Keith Rabois is a partner at Khosla Ventures and former COO of Square, which is a financial services, merchant services aggregator and mobile payments company based in San Francisco, California.
Keith, talking about how to operate a firm as a manger, says that forging a company is much more difficult that forging a product because people who are included in building a company are mostly irrational and it gets tedious coping with them. He says building a company is like building an automotive engine.
On the whiteboard it looks clean and beautiful with architectural patterns while in practice it is more like holding the pieces together with a duct-tape, emphasizing the need for an effort by everybody to hold the firm together. He adds that the ultimate aim is to have a smooth functioning performance machine that nobody has to bother about constantly.
Rabois says a manager’s output is measured as a sum of the output of his organization as well as the output of organizations around him that are under his influence. A managers role is much like an editor who ‘red marks’ the contents and omits them to simply matters. Simplification is necessary for people to understand matters easily and create a framework that they can repeat without thinking.
He also mentions that most people are scared of the complexity of matters as told to them by someone else. The trick is to simplify matters in every initiative; every marketing techniques that the firm is involved in. Most major products built by great companies in history are built and marketed on the simplicity of matters.
A manager also needs to clarify every procedure that happens in the firm. He needs to ask a lot of fundamental questions and see to it that he gets the right answers. Every unnecessary step that is eliminated in every procedure improves performance by 30 to 50 percent.
Allocation of resources is also an important aspect that a manager needs to look at. The goal overtime should be to reduce the ‘red marks’ in every procedure. Overtime reduced editing converts in to improved performance for the whole team.
A manager also needs to ensure a consistent voice throughout the various sections of the firm. It should feel the consistency of voice on the website, the press releases, the marketing campaigns, the packing (in case it is a physical product). It should all look like it is done by one single person. Every member of the firm needs to be trained to recognize this change in voice.
Delegating work is also an important aspect when managers are concerned. A manager should not be the one doing the most work. He needs to understand the nature of the employee working under him and delegate him based upon his strength, weaknesses and experiences. A manager’s management style should be dictated by the employee and hence reference check on employees only helps to increase productivity.
About creating the right team for the firm, Rabois says that editing a team maximizes the probability of success for the team. No one has the perfect team while they are beginning. He says that a firms teams is like barrels and ammunitions. Hiring a lot of employees will only add ammunition to the firm, what is actually needed is the barrels to launch this ammunition in the right direction.
There are always people in the firm who will be approached by others for help and inputs. These people are the barrels in the firm and they need to be encouraged as much as possible to use the ammunitions in the right directions in the right ways. Barrels are people who can take ideas from inception to shipping.
To find the right role for the right employees, the manager needs to expand their scope of responsibilities till the breaking point. The point at which they break is the role where they should stay. Rabois says that there are many instances when a person without proper background and experience can handle enormous responsibilities and difficult tasks, such people are potential barrels for the firm and should be encouraged.
Scaling up a company, according to Keith Rabois, needs to answer the right question as to when to hire/replace/mentor an employee. Rabois recollects that when he joined LinkedIn as the 27th employee and worked till he quit after two and half year, there were only 57 employees totally in the firm. But when he joined Square as the 20th employee and exited the firm two and half years later, there were around 300 employees. He emphasized that every firm has its own model of scaling up.
The individual slope of the employees needs to be above that of the company growth rate on the scaling chart to achieve maximum success.
Aiming the barrels at the right targets is also an important decision when a manager is concerned. A manager always needs to insist on focus. The common fact is that people will solve those issues that they understand better. A+ problems are the high impact ones while the B+ problems are more more goal based ones. So when employees solve more of B+ problems, they do scale up but will never create that breakthrough idea because no one’s solving the A+ problems.
In a firm, there always needs to be tools that would enable others to make decisions at the same level as the manager does himself. The ideal tool for this is to build a dashboard that is to be drafted by the founder himself.
Having a dashboard simplifies the company’s value proposition on the whiteboard. It helps to understand what business success looks like to the company and what the key inputs to those are. It is also important to note what fraction of employees use the dashboard – the more the number, the better the efficiency.
Rabois also mentions the need for transparency in a firm. Everybody needs to have access to everything going on in the firm. While there are meetings being conducted, it is natural for everyone to want to be a part of it, which is quite impossible. Circulating notes from meeting among all the employees will help improve transparency in such situations. Rabois says that conference rooms with glass walls in an office space have worked wonders for many firms. He also mentions the needs to predict the firm’s output to adjust the course of action and that measurements should always be made in terms of outputs rather than inputs.
Anomalies in stats relating to their products, according to Rabois, are something that every firm needs to closely look at as they can point out certain unusual patterns of user behavior. He also says that attention to details is the most important part of managing any firm. When an organization as a whole does everything the right way and when everyone executes up to the same standards of performance, the organization reaches the highest possible performance level. Rabois says that in an organization, when you take away all the distractions and provide tools to be productive, an organization turns successful.