Episode 7

Who Are All These People?

Hosted by Okta's Frederic Kerrest and Epic Magazine's Joshua Davis
With every successful company, there comes a moment when things really start to click. But what happens when you hire 10, 20 or 200 new folks a week to handle the new business coming in? How do you inspire your team when you no longer know many of the people around you — at the company you founded? In this episode, we talk about how to empower your people, scale your traditions and show employees you care — even when you can’t grab lunch with every one.

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Guest List

Carl Eschenbach

Partner at Sequoia Capital

Melanie Perkins

CEO and co-founder of online design and publishing tool Canva

Amy Pressman

Cofounder and board member of Medallia

Patty McCord

Former head of HR at Netflix

Fred Luddy

Founder of ServiceNow

Transcript

00:03
Joshua Davis
I got an e-mail one day from somebody I'd never heard of who was pleased to announce that they had hired someone into a position that I could not identify on the org chart. When I walk the halls, every person I see, I look at him in the eye and say, "Hey, how are you? Good morning, how you doing?"
00:19
Amy Pressman
I don't think the culture of a company is defined by number of foosball tables and snacks. I think the culture of a company are the values that you live and the mission and vision of the company.
00:32
Joshua Davis
Welcome back to Zero To IPO, a podcast that examines each specific stage of the lifecycle of a company, from the beginning until, hopefully, an IPO. I'm Joshua Davis, co-founder of Epic Magazine and a contributing editor at Wired.
00:49
Frederic K.
My name is Frederic Kerrest. I'm the Chief Operating Officer and co-founder of Okta.
00:53
Joshua Davis
Today we're going to be looking at the stage of a company where you look around and you say, "Who are all these people exactly?" Your company has now grown to such an extent that you no longer know who everybody is and it could be a challenging moment. With Okta, at the beginning it was just you and Todd. Now there are how many people?
01:15
Frederic K.
Coming up on 1,500.
01:17
Joshua Davis
How many of those 1,500 do you know by name?
01:22
Frederic K.
Not all of them.
01:25
Joshua Davis
What would you say, maybe 300 probably?
01:28
Frederic K.
No, I know more than that.
01:29
Joshua Davis
No, you don't know 300 names.
01:32
Frederic K.
I definitely know 300 people in my company by name.
01:39
Joshua Davis
Today on the show, we have Carl Eschenbach who was the president and COO of VMware and built the company from 200 to 20,000 people. We've got Fred Luddy, who started ServiceNow which is now a multi-thousand person organization, might be even coming up on 10,000 people. Patty McCord, who obviously helped build Netflix into the powerhouse it is today. We've got Melanie Perkins from Canva, who has a completely different philosophy on how to build companies, which I think is going to be super interesting for us.
02:07
Joshua Davis
We have Amy Pressman who started a company with her husband, so maybe they could split it up and each learn half of the employee names. We've heard from Carl Eschenbach before. In case you need a refresher, years before he became a partner at Sequoia Capital, Carl was running things at VMware as the company's president and COO, and over the course of his tenure, Carl took VMware from 200 employees, Freddy, to 20,000 which is mind-blowing.
02:37
Joshua Davis
We're just going to jump right in with Carl talking about his early days at VMware. You probably knew almost everybody in those early years, at least a good portion of them. At a certain stage you look around, you're like, "Who are all these people? What's that like?"
02:56
Carl Eschenbach
Yeah. I definitely worked really hard to stay very connected because when you're there early, as Freddy knows, how many people you have now in your company?
03:06
Frederic K.
1,300, 1,400 people and growing fast.
03:09
Carl Eschenbach
You probably still know a very significant portion of them.
03:12
Frederic K.
Absolutely.
03:13
Carl Eschenbach
I made a big effort to get to know people. I made a big effort to make sure I was meeting as many people as possible. I would inject myself into interview processes as much as possible, not to make a decision one way or the other, but I always felt like if a more senior person gets in an interview, even if it's for 10 minutes, it makes the people who you want to hire like, "Wow. I had a relationship with him or her. I talked to them."
03:38
Carl Eschenbach
When I walk the halls, every person I see, I look at him in the eye and say, "Hey, how are you? Good morning. How you doing?" Just engaging with people, it's amazing how many people you get to know, but you can't know them all, especially when you're international. There's probably 10,000 people internationally across the world at VMware today.
03:57
Joshua Davis
Did you have to change the way that you approached interactions with all those employees? When there's 200 people, you know everyone's name, you know what they did over the weekend, you know the name of their wife, their husband, their kids, you know all those things, as things change, you go from 200 to 500 to 2,000 to 10,000 to 20,000. There's a different perspective too. You become a public company, all these things change.
04:19
Carl Eschenbach
When you're in a leadership position, you have to recognize that you have a megaphone strapped to your mouth and everything you say, no matter how big or small it is, you think it's 10 times that to the public market. Especially when you become public, Freddie, as you know now, you have to be cognizant that you're a public company and what you say can or cannot be put on paper and could be held against you in a court of law.
04:47
Joshua Davis
You don't want to be on the front of the Wall Street Journal.
04:48
Carl Eschenbach
Yeah, exactly, but to answer your question, I've never changed my approach to people, who I communicated with, no matter how many layers there were ... I never changed, because I fundamentally believe as people accelerate their careers ... Listen, we learn things along the way, we become better at things, become more polished. We understand our roles and responsibilities, but the core of who you are is what got you to those roles, so changing it just because a company got bigger or because there's seven layers between you and the individual contributor doesn't mean for a damn minute you need to act differently or engage with people differently or just how you treat people.
05:33
Joshua Davis
That's under the assumption that you are already at that maturation point from a behavior, from a language, from a leadership position at 200 that you need to be at 20,000. That's making that assumption. I know that I wasn't there.
05:47
Carl Eschenbach
Yeah.
05:48
Joshua Davis
There are certainly things that I do today differently or that I don't do anymore that I used to do because I had to learn along that path.
05:59
Carl Eschenbach
I agree, but it depends on what you're talking about what you had to learn. You have to learn how to be a public company executive, you have to learn what you can and can't say in public, but you don't necessarily have to learn how you treat your people, how you engage with them, and how you communicate with them. My point I'm driving is just because you grow in scale doesn't mean you have to change who you are, especially if people really believe in you as an individual and a leader. Perpetuate that, add that to your repertoire even more to get people to rally around you and the company.
06:32
Frederic K.
Carl is such a decent person and I think it's something that just radiates out across the entire organization when you have a guy who's walking around saying, "Hey, good morning. How are you doing?" and he's genuine about it. He's not putting on some façade.
06:47
Joshua Davis
Yeah.
06:47
Frederic K.
Yeah. Josh, I think it's infectious when you see a leader walking around like that, people identify with that. We talk about leading from the front. What better way to lead from the front than with that kind of approach and attitude?
07:00
Joshua Davis
When you're in the middle of this massive growth spurt and you're onboarding people left and right, things can obviously start to feel overwhelming, Freddy, right? I think the lesson we take away from Carl is that you have to stay grounded in the most positive aspects of your personality.
07:16
Frederic K.
Josh, what I think is really interesting here is that this does not just apply to company leadership. It also applies to how you adapt your startup's core traditions to fit its new size. For our next guest, this took the form of communal lunches. When graphic design giant, Canva, was in its early days, co-founder Melanie Perkins learned the value of bonding with her co-workers over shared homemade sandwiches.
07:42
Frederic K.
Now that she has hundreds of employees, however, she wanted to find a way to maintain that same level of intimacy to ensure the company feels just as tightly knit no matter how big it gets.
07:54
Melanie Perkins
Back in the very early days, we'd have pretty basic lunches, there'd be leftovers from the night before. My co-founder, Cliff, he happens to be an amazing cook so he'd make some pretty epic sandwiches or we'd just get something together. We now have an amazing team of chefs and people who are creating incredible lunches every single day, but I think that, yeah, we really just learned the power of having lunch together and how important and bonding that can be.
08:22
Joshua Davis
How do you do that as the company grows bigger and bigger?
08:27
Melanie Perkins
We can keep the principles the same. It was actually funny, one of the goals for the Vibe team a few years ago I was two-minute lunch lines. We found that the lunch lines were getting too long as the company were expanding, but now we actually ... We can't have lunch at the exact same time every day, so we have an hour lunch break where people can go in and have lunch at anytime they like, but it still keeps ...
08:47
Melanie Perkins
We have some really cool principles. We have communal tables, so we've got long table so people can sit next to people. You don't have to ... I did a PR internship years and years ago, and when I did that I remember sitting by myself with my computer and not really having anyone to have lunch with and so I never wanted people to feel lonely like that. I wanted people to always have others to sit next to, and so that's why we have these long, communal lunch tables and everyone can always come down and have a good chat.
09:15
Joshua Davis
Certainly when there's two people or five people, you know everyone's name. At 400 people when you're adding 10 people a week, everyone knows everything about you. You're probably a big reason they're so excited to join, but you don't know anything about them.
09:30
Melanie Perkins
Something we do which I really love is that every time we have new people start they always start on a Tuesday and we have something called a new boarding session and we have a vision session. Every newbie always attends this and we go through the entire pitch deck, all of our plans, what we're trying to achieve, we're very transparent within the company. I think that's been really helpful in-
09:50
Joshua Davis
The pitch deck from 2011?
09:52
Melanie Perkins
We updated it, so now we have lots of nice, pointy graphs in it, but there are still a lot of slides there that are derived from those early days and we run through that as well and really explain the vision and what we've pitched to investors, and I think having that common alignment between what our team's seeing, what investors are seeing, is really helpful but it does mean that I don't get to have a personal relationship in the deep way that I did when we were in the early stages and I really liked that.
10:20
Melanie Perkins
I think that we still try to keep as much of that as we possibly can. For example, every day at lunch time, I'll go and sit with new people and get to know them. Every single cohort, every single group of people coming into Canva, we get to meet them in some capacity, but it might not mean I get to sit next to them every single day when we had five people.
10:41
Joshua Davis
Things have certainly changed. Every word that you now utter is something that you need to think about how that's perceived or every day when you walk around and you see someone new, you need to think about whether you have a smile on your face or you don't, which might be completely unrelated to business, but that's how people react. How have you dealt with that personally?
11:03
Melanie Perkins
I think I naturally am a positive person and I really like my job and I really like getting to achieve cool things with such amazing people, but at the same time, I'm actually, naturally, a really introverted person. Every single week it's like, "Do I go and be that crazy CEO and we do some mad celebration and make the company feel like family again, or do we go and do something that doesn't feel right to me?"
11:25
Melanie Perkins
I think that even though those decisions along the way have been challenging, it does mean that when I look out at the company, when I see our office, when I see the celebrations that we have as a company, when I see our team lunches, that feels right to me. You don't start out with 400 people in your team, you start out with no people in your team and then you have to grow it and the same applies to building a product.
11:47
Melanie Perkins
You don't start off with millions of customers, you start off with no customers and investment on every single front. I think that's what's fun about starting a startup, and also in those early stages, you put in that foundation and learn that determination of exactly what you want.
12:07
Joshua Davis
Freddy, here's a line that Melanie said that struck me. She said, "Do I go and be that crazy CEO and we do some mad celebration and make the company feel like a family again, or do we go and do something that doesn't feel right to me?" I think what she's saying is that, yes, she should go out and be the crazy CEO. I guess so. That might work for her, but no, I think that's an important thing. I think it does work for her.
12:32
Joshua Davis
I think there are some leaders who just have this crazy energy. It's not you.
12:39
Frederic K.
But others.
12:40
Joshua Davis
But others. You've seen them in movies.
12:41
Frederic K.
I've seen them in movies.
12:43
Joshua Davis
We just spoke to Melanie. She has this infectious energy and everybody's got their different style. She's got this infectious energy.
12:52
Frederic K.
Yeah, and I think what really works for her is that it seems very genuine. I think if you're trying to make this up or you're trying to create some persona and it's not you, you're going to have problems down the road. I think what I really gleaned from our conversation with her was how that really is how she is, and I think it becomes a natural edict and approach to the company. By now, we know you have to evolve as a leader as you start to recognize fewer and fewer of the faces in your office.
13:22
Frederic K.
How do you actually get all those new faces there in the first place? According to our next guest, it takes a lot more than a great snack selection and a rock climbing wall. We've heard from Amy Pressman on the podcast before but now the co-founder of Medallia is back to reveal all the ways that she attracts Silicon Valley's best, starting with how she does onboarding.
13:43
Joshua Davis
You talk about getting creative to attract talent. I think there is a sense here in the valley and elsewhere that means nice snacks and bouncy balls.
13:56
Frederic K.
We have a nice snacks.
13:57
Joshua Davis
You've got to get more creative.
14:00
Frederic K.
We've put them in really nice and appealing jars.
14:03
Joshua Davis
Yeah, that's not good enough, Freddy.
14:05
Frederic K.
It's working okay.
14:06
Joshua Davis
What does that mean to you?
14:07
Amy Pressman
It's really funny. We do a lot of employee feedback and one of the big, hot button issues is the snack quality. Whenever you pull a snack, somebody is going to get pissed when you add a new one, someone's going to be having ... It's just there's no-
14:23
Joshua Davis
This is a real thing.
14:25
Amy Pressman
Yeah, so no, I don't think this is the ... I don't think a culture of a company is defined by number of foosball tables and snacks. I think the culture of a company are the values that you live and the mission and vision of the company, and the rest of it is nice add-ons and nice to have, but I'm from a generation where there was no free food. All this to me is great.
14:51
Joshua Davis
Were there other creative things that you did in those early days to attract talent or get your message out or express why it was worth coming to work for you?
15:01
Amy Pressman
We started doing an onboarding and started getting a reputation for a culture that was attractive to people. A key part of that is the organization actually has to listen to the feedback including the negative feedback, and that's how you become a real learning organization. What I was finding in our organization is we had to have that same message internally, that we need to be all about active learning and taking in all feedback, positive and negative, and iterating and getting better.
15:36
Amy Pressman
I personally read a book called "Mindset" by Carol Dweck. I don't know if you guys are familiar with it.
15:42
Joshua Davis
Say it again.
15:43
Amy Pressman
It's called "Mindset" and it's by Carol Dweck, who's actually a psychology professor here at Stanford. It was very powerful for me. I started sharing it with other people in the company, made it part of onboarding. We had her speak at our customer conference one year. I won't get into the whole thesis of the book but the long and the short of it is, basically, it gives people license to be imperfect humans in order to become the best versions of themselves.
16:11
Amy Pressman
Really what works in a startup is trying stuff, falling flat on your face, learning from that experience and iterating and just constantly learning and taking that information back to the organization. Being quite honest about this didn't work. If you think about where people stumble and fall down in their careers, it's often because they're not willing to put themselves out there, to take the risk, to potentially not do a good job, and seeing that you can push through those fears and do something and be bad at it first in order to get better is incredibly powerful.
16:46
Joshua Davis
Your company's all about the learning culture. You talk about it a lot for yourself and for others, what are some of the biggest lessons that you try and impart on every employee?
16:56
Amy Pressman
The biggest lesson is really learning to be an active learner and having a growth mindset. This is the Carol Dweck term and this is the idea that you can get better with effort, and the minute you give up this idea that you have to look perfect, I think you lose this imposter syndrome.
17:15
Joshua Davis
Wait, you're not supposed to be perfect? You've been doing it all wrong, Freddy.
17:20
Frederic K.
I've been doing it all wrong!
17:22
Joshua Davis
How do you break people out of that? How do you break people out of the imposter syndrome?
17:29
Amy Pressman
I think it's an individual journey and I think that ... One of the things that I've noticed when I'm around people who've been extremely successful is they tend to have a language that goes something like, "I used to think but what I learned was." Even if they're arrogant or whatever, there's this undercurrent of they've been constantly figuring out how to get better at whatever it was that they do, and I so I think it's a journey that people go on.
18:02
Amy Pressman
I think the onboarding, recommending the Mindset book, talking about how people have learned, talking about how our customers learn, all those things are helpful messages but ultimately I think each person has to come to it themselves.
18:27
Joshua Davis
Amy gets at something really important here. When you need to hire a bunch of people, it's more important that you hire the right person, the kind of person with a growth mindset than it is to just hire any person. Not all employees are created equal. According to Netflix alum, Patty McCord, it's all about being honest about your needs and letting go of people who don't suit them. Since writing the world-famous Netflix culture deck and the book, "Powerful," Patty has done a ton of consulting for various startups helping them reach their own version of 200 to 20,000 in a way that makes sense for them.
19:04
Patty McCord
Here's the deal with complexity and scale. Some people are just blessed with the ability to continually attack more and more complex problems. Their brains just keep growing because of that and every so often you're going to have somebody that can really do that at the pace you need them to. The problem with problems of scale is that I think we can imagine 10x as humans, but man, it's hard to imagine 100x unless you've seen 50.
19:33
Patty McCord
The deal with problems of scale is that the way to accomplish them quickly is to hire people who've seen them. That changes the composition of your employee base almost instantly, and it often correlates with a lot of other things that happen in the startup ecosystem. You've got a big round of financing, your VCs want to be on your board, it's time for you to grow up. Maybe they see that glimmer of an IPO in the distant horizon, so now we need adults in the room.
20:07
Joshua Davis
This is no longer the small startup in your garage. This is-
20:10
Patty McCord
This is like, "We could make it."
20:13
Joshua Davis
Yeah. Who is we at this point? It becomes maybe the "you" who were with me up until now, maybe it's no longer you.
20:22
Patty McCord
I'm such a storyteller. I have to tell you about this wonderful young CEO that brought me in to consult with him, and he had a team of 75 people, let's say, and I said, "So what do you want me to help you with?" and he said, "Well, we're going to have 150 people by the end of the year and I'm really concerned about doing it right and I want you here to help me scope that out," and I said, "Why 150?" and he said, "Well, we've got enough money to double."
20:48
Patty McCord
I'm like, "So you're thinking if you have another 75 people, you get twice as much work done," he goes, "Absolutely." I'm like, "Absolutely not because you're just going to hire 75 people like the 75 people that are here." Then we stepped aside and we started diagnosing. I'm like, "Before we get to headcount, what you need to do?" I'm like, "What are those guys in the corner doing? Do they have tape guns? Are they putting your hardware in boxes and shipping them?"
21:13
Patty McCord
Well, yeah, they're our shipping and receiving department, I'm like [inaudible 00:21:16] in San Francisco. Trust me.
21:22
Joshua Davis
This shouldn't be happening in shipping and receiving.
21:24
Patty McCord
This is not where tape guns should be, and oh by the way, the ability to ship and receive physical goods is something that there are people who are extraordinarily good at doing this and this isn't probably a key competency. We walk around the organization, we talk about what if instead of having another 10 people who are making it up, if you had three people who had actually seen a problem like this, might you go faster? We diagnosed it's not about headcount.
21:52
Patty McCord
It's about what are your priorities? What are you going to do? What are you not going to do? What's important to do, so we go through all that and he says to me, "Yeah, but I need you to be my executive coach," and I said, "Really? What do you think would happen with that?" He said, "Well, I know I'm going to make a bunch of mistakes as a first-time CEO that you've seen before and you would point them out to me and then I wouldn't make them," and I said, "That's absolutely true, but then you wouldn't learn anything."
22:18
Patty McCord
He's like, "Yeah, but what's the critical thing?" I'm like, "Firing your sister's boyfriend because he's kind of an idiot." He goes, "Oh my god!"
22:27
Joshua Davis
Was that advice free?
22:31
Patty McCord
Yeah, and I said, "There's always one."
22:32
Joshua Davis
Yeah.
22:33
Patty McCord
Because when you begin, it's a crazy idea. Only people that know you and trust you, that's why you end up with all your friends and family in your early stage startup because nobody else is crazy enough to do it.
22:48
Joshua Davis
Then at a certain point you've got to let them go.
22:51
Patty McCord
Yeah, or take a bet on them and tell them what the bet is and this is one thing I think I'd love to teach people, which is I have no problem at all taking that inexperienced person who has that startup passion in their DNA and really understands what you're trying to build and give them the opportunity to attack scale or complexity.
23:16
Joshua Davis
To become the big company person.
23:18
Patty McCord
Bigger company. We don't go from 50 to 50,000.
23:22
Joshua Davis
Right.
23:22
Patty McCord
It's a long journey until then, and every company that's done it too quickly has suffered. Back to the particular problem. You could take a bet on somebody but you have to be able to say, "Hey, we think you're somebody who maybe could do this. Here's what needs to get done. Here's the timeframe it needs to get done with quality on," so the other thing about startups is we're really fuzzy about time.
23:52
Patty McCord
We don't say, "Man, if we don't do this by next year, we're toast," or "This absolutely has to be ready and capable in six months-
24:00
Joshua Davis
Because startups just keep slugging it out.
24:02
Patty McCord
You think there's forever. First of all, you don't know any better-
24:05
Joshua Davis
It's also your baby, it's your idea.
24:07
Patty McCord
It's your baby, it's your idea, and by the way, people keep writing you checks up to this point, so at some point you figure ...
24:14
Joshua Davis
As long as the lights are on.
24:15
Patty McCord
They'll keep coming, but when you add time to it, then I can say, "Hey Frederic, I think you're the guy but if we don't pull this off by spring of next year, we've got to have somebody that will, so let's both agree that you're going to give it your all because we don't know anybody on the outside that knows what you know, but it has to happen."
24:42
Joshua Davis
You've got to transition from being the startup guy to being the guy that the company needs at this stage.
24:48
Patty McCord
Or not.
24:49
Joshua Davis
Doesn't mean you're a bad person.
24:53
Patty McCord
Listen, this generation of startups has more co-founders than I ever remember seeing and I used to be a non-believer. You cannot do two in a box, but I work with a lot of companies that are able to do it for a fairly long time. Those first three or four or five people that come together to put something together are very rarely the executive team of a public company.
25:21
Joshua Davis
No way.
25:21
Patty McCord
Yeah. [crosstalk 00:25:23] There's this belief, isn't there? Then you have this perfect storm, so you as CEO, you know they're not the right people but you feel loyal to them, then your VCs come in. They write you a big check and they sit on your board and they tell you it's time to grow up. Then those loyal employees who have been with you forever are starting to get nervous and now you're spending a whole bunch of trying time to make them happy.
25:53
Joshua Davis
Totally.
25:53
Patty McCord
Totally, and then you haven't developed any skills to be able to hire those adults with experience that belong in your company and the room, so you randomly hire somebody who appears to be one, and it's almost always the wrong people.
26:08
Joshua Davis
The wrong adult.
26:09
Frederic K.
Well, also because you don't know what that adult should look like, and so like you're trying to hire the first enterprise head of sales and you've never hired one, or you're trying to hire the first head of customer success and you don't know what they look like.
26:23
Patty McCord
I used to tell people in the first 100 people you hire, you want to hire people who are the smartest people you can get for what you can afford to pay them. You need them to work very hard because those early stage problems that we talked about, it's just hard work. What you want in those first 100 people as you want them to believe and always the belief is not logical. They just have to and that's part of the DNA.
26:47
Patty McCord
That's what makes those early companies, that's what makes those cultures ones that people want to hang onto. How do you keep the culture? The thing is that we all change back to the things of scale and complexity, so what CEOs and leaders need to understand is that the diversity of talent on their team is not just about race and sex. It's about the diversity of thought and that the team that has conflict is usually the team that gets more done.
27:30
Joshua Davis
Patty says fire them or take a bet on them and tell them what the bet is and I like this idea of just being super transparent with everybody about like, "Hey, this is what it's going to take. This is what I'm seeing. This is where I think you need to go and maybe it's not a fit, but you can try if you want."
27:48
Frederic K.
Now, I bet, Josh, that seasoned executives will tell you that that's a lot easier said than done. People talk about annual performance reviews, which means once a year we're going to talk about how you're doing. It's always retrospective anyway. It always has recency bias, so it's really like, "Here's some examples that happened the last month because I can't remember what happened six months ago."
28:07
Frederic K.
If you and I are having constant conversations every week or every other week or twice a month or whatever the case may be and saying, "Hey, here's how it's going. Here's what's going well, here's what's not going well, let's try these things. Let's try these other things." I think you end up getting to a point where we're having a dialogue about it. It's not news, it's not a surprise. I love it.
28:25
Frederic K.
The best situations are when you walk into that quote unquote "annual performance review" and you give the person, you say, "Here's your review. Here's what the blind 360 says. Here's my impression. Do we even need to talk about this?" and if the person says, "Well no, we talk about this every week," you're like, "Great," and we can move on, and it can be a five-minute conversation. Those are the best situations.
28:45
Frederic K.
Conversely, when things aren't going well, if you're having that ongoing conversation, it's not a comfortable thing for the employee. The employee's like, "This is not fun. I'm showing up every week and we're talking about things that ..." They might very well just opt out. You might say, "Hey, we need to have a conversation about what's going to happen next." They might just say, "Yeah, I don't think it's working. It's not working out for me."
29:05
Frederic K.
Those are the kinds of things that I think you hear Patty talk about; if it's not working, it doesn't mean they're a bad person, it just means there might be a better role for them or it might not be the right time in the company for them anymore. You hired all the right people and you're getting comfortable managing thousands of employees without actually knowing all the details of their day-to-day lives.
29:29
Frederic K.
Now, how do you make sure that they know that you know what impact they're actually having. Years before he was ever a founder himself, our next guest learned how to do this from one of his old bosses. We've heard from Fred Luddy before. Currently, Fred is the billionaire founder of ServiceNow, one of the most successful cloud computing companies around, but it took a lot of years and a lot of hires including Frank Sluteman, as then-CEO, to get Fred there.
29:58
Fred Luddy
One of the things that we hadn't done is we hadn't hired enough people, when it comes down ... Talent acquisition is something that's near and dear to me and I can tell you how I did it wrong. In any case, Frank started preparing us for hiring. When Frank took over the company, I think we were $175 million in sales and roughly 175 people, and now it's a very large company.
30:27
Frederic K.
Looking from the outside at that time, it looks like a massive success. You did a fantastic job. You bring on more help, Frank comes in. It just keeps growing majestically. What did it look like from the inside? How did it feel from the inside?
30:42
Fred Luddy
Overall, it felt very good and there's several reasons for that. Again, pointing back to Frank personally, he laid out our goals, they were succinct, they were attainable, and they were metric-driven. There was nothing squishy there. We operated within these parameters, every employee got a bonus based on three specific metrics.
31:11
Frederic K.
What metrics were those?
31:13
Fred Luddy
It was revenue, hiring was one. We have to hire enough people and we were always behind in our hiring because hiring takes a lot of time. Not only just to hire, but onboard them and have them be, again-
31:26
Frederic K.
Hire well.
31:27
Fred Luddy
To hire well.
31:28
Frederic K.
Takes even more time.
31:29
Fred Luddy
Yes, exactly. Well, like everything else that goes without saying, that goes without saying and so therefore it shall be said, but in any case we had metrics and we laid them down every quarter and so the employees knew what they were driving for and it's not like, "Let's go out and make as much money as we can." That was not the objective; people knew why the larger thing was moving the way that it was moving and I think that was very important.
32:02
Frederic K.
What did you lose or did you regret anything about that growth? It started very small, you and your brother, a family feeling quite literally.
32:16
Fred Luddy
We were all family, yes.
32:18
Frederic K.
At a certain point, you said, "Look, if this is going to be a billion dollar plus company, it can't be that anymore." Do you have nostalgia for that?
32:30
Fred Luddy
No.
32:31
Frederic K.
No.
32:32
Fred Luddy
I'll tell you why, is because the success of a company like that affords you the ability to do it again and to find a different problem to solve and I think the reason that I stepped down as a CEO and the reason that I stepped away from the business was I didn't feel I was being tremendously effective. I got an e-mail one day from somebody I'd never heard of who was pleased to announce that they had hired someone into a position that I could not identify on the org chart.
33:03
Fred Luddy
I'm thinking, "I don't know who this person is. I don't know what they do and they just hired somebody into a position where I couldn't begin to tell you what this person does," and I thought, "That's very different from when I not only knew every employee and what their job was, but I knew most of who their partners were. I knew some other kids, the kids that came to the office. I knew some of their pets." [crosstalk 00:33:26]
33:26
Frederic K.
How did you deal with that? Because I'm sure that person knew who you were, that hiring manager, and that new employee probably knew who you were too, because they'd looked you up on the website. The next time they saw you in the hallway and said, "Hey Fred, how's it going?" you don't know who they are. How did you manage that situation so successfully?
33:48
Fred Luddy
That's one of the most uncomfortable things is have people come up and say, "Hey Fred. I just want to thank you for yada-yada," and you're like, "Oh geez, have I met this person? Do I know this person? Did I meet them once, have I never met them?" It's a dreadfully, I think, uncomfortable situation so you have to learn tricks about what are you doing now, how is everything going, then they remind you, "Oh no, I don't work for you. I'm your neighbor."
34:14
Frederic K.
My kid goes to school with your kid.
34:16
Fred Luddy
Yeah, but it's not a situation that I think people like to be in.
34:23
Frederic K.
Do you think of yourself as a small company person?
34:27
Fred Luddy
Well, I think of myself as being effective in a small group, so I can be effective in a small group that's in a big company. If we were given enough poetic license to do what we want and we don't have to fight corporate antibodies day in and day out, I'd be very happy in a group. We would take a room, we'd get 15, 20 people, we'd have a mission. We'd accomplish the mission.
34:52
Joshua Davis
That startup spirit.
34:53
Fred Luddy
It is.
34:54
Joshua Davis
Can that exist in those giant companies?
34:56
Fred Luddy
I think it does in many giant companies that are very successful. I think many of them have many small groups and 90% of this stuff withers, but the 10% could be exceptional. I like small groups where we're pretty autonomous for a long period of time.
35:13
Frederic K.
I was at your ... I don't know if it was your sales kickoff for your partnership kickoff or something like that maybe last year or the year before, and you came out on stage and I've been to some concerts with some rock stars and you got from your employees a greater rockstar reception than pretty much anyone I can ever remember, so there is still a level of excitement and motivation and vision and leadership that you're bringing to this organization that's just orders of magnitude larger than it was when you started.
35:48
Fred Luddy
I think there's a little trick that I learned from. Dr. Jean Amdahl, and I think this trick, it's worth a trillion dollars. I get emotional even just talking about it. He didn't know who I was, I'm working in this hugely successful company. He's the father of not Mainframe Computing, he's the father of super-computing. He comes into the computer room one day where I'm programming, puts his hand on my shoulder and says, "I'm so thankful you're here. You're the only guy that can do this job."
36:21
Fred Luddy
I'm like, "Wow! This guy believes in me." If you instill a belief in your employees and let them know how important they are, what greater gift is there? They give back 1,000 fold and it costs you nothing just to let them know that they're important, that if it wasn't for them, we're not going to get to where we want to go. That's true of every single employee in the company, to know that they're appreciated by somebody that's seven layers above them on an org chart. It's worth a billion bucks, trillion bucks easily.
37:01
Frederic K.
How do you do that when you ... You can do that when you have 50, 100 people, but now you have thousands of people.
37:10
Fred Luddy
What happens is that legend, it spreads. Jean Amdahl talked to you, so now everybody in my group thought that they were important because I relayed that conversation and it wasn't. Again, he didn't know my name, he didn't know the job I was doing but he came in, 7:00 in the morning, put his hand on my shoulder, thanked me for being there, said, "I know what you're doing is super important."
37:36
Fred Luddy
I was in a group of people that was doing a thing that was super important, still unknown to him what it was. He took it to his grave.
37:42
Joshua Davis
Is there anybody for you, Freddy, like Jean Amdahl is for Fred, somebody who came to you at a key moment in your career?
37:55
Frederic K.
Well, I do actually remember ... This is probably 2005. I was working later one night in the office at Salesforce.com and Marc Benioff was walking around. I remember him walking around our floor and there weren't that many folks there, it was pretty late and he came over to my desk and he stopped and he said, "Hey, how's it going? What are you working on?" and I think it was pretty fortuitous. I happened to be there that night working on a bunch of things.
38:21
Joshua Davis
Did he have any idea who you were?
38:22
Frederic K.
He did have an idea. Probably because I messed up a bunch of stuff and he was like, "You! I can't believe you still work here!" No, but he said, "Hey, how's it going?" and I talked to him a little bit about some of the ideas and some of the things I was working on and he seemed to have some real interest in it, and it was an invigorating and an inspiring moment. No doubt about it. That's the thing.
38:42
Frederic K.
Dr. Amdahl comes up to Fred and he's like, "I'm so thankful you're here. You're the only guy that can do this job."
38:49
Joshua Davis
At the time, he's like, "That's amazing!" I'm sure an hour later, he's like, "Wait, what? How does he even know what I do and there's 100 other people doing the same job?"
38:57
Frederic K.
Josh, it really makes me think back to what Carl was saying, the first interview on today's show, about just as a leader walking around and talking to people and looking them in the eyes and especially in today's culture of everyone's walking around staring down at their phone. If you can put your phone away and walk around the office and look people in the eyes and say, "How's it going and how you doing?", it's one of these subjective things that can have such a big impact in building your company and your culture and motivation for all of your teams.
39:28
Joshua Davis
As Carl and Melanie say, and Fred too, find those aspects of your personality that are positive and emphasize them.
39:41
Frederic K.
I think that's key, Josh, is your personality. It has to be genuine. Now we're talking about culture, we're talking about growth and once that gets off-track a little bit, I think it's very very hard to get it back on-track.
39:55
Joshua Davis
This has been Zero To IPO. Special thanks to our guests today; Carl Eschenbach, Melanie Perkins, Amy Pressman, Patty McCord, Parker Harris, and Fred Luddy for taking the time to talk with us and to the Martin Trust Center for MIT Entrepreneurship for collaborating with Okta to bring this podcast to life.
40:15
Frederic K.
If you like what you've heard and want to know more, check out exclusive, in-depth stories from each episode at FastCompany.com. To hear the next step in taking a company from zero to IPO, make sure to subscribe and give us a good rating on iTunes, Spotify, Stitcher, or wherever you listen to your podcasts.
40:31
Joshua Davis
I'm Joshua Davis.
40:33
Frederic K.
I'm Frederic Kerrest, and we hope you'll tune in for our next episode, "Hooked." Thanks for listening.
40:39
Carl Eschenbach
If you see something that is 10% better than what's already in the marketplace, customers are going to buy from the existing vendors. You've got to be 50 to 100% better.
I don't think the culture of a company is defined by number of foosball tables and snacks. I think the culture of a company are the values that you live and the mission and vision of the company.
Amy Pressman