INBOUND 2016: Alison Elworthy "Your Co's Operating System: Innovation Killer or Secret Weapon?"

Thanks so much, Becky. Welcome to Inbound, and thanks for joining me this afternoon. So over the course of the week, you're going to have the opportunity to learn how you can grow your businesses by better matching the way you market and sell to how your customers want to shop and buy. This afternoon, what I'll be talking about is how you can better grow your businesses by matching your operating system to how your employees are most motivated to do their work. So I'm going to take you behind the scenes at what HubSpot's operating system looks like. How it has helped us to grow, scale, and innovate over the past 10 years. How we've grown from 15 to 1500 employees and now impacting over 20,000 customers. So as VP of Operations, one of my responsibilities is to create and maintain our operating system so that we can execute to our highest potential. And oftentimes I think of myself as an air traffic controller. I need to make sure the planes are taking off on time, we're arriving on time, we're all flying in the right direction, no one's colliding in the air, and that we're constantly communicating. So my goal is to create alignment and order within our company, but to also inspire innovation, because that's what furthers us as a company. What we've learned at HubSpot is is our employees do their best work and are most motivated when they're in high performing autonomous teams. So we hire really talented individuals and we give them a vision as to where we want to go as a company. We don't tell them how to get there explicitly. We talk about where we want to be in a year, five years, 10 years. Then we give them big, impactful problems that align to that mission that will help us succeed at accomplishing that mission. And then lastly, we give them autonomy. Our employees don't want to be micromanaged. And oftentimes our employees who are working close to a problem or working close to our customers can come up with better solutions than our leadership team can. So that's why autonomy is so important. Now, if you're at a small company, who here works at a company of less than 50 employees? Okay, more than 50. All right. So for the folks that are at a company less than 50, implementing this idea of autonomous teams is relatively easy. So you probably all sit on the same floor. Sales, services, marketing. You can huddle up, come up with your mission, your strategy, delegate out who's going to do what as part of that strategy and go off and start working. And as things are going well. Great. You can celebrate that as you're starting to experiment and innovate. And you need to pivot or adjust the steering wheel. It's pretty easy to do. So you can kind of gather up, exchange feedback, huddle up, figure out your new path forward. This is what we do at HubSpot when we launch a new product line. So we just launched our sales product line when we first started with that, we actually took that team and isolated them from the core part of the business. We treated it like a startup within a startup. What ended up happening is that team could innovate and iterate very quickly as they found product market fit. Two years later, we're now thinking about merging that back into the core business. They really were able to push the boundaries because they were secluded. And this is what HubSpot looked like seven or eight years ago. We all sat on the same floor. It was easy to quickly huddle, iterate, innovate, experiment, come up with big new, bold ideas, and then push forward. Fast forward to 2016. We're over 1500 employees, we have six offices around the globe. So we wanted to maintain that sense and that culture of innovation. As you can imagine, just letting free range autonomous teams go out there and innovate can cause a lot of turbulence in your organization if you don't have any alignment or coordination behind it. So you have a whole lot more people, many moving parts, different offices, different time zones. It's just really hard to go out and execute in small teams, but stay aligned as you work towards one common vision. And that's really where an operating system comes into play. You want to align your operating system alongside of these autonomous teams to give them structure so that you can achieve your big goals. Okay, so traditional operating systems are typically long rule books, tons of procedures, documentation, talking about who owns what, how to solve things in your organization. It's a rule book. And the pros here are that it's very easy to communicate. It's oftentimes very direct. It's crystal clear. The cons are that it's heavy, slow and antiquated. It's not really how we do business today. It doesn't allow you to be nimble and innovate and iterate quickly. What ends up happening is your employees spend more time reading that rulebook, trying to navigate the organization, finding answers, helping others make decisions, as opposed to doing the real work. And by the real work, I mean coming up with big, bold ideas on how to solve your biggest business challenges. It ends up slowing you down. It Kills autonomy. It's also really hard to recruit people to come work at that type of organization. These operating systems are usually at odds with innovation and that's what we're going to be talking about today. Operating systems are usually tops down, really heavy and it's hard to boil up, to bubble up ideas from the bottom up. Typically, your employees who are working closely with your, with your customers have those really awesome ideas on how to best solve those problems. And you want to find ways to get those ideas up to the top in a timely manner. So what we'll be talking about today is how do you create a lightweight and effective operating system that provides your company with alignment and order, but also doesn't kill innovation, but instead fosters innovation. So, so we'll be walking through the steps of how we've created that at HubSpot and how it's been a success. So there are five steps on creating a system like this. We're going to talk about these in more detail. But first, you want to create a foundation of trust. You want to make sure your leadership trusts your employees and that your employees trust your leadership and that they're making good decisions. Next, you can create your vision. Where do you want to be in five years, one year? How do you communicate that out so your entire organization knows where you're headed and how they can contribute? Once you have that vision, you can then work on getting alignment in your organization. So you want all of your teams pointed towards a true one North Star so that you can see success and then you can get into implementing autonomous teams. So this is where we provide a lot of flexibility and a lot of flexibility to innovate in our organization. And then lastly, and the most important part is tracking your progress transparently. How you set goals that you can achieve and celebrate. How do you shine light on those goals and be transparent in your organization so you can make sure that you're headed down the right path. Okay? So the first step is creating a foundation of trust. Trust is a two way street, okay? You want to make sure your employees can trust leadership, that your leadership team are making really good, sound decisions. You can do that in a few ways. You can have an open book, be up front about what you're worried about, what you're excited about, what your plans are, what your mission is as an organization. Be transparent with the data that you share with your employees so that they can understand how the business works and trust that you're making the right decisions based on that data and information. On the flip side, you Want to make sure that leadership can trust your employees. You need to trust that your employees can make the right decision and solve for the customer to the best of their ability. So you can do that in a few ways. You could create a whole list of rules for your employees. But if you were to do that, you're going to lean towards that old antiquated operating system that no one likes. Instead, at HubSpot, we have one rule. We call it UGJ, which is use good judgment. That is the only rule that you'll find at HubSpot. And what this means is that we trust our employees with the right context to make good decisions. And this comes to our social media policy, our work from home policy, our travel policy, asking for budget for a project, you name it. We have one rule, and we expect them to make a good call with use good judgment. But we do give them some context. So who here has heard of HubSpot's culture code? Oh, man. Okay, after this session, you should all go online, look up HubSpot's culture code. It's got over 3 million views and it was written by Dharmesh, our co founder. And at the core of our culture code is our operating system. It's a set of our values, beliefs, and best practices for how we work with one another, how we work day to day as a company. So not only does it give us context and our employees context on how to make good decisions when we talk about use good judgment, but it also helps us recruit awesome talent to our organization who can continue to make good decisions for our business and help push our business to new levels. Okay, and the last piece when we're talking about trust is creating transparency. We are super transparent at HubSpot, and I think it's why we have such great trust across our organization. We share our P and L, all of our financials, our board meeting minutes, you name it. All of our employees have access to all of our data. It doesn't matter if you're the CEO or a college intern. Transparency is so important that when we went public two years ago, we made an active choice to make everyone at HubSpot an insider so that we wouldn't have to pull back on transparency. So this is critical that we maintain transparency at all levels. One way that we do that is with our internal wiki. So our wiki is hugely popular in our organization. You can go here, post. This is where I post our board meeting minutes, our executive team meeting minutes, you name it. Also, employees post their ideas, what they're working on ideas for the business that can further ourselves. And then we push each other to make comments and, and progress and have conversations on this wiki. It's very active, but is key to keeping us both transparent and creating trust. Okay, so once you have that foundation of trust now you can start working on your vision. So your vision can be where you want to be in a year, where you want to be in five years, where you want to be in 10 years. At HubSpot, we talk about our moonshot, so that's where we want to be in five years. We, that's what we want the company to look like. From there, we figure out what our annual vision is going to look like, what is our strategy going to look like in the upcoming year so that we can execute on where we want to be in the long run. So the first step is to get out of the ivory tower. Like I mentioned before, the best ideas come from those who are working with your customers day in and day out. So it's really important that you create transparency and trust with your employees and and a way to communicate clearly with your employees so that they can help you devise your strategy and vision as a company and pair that with your strategic plan. We have something at HubSpot we call it all the time. We say solve for the customer. How are we solving for the customer? That is the one true north star when we talk about our strategy. So once you come up with all of these ideas right, you need to document them. At HubSpot, we try to get everything all on one page to keep it crystal clear. Because remember, the whole point of this is not just creating your vision and your strategy, but being able to communicate it so your employees fully understand it. So at HubSpot, we use something called an Mspot and I'll walk you through what the MSPOT stands for. It stands for our mission, our strategy, our plays, omissions and targets. So the mission and strategy up top we rarely change year over year. Our mission is to transform how companies market and sell and our strategy is how we're planning to achieve that. What does change on a yearly basis are our plays. So we typically have five to six plays each year of big meaty projects that we want to focus on to help us execute on our strategy and our mission. So this year it was all about customer value, becoming a multi product company, pulling in that sales product line, which you'll hear more about this afternoon, thinking more globally, deepening our moat and investing in people to continue to be competitive. Next to each play we'll move to the targets here, and I've had to blur them out, but every single target has a number. We love data. We love metrics at HubSpot. And next to each number, you'll see some shades of yellow and red and green. So every month, what I do is I go in here and I mark how we're doing. Green, if it looks good, are we likely going to meet that target? Yellow, if there's some risk, maybe there's an obstacle in the way or we may miss it by a couple months. In red, if there's a clear blocker there, that's going to prevent us from reaching that goal. So when we have something in red, that's when I raise the flag and say, hey, guys, we need to huddle up as a team, figure out how we're going to course correct, adjust the steering wheel so we can head down that path of success. You'll see here we also have stretch targets. So stretch targets are something new that we implemented this year. It's really important to push yourselves. We only expect our team to hit 50% of these stretch targets. We want our employees to push and fail because you learn a ton when you fail, as you all know. Okay, and the last part, even though it's at the bottom, omissions, it's one of those critical pieces of our M spot. So every year, there's obviously a ton that we want to accomplish. Right. But you only have so much time, so many resources. So we have to explicitly call out the things that we're going to say no to. What's great about our emissions is as these ideas come up over the course of the year because they always surface again. It allows us to go back and easily say no and allows us to focus on our plays and not get distracted. So our missions are critical in this M spot. So once you have your document and you've documented what your strategy, what your big plays are for the upcoming year, then you can work on communicating it. Communicating is super important. You want to make sure that every employee in your company, when you walk down the hallway, can tell you what your mission is and can tell you what some of the big plays are for the company to allow you to get to where you want to be in a year, in five years. So we do this in a few ways. At HubSpot, we talk about it quarterly. At our company meeting, we talk about how we're doing on our mspot. Why are some things in red? Why are they in yellow? Why are they in green? We talk about them in team meetings. We post it on the wiki, there are conversations. We have a monthly exec deck that highlights our MSPOT and goes into detail behind the metrics on why we're ahead or why we're behind on certain plays. So it's really important that once you create this document, whatever it may look like, that your employees fully understand it and absorb it because then you can talk about creating alignment. So this M spot or document vision is going to be your true north star. You want the entire organization behind it so that you can see success and get you to where you want to be in your vision. So at HubSpot, we use the term aligning the vectors. Okay? So a vector is both kind of the velocity behind something and the direction that it's pointing at. You want all of the vectors pointing at those plays that you've set out. Okay. You don't want any going off in different directions. You don't want any colliding. You want as many pointed to that one true M spot so that you can, you can ensure success for your business. We do this in a few ways, so you can't really see here, but these are what I call second level M spots. So every team, after we create that company wide M spot, goes through and creates an M spot for their own team. So you'll see we have one for product, for sales, for services, for marketing, and it's all derived from that one mspot. So we create alignment that way. We also create alignment across these teams. So I'll go through each of these M spots and make sure that there are no omissions on the marketing M spot. That's a play for the product, right? We want to make sure that we have alignment and there's no friction. I also make sure that we have shared goals. So you'll see if you were to zoom in here, that many of these M spots have the same targets. Again, that's the power of vectors all pointing in the same direction. Shared goals are really powerful. The other great thing about these second level M spots is we share them, we post them on the wiki, we talk about why certain things are in red, yellow, green status for, but it's very clear and easy to figure out who owns what in your organization and if you're dependent on any of those key projects. And lastly, when we're talking about alignment, you also want to have alignment with your budget and your resources. So as we're creating the mspot, we're also going through our budget cycle for the next year. What we want to do is align our budget, our people, our resources, our systems, and to those plays. We want to make sure everything is fully funded and supported so that we can enable our employees to have success against those big plays. This is a really important piece. So we create our M spot first and then closely behind it. We work with the budget to make sure that we have alignment. So once you have alignment, now we can start talking about how you can create autonomous teams. It's pretty basic. So like I said before, you want to tell your employees what where that end state is, but you don't want to tell them how to get there. Instead, you want to give them context, you want to set some expectations. We use the term guardrails, right? We want to give them wide guardrails so they can figure out their own path forward, but not go totally off track. So an example of a guardrail could be a budget, a time, a resource, a team, clear expectations on the width of where they can innovate and experiment as they come up with their solutions to their business problems. We also have this term called a DRI, which is a directly responsible individual DRI's, once they're named for a project or a team, have the autonomy and authority to make decisions for their project that they're working on. What's great is it allows you to go fast and iterate so you don't have to run every decision up the chain of command and then back down. We trust that once we name these DRI's, they're going to make the right decision and that they can move forward quickly. We do give our DRI's some context. This here is a chart from one of our board members, Laurie Norrington, who has led large organizations at GE and Intuit and ebay. And on the bottom you'll see is it easy to roll back? Are you trying to make a decision that if you were to roll it out and it wasn't the right call, can you quickly roll it back and would it not make a huge impact on the organization? The vertical line you have, are you betting the company? So it's going to take a lot of resources outside of what we've set in your guardrails to make this decision. So if it's easy to roll back and you're not betting the company, just go ahead and do it. Use good judgment and go ahead and do it. As it gets harder to roll back, as it gets harder and you start betting the company, you need more resources. This is where we ask those DRI's to start collaborating with other teams and start communicating. Be transparent about what you're working on so it doesn't come as a shock to the organization or to the other teams that you may be impacting. And then we have a very rare case up at the top right hand corner where it's almost impossible to roll back. You're betting the company. It's a huge decision. That's where we have employees ask as it usually takes realignment of budget, resources, usually realignment of the entire organization. So that's when we like to pull in our execs to help guide them to make sure they're set up for success by making this decision. Now onto the last step. So you've created this foundation of trust. You have alignment, you have autonomous teams working on your biggest, most critical, critical business problems. How do you ensure that you're doing the right thing? Tracking progress transparently is key. So you want to be able to set really great, solid goals, have metrics to track those goals, and be crystal clear about how you're doing with everyone in your organization. So when we talk about goals, it's important to make them achievable. So at HubSpot, I talk to you about this moonshot, right? We talk about where we want to be in five years. Our first step is to break that down. We talked about our M spot. We have those on a yearly basis. Those are our annual goals. But you want to break those down further because it's hard to execute on something when you just have an end of year goal in sight. So we have monthly goals at HubSpot and the other thing we pair monthly goals with are priorities. So each exec at HubSpot, every month we go into the wiki, we write what we're focused on, four or five things. What are the priorities that are going to get us to hit those monthly goals that align to our yearly targets. And at the end of each month, we have our execs go in and we hold them accountable to writing how they've done against those priorities. What's great about this is it's transparent. So everyone knows what our teams are working on and what's a priority. And also keeps us on track to hitting those monthly goals, those yearly targets. And lastly here we talked about stretch goals, right? Give yourself some stretch goals. Give yourself some goals that you know you're gonna fail at because that's where the big ideas come from. One of our biggest ideas at HubSpot and biggest parts of our business is our agency partner program that started out as an experiment, a bet that we actually didn't think was going to succeed and now is a huge part of our business and has a huge impact on our business. So these are some of the big stretch targets that you want to put out in front of your employees to see what will happen. Okay, so we use this quote a lot at HubSpot, Sunlight is the best disinfectant. We shine sunlight on everything. The good, the bad, and the ugly. The good we celebrate, right? If we're on track and hitting some big targets, the bad if we're behind and we're likely to miss, and the ugly. So we call BS a lot at HubSpot. We're very transparent about it. We want to keep ourselves honest and accountable. And that's what sunlight is for. Our best form of sunlight at HubSpot is data. We are so obsessed with data. As a new hire, when you come in, you learn about all of our metrics. You learn about how our unit economics work. You learn about how the business ticks. We also give you access to to data. You have access to all of our data. Again, it doesn't matter who you are. And I think that's what's so important at HubSpot is all of our decisions, our initiatives are tied to data. Everyone has access to that data. Every decision is supported by data. And when we need to pivot, it's driven by data. So that brings me to my summary. We talked about five different ways on creating this operating system. It has helped us grow again from 15 employees to 1500. It's actually how we operated back seven or eight years ago. And we've maintained it. We've doubled down on trust and transparency. We've doubled down on autonomous teams, but we've supported it with this operating system to allow us to keep order and to execute and hit big goals. A lot of awesome innovations have come out of it. Like I mentioned before, who's heard of our agency partner program or is part of it, right? It's a big part of our room. It's a big part of revenue now. I mean, that started five or six years ago as a small idea with an autonomous team, and now is a huge part of our business. Our sales product, right? We started that as a startup within a startup. We kept that as a small autonomous team, let them innovate, and now is a big part of our business. So these big innovations have come out of these autonomous teams with some structure that has allowed our business to go from point A to point B and continue down our path as we set forward on our mission and vision. So with that, I hope HubSpot's operating system or some ideas that I shared today can help impact your business and bring it to the next level. And I hope you can evolve and transform your operating system to how people want to work today and bring your business to new heights. So thank you so much.