamentally when you are worried about yourself. And I think that the place where I work right now, and granted, one thing I think every senior executive has to be aware of is you are not aware of what is going on under you. You are definitely out of touch with the experience of the individual contributor on your team, particularly if there's a couple of layers between you and the team. But you can be sure that the political folks will rear their heads when they have time to worry about themselves. when there's headspace to sort of, you know, meander at work and think about, um, yeah, am I making enough money? What's the guy next to me making? And there's, you know, something you cannot will into existence, but something that, if it is true, eliminates politics, uh, is that if there's way too much work to do, like if it's crazy busy and everyone is just running super hard and, you know, just like you're exhausted at the end of the workday in a good way, like you're depleted, you've like put everything you had into trying to get everything done, then I think— I think there's not much room for politics. And this is less an admonition to executives to like go make everybody busy, but it is— there are 2 really important takeaways I think from this. One is back to the point about resource allocation. You can overstaff or you can understaff a team. What's worse? I think the answer is like overstaffing is way worse. You know, we talked about a counterexample to that with respect to support, because for a brief moment you want to deliver a higher service level. But if you just look at a project team building a product, or you look at a sales team, whatever you want, you want to understaff. Because if you overstaff, man, there's just way too much room for trouble. And so one really actionable thing, and this is something I learned at Apple, like we always felt understaffed, and it was because literally, deliberately, always, they made sure that they squeezed the least important work out of the organism by making sure there wasn't room for the least important work. Right? Because everybody was always short-staffed, always. So one way to make sure you don't end up with a political environment is to keep it lean, like keep it super fucking lean at all times, even when people are— especially when people are sort of on the edge of crying about it. The other important takeaway from this is that as an individual, when you go and look at a place you want to work, go to the place where everyone is incredibly busy. You want to work at a place, you do not want to work at a place that's easygoing and has a lot of slack on the rope. You want to go to a place that's deeply, deeply struggling to keep up with what has to get done because that is, again, it's the place where you're going to go and find the fewest politics in a team.

That's really helpful. We were talking earlier and you mentioned that good processes are important for scaling, But if you don't have product-market fit or you don't have a healthy culture, no amount of process will save this. Were there moments at Inkling or other companies you've invested in, what are moments you've seen like, oh wow, the culture is less healthy than it used to be, and what could lead to that that is maybe not obvious that founders should be mindful of?

Okay, so there's the question of process not being The solve for more fundamental or higher-order bit issues like product-market fit. And then separately, there's a question of culture. And I want to make sure I understand because you put those 2 together.

The question I'm asking is basically one thing you said earlier is you don't know what's happening a few layers down at your company. And so are there moments where the culture was less healthy and you weren't aware of it? And how can founders stay up to— why does that happen? How can you make sure that the culture is healthy, etc.?

Yeah, so my comment around what it's like to be a couple layers up is I think it's about lenses. You've got a lens through which you view the world, the way you view your workplace, and it's really like you don't see the lens as you're looking through it. It's just warping what you see. Kudos to you if you're aware that the lens is there. It helps. But it's very difficult to take the lens off and stare at it. I have been a CEO and then a COO now for more than a decade. And so I'm just very aware that my perspective on what it's like to show up for work every day as an individual contributor support rep or as an individual contributor engineer, I don't claim to know what it's like and how you see the world and how you think about decisions that are made by people over your head. I also, by the way, don't think that those people understand my perspective. They don't have the same context or experience that I have. You don't have to know exactly what's different about someone else's perspective to appreciate the fact that they have a different one. It gives you a dose of humility as you approach difficult questions. You know, if you're going to go through a layoff, if you're going to decide to terminate a project that everyone's been working hard on, if you bear in mind that your perspective on this decision is going to be wildly different from, from many, many other people who are constituents, or going to be affected by the decision, you'll at least sit and with an open heart and an open mind listen to their reaction to a decision and perhaps adapt your behavior in response to that. That's like not knowing what's going on in the world underneath you is, I think, if you admit that and you understand the implications of that, makes you a far, far— it makes you a better person, frankly. And it also makes makes you a much more effective executive. So there's that. And then the topic of culture always comes— you can sort of spend hours and hours talking about the nuances of culture and the idiosyncrasies of any given company's culture. I think, again, back to sort of first principles on what is culture and like how do we define it. My opinion is that the culture of an organization is the collection of behaviors that are acceptable to That collection of people. You have culture in your church, you have culture in your family, you have culture in your city, in your state, in your country, you have culture in your workplace, and it's a collection of behaviors and expected norms. To cultivate culture to me is like— I don't remember who said this, I think it may have been Sam Altman, but it was like the distinction between good and bad culture is not actually good and bad, it's actually just strong and weak. A strong culture is one where people know what's expected of them and can behave in accordance with those expectations. A weak culture is one where there's no real clear code of conduct, and so the most unconscious behaviors just sort of naturally surface. Unconscious behaviors are ones, again, where you act with your lizard brain instead of your thinking brain. So you act out of fear, you act out of self-interest, which is what we're evolutionarily programmed to do, and then somehow we've learned to do otherwise. My take is like, you got to keep people focused on a few very critical things in any business. You got to keep them focused on winning. So when I think about like where things went off the rails for a while at Inkling, we had become overly concerned with the employee experience and way less concerned with just driving results. And it really gets back to like, if you create space for people to worry about how they feel, they will worry about how they feel. If you draw attention to, you know, the employee experience in a way that prioritizes it over the customer or over winning as a team, then people will prioritize how they feel and what they think about the work experience over the customer and over winning. And all too often in the Valley these days, I see this sort of drift toward the employee, you know, you got to compete for employees, you got to retain employees. And I love employees who come to work every day and give their life energy to the success of the company. But it is simultaneously true that it's not about them. It is about the customer, and it is about the mission of the company above all else. And so for me, my personal experience of culture gone sour is where we lost sight of that priority, and we allowed the sort of soft, touchy-feely employee experience stuff to take center stage to the detriment of just building a winning team.

Well said. We have less than 10 minutes and 3 more topics I want to get to. So you have this one quote that I found interesting. Optimizing early makes people of modest intelligence look good while they suck the life out of your company.

Explain. Quotable quotes. Optimizing too early makes people of modest intelligence Look good while they suck the life out of your company. Yeah, I do agree with that statement that I made.

What do you mean by optimizing early?

Yeah, when you're in a business and it's like— actually, forget even just like in a business, you're in a product line, if you're in a department, like you're in something that is in build mode, it's just about getting like all the most basic components strung together so that they just barely work. You know, get a product shipped, get a new team stood up. It becomes— it's really messy. It's really chaotic. And you have to have an appetite for that chaos and to understand that it's going to be a pretty unpredictable engine for a while, but it's the only way to do it. You got to start from something that's very rough-hewn and then optimize it over time. But optimization is— if you think about optimization very literally, it can be about building a spreadsheet and talking about metrics and trying to twist the screws on a particular operating metric. But optimization can be a broader concept of worrying about whether the staff meeting is organized correctly. I mean, honestly, we were just talking about DE&I, and DE&I is in fact, whether that's a popular opinion or not, is a form of optimization. You can't really worry about DE&I when there's 2 people starting a company to get off the ground. You've got to earn the right to worry about that problem down the line. So it too is unfortunately a form of optimization. So what you'll find is people who are in your company who don't have a broader perspective on what's trying to be done, who don't— and you can't expect everybody in a company to understand the driving force of the business at the highest level, to really understand the interface of the company with the market. There's a relatively small number of people in the world who are very, very good at that. I happen to work with one as the CEO of our company. They have a really unique insight. You got to let that insight play out. But people want to walk into the room and sort of put their pet project or the thing that's right under their noses in center stage. And it can immediately get everyone distracted with these things that just don't fucking matter yet. And I think as an executive, you've got to know and you got to beat that stuff back. I'm not talking about the DE&I thing. I'm talking about Like worrying, you know, OKRs. Like, this is one of my favorite examples. I have watched companies of like 50 employees or 75 employees holding meetings debating how they're gonna implement an OKR infrastructure to drive alignment. I'm like, what the fuck are you doing? Like, what are you doing? Like, if you know what product you gotta build and you're only 75 people, you're 50 people, you're 25 people, go build it. Like, let, let the communication happen by osmosis. If you guys aren't tight-knit enough to communicate with one another without a formal framework like that, you know, way bigger problems. Like, way bigger problems. But like, man, I guarantee you in every 50-person startup and every 75, 100-person startup in Silicon Valley right now, there's someone agitating to go implement like an OKR process Where they're going to spend hours debating the difference between an O and a KR. Oh, this one's measurable, this one's not. I mean, what the— like, oh man, it's just poison. And so that's what I mean by like sort of the early optimization. Like the minute a company gets into that trap, they have completely lost sight of the race they're running. They're focused on like their sneakers and their laces and like it's just the wrong thing.

Well said. 2 topics in 2 minutes if you can get to it. How to make better staff meetings? What's non-obvious in terms of what people miss on staff meetings? And then the last one is, um, you know, a reference is worth 10 good interviews. What's the key to getting a reference right, doing a good reference check?

Oh yeah, staff meetings. You show me someone who thinks their staff meeting is awesome and I'll show you a liar. I just don't think Staff meetings are inherently this really challenging necessary evil where you've got a bunch of people across multiple different functions, in a sense, kind of looking for the common ground among them to try and sort out problems, conflicts, issues, obviously drive alignment. There's a lot of different things you can list as the ostensible purpose of a staff meeting, but I will say over a decade-plus of trying to get staff meetings right and also coaching other founder CEOs, or I don't like the word coaching, but like, you know, helping them think through how to build an effective meeting, no one's ever satisfied. And I think one of the key takeaways is like, don't look for perfection. Don't look, don't set your expectations super low. Like, don't expect to be satisfied by your staff meeting. And then the other thing I've learned is like, it's a living thing. The people who are in that meeting come and go over time. People are promoted, people are hired. And you want to tailor the shape of a staff meeting, or perhaps more to the point, you want to tailor the shape of an executive team to the challenges that the company faces at any given moment in time. And so people tend to, number one, try to optimize the staff meeting towards some much better state. And number two, they tend to think of it as a static entity. And in reality, you got to think about the staff meeting as an inherently imperfect practice that is in constant motion. Like, you have to constantly rethink, you know, is the approach we're taking to this right now appropriate for where the company is? And again, it's like, you know, the minute you cast aside this artificial standard of perfection and this false assumption of constant, of sort of the stability of the entity of a staff meeting, then like you can just like go with the flow and just sort of continuously try to make each meeting better than the next. That's how I think about staff meetings. They are like, there's a much deeper well of thought on that topic, but I'll spare you guys the boredom.

Totally. That's helpful. And how about lastly on references? You know, what's the key to getting references right?

When you do a job interview, it is akin to trying to sort of watch a movie through a peephole. You get this really narrow and definitely warped view of a very complex entity on the other side of it, which is this human being that you're considering working with. It's the least evil option most of the time to conduct an interview to try to make a decision about somebody, but you really have to admit that the fidelity of the information you get through an interview is just insanely low. Compare that with somebody who's worked with someone before. And like that person has 2 things that you don't. Number one is they have a work history with that individual, so they've seen them in action over the course of a long period of time and can formulate much more distilled thoughts about that person. And then the second thing that a reference has that like you don't have is that they have a— or sorry, I shouldn't say that you don't have, but that the interviewer you're talking to, or the— sorry, the candidate that you're talking to doesn't have, is a third-party perspective on that candidate. You're going to have a third-party perspective on that person. You're not that person. And this person you're talking to as a referee is a third party to that person. And so they're on the same side of the table as you with respect to that individual. There's a bunch of reasons why references are also imperfect. But if you talk to a reference and go super deep, if you get really— I'll give you a trick that I like to do. It's always about contrast. You're trying to get someone to compare this person to someone else so that you can see where they spike. Because like, again, interviews and references, everything that you do when trying to pick someone to work with is about identifying their strengths. Yes, their weaknesses to some degree, but like, you don't build things on weaknesses, you build things on strengths. And so it's about identifying 1, 2, or if you're lucky, 3 areas where this person is just particularly good. The reference can identify those things for you pretty quickly if you force them to compare that person to somebody else. So what I like to do is say, okay, Who have you ever worked with? How many people have you worked with in a role similar to the one that you worked with this person in? They say 5, 6, 7, 10, 20, whatever. You say, okay, so inevitable question, like stack rank this person. And they say, oh yeah, like they always say, oh, he's the best one, you know, number one. You're like, okay, cool. So like, who is the next person on the list? Who was the person who like most closely competed with this person for the top spot in your list? Oh yeah, oh, it was Bobby. Okay, cool. Let's talk about Bobby. Let's not talk about this person that I'm getting a reference on. Let's talk about Bobby for a second. The reference person always thinks this is super fucking weird. Like, you talk about Bobby for a second, and then you ask them to say, okay, what did Bobby have that this person did not have? And then you ask them, what did this person have that Bobby did not have? And you immediately get this, like, contrast point between 2 human beings where you learn about the person you're referencing. You're asking that person to put a little bit of their reputational skin in the game in telling you about the person you're considering hiring. And so you get so much more data and so much more of a distilled version of that data in the reference than you could ever suss out in a 45-minute conversation, you know, with a person that you're talking to literally, you know, or figuratively rather, through a peephole. I do think that a really good reference where you go super deep you make the reference person, the referee, uncomfortable is easily worth 10 times as much as any interview in making a decision about whether to hire somebody.

I heard someone say yesterday that they do 3 references. They ask the guest for them or the candidate for them. One is someone who they reported to and one is someone they worked with, they've known for 8 years, and I forgot the third one.

Last question, off book or on book, or who do you like to reference So I always want to make sure I get somebody who has had this person report to them, somebody who's reported to that person, and then a peer. That's the trifecta. And then I think front-door references are super useful because you're at least getting the positive side of the picture. But when you say on-book, off-book, you mean sort of front door, back door, right?

Yeah.

And of course, the back-channel reference is The critical— in fact, it's really almost impossible to make a high conviction hire, particularly on a senior executive, if you can't get a backchannel reference on that executive. It's basically mandatory. Again, it's back to who's got skin in the game and what are the incentive structures. The big difference between a front door reference and a back door reference is who are they loyal to? In a front-door reference, they're loyal to the candidate, and in a backdoor reference, they're loyal to you. And like, that simple distinction fully changes the dynamic of, of the data that you get.

Yeah, no, that's very helpful, very tactical. I could say that for this whole podcast. Uh, Matt, thanks for, for coming on. This has been fantastic.

Yeah, my pleasure. Thanks for having me. Awesome.

Thanks for listening to today's episode. Execs is produced by On Deck, where top talent goes to start companies, find their next roles, or invest in their careers. If you're looking to start a company, uplevel your career, or navigate a career transition, I encourage you to visit beyonddeck.com. See you next time.