Why it is sometimes important for founders to find that ‘valuable friend’ to scale an organisation
As startups grow at a break-neck speed, founders find it imperative to start delegating and ceding some of their control.
When Eric Schmidt took over Google, he forged a harmonious relationship with Founders Larry Page and Sergey Brin, while also providing what he, rather unapologetically, called ‘adult supervision’. As companies grow, they also realise that their ability to inspire people and passion as well as garner financial resources isn’t enough.
Sometimes, the founder has to bring more people to help with the day-to-day activities of the company, which is what Uber’s Travis Kalanick is trying to do by hiring a new COO. But with the backlash the company is currently facing, it looks like Uber needs more than just someone with business experience and talent – it needs a miracle worker. In short, many believe that Travis needs a Sheryl Sandberg.
As organisations grow and continue to target scale, it becomes difficult for a single individual to run the ship. A week after Travis announced that he was looking for a COO, Airbnb indicated it was again on the lookout for a senior executive to help CEO Brian Chesky manage the rapidly growing organisation.
In fact, in the case of Airbnb, the company had first spoken of hiring a COO all the way back in 2013. According to an article in The Information, Airbnb isn’t exactly looking for a COO now, but rather a senior executive who can be a ‘strong general manager and operator’.
It is believed that the role is crucial for Airbnb, as the company could be heading towards an IPO next year. It now has a $31 billion valuation to live up to. Airbnb is under pressure to keep the money flowing as it continues to grow.
How does a COO help?
Closer home, Freshdesk appointed Nishant Rao, who had earlier served as the Managing Director of LinkedIn India, as its COO in October 2015. To begin with, his job was to get a broad alignment between the various stakeholders in place and to get a sense of where the business was in terms of systems, processes, strategies, and where it needs to be headed. The focus actually depends on what you are looking to solve.
Every CEO and COO duo needs to find their own sweet spot; there is no single formula that works. Nishant also believes that it is important to have several conversations before getting on board. He says that it is important to understand if one is aligned towards the goals that the organisation is moving towards.
“I think the role of the COO is the most misunderstood one in the company. The definition of a COO is to help make the CEO successful. The onus is on the COO to fill in the gaps from a time and data standpoint, where a CEO is not able to focus his energies.”
So, in that respect, the role of a COO varies from company to company. For instance, in the case of Facebook, Mark Zuckerberg has always been a product guy, while Sheryl Sandberg, the COO, is more on the market side. Nishanth adds that Freshdesk follows a model similar to Facebook’s. He says,
“I, as the COO, take care of the go-to-market and the day-to-day operations of the business; this gives Girish the bandwidth to focus on bringing great products to life. Girish focuses on brand, R&D, product, and the board, which are more strategic, while I focus on day-to-day operations like sales to customer success, pre-sales, finance, HR, and legal. If you take Uber’s case, Travis is more of an external-facing, sales-driven guy, so he needs a COO who complements his skill sets.”
This actually helps one to devolve and conquer, rather than forcing one person to manage a large, unwieldy ship. Each individual plays with their natural strengths.
A fluid and changing role
Sometimes, the role of the COO evolves and alters as the organisation moves forward. Freshdesk’s initial focus was to get a solid people’s operations in place, as both Girish Mathrubootham, Founder and CEO of Freshdesk, and Nishant were particular about the culture of the company. So that meant bringing in the right processes and elements of transparency and putting in place new onboarding systems, and helping them assimilate into the company.
After they hired an HR head, Nishant shifted his focus to sales, taking cognisance of what was working and what was not, thinking about go-to-market, and making sure that the teams were properly supported. Since then, the focus has moved a little to the finance side, looking at the journey ahead, and whether Freshdesk has the systems in place now that the company is touching over 1,000 people.
“Both Girish and I have similar passions about people and culture, and that made the transition easier for us. Girish also gave me the space I needed, and I too made sure he was in sync with the transitions and gave him his space,” says Nishant.
More than just operations
Looking to hire a COO is Travis’ way of showing that his company can grow up. Facebook is, in fact, one of the best examples of what a CEO and COO relationship should be like. When Facebook hired Sheryl Sandberg, she came in to compliment her skill sets with that of Mark Zuckerberg's.
An article in Wired states that some employees at Facebook had reservations about Sandberg as they considered her to be too corporate for Facebook’s hacker culture; she, however, convinced the leadership team at Facebook to take its ad business seriously, and within two years, the company turned a profit.
But Sandberg didn’t just turn the company around, she helped shape Mark Zuckerberg into a leader, and went on to become Zuckerberg’s ‘most valuable friend’. An article in The New York Times states that the two did this by making time for each other. Every Monday morning, Zuckerberg took out one hour of his time to spend with Sandberg, and did the same on Fridays.
The article quoted Sandberg as saying, “We agreed that we would give each other feedback every Friday. We are constantly flagging things. Nothing ever builds up.”
In most startups, during the early stages, a technology-oriented founder who has complete control might be the best person to lead, but as the company grows, it becomes more important to have someone with different skill sets. In many cases, it might even become necessary to hire an external CEO. This comes from understanding that there is a need to bring new blood into the organisation.
When to bring in a COO
The prospect of bringing in a COO would make for a rather interesting shift, especially as Travis has operated for a long time without having a second in command. His ability to share power is going to be tested for the first time ever.
Generally, in cases where the CEO has been a complete hands-on person and is used to taking decisions, it would be preferable to find a COO who can ride and dovetail along with the founder and CEO, see how they are thinking, and influence and slowly build alignments.
How much control needs to be ceded is a board’s choice. Sanjay Anandaram, Mentor, Venture Partner Seed Fund, and Advisor at iSPIRT, believes that there is a certain skill set that takes a company from zero to 100, and a completely different set of skills needed to take the company from 100 to 10,000. And managing a company of over 10,000 purely depends on the kind of skill sets the founder has.
Also, bringing in a new COO can drastically transform the trajectory of a business. But when is the right time to cede control?
T.N. Hari, HR Head at BigBasket, believes that it is important to be able to cede control of a certain set of activities to individuals better equipped to perform those activities at scale, without the wheels coming off or without having to reinvent the wheel at every stage.
“The journey would be considerably slowed down if the founders are unable to do this. By ceding control to experts, they can move on to drive continuous innovation and build adjacent businesses,” says Hari.
A survey by the Harvard Business Review found that by the time most ventures turned three, over 50 percent of founders were no longer the CEO; in the fourth year, only over 40 percent held a corner office, and fewer than 25 percent were responsible for leading their company to an IPO. And this isn’t restricted to startups; it is a phenomenon across industries.
The game of controls
“At times, the professional managers that have come onboard do not have a working knowledge or appreciation of what it takes startups to succeed, or an understanding of the core elements of a startup work culture. As a result, the founders are suspicious and are always second guessing them, or not ceding control of even the routine decision making to the stabilisers.”
And sometimes, founders just want to hang on to something they have created even when the better thing to do would be to hand over control to professional managers and move on to look for other things that can be disrupted within the business or create adjacent businesses. Sometimes, the reluctance to cede control is because of an inadequate appreciation of the value that stabilisers bring with them.
“At times, it is also an inherent suspicion of people who are different from you. At other times, it could be that they genuinely believe that their continued leadership is important,” explains Hari.
Apart from bringing in the much-needed professional management, the ‘adult’ in the room can tune and shape the culture of a company. This gains considerable importance in Uber’s case.
In the early to middle stages of startups, the founders who bring in the innovative and entrepreneurial energy dominate, and that’s the way it should be. The purpose and energy of a startup is derived from this motive to disrupt the status quo.
“The founders represent this culture of disruption. As parts of the business get into a mature phase, there is an increasing need to optimise and stabilise. It is at this stage that the stabilisers, mostly represented by senior professional executives (CXOs) who have been part of mature systems, have a role to play,” explains Hari.
Nishant believes that there is no single foolproof formula of how the transition would work. He says that it will depend on the culture of the company, the attitude of the CEO, and the person coming in as COO. Taking Freshdesk’s example, he says that everyone in the leadership team was agreed that the first shift that the organisation needed was a cultural one. That helped in the smooth functioning and transition.
While it is essential to hire someone who carries with them complementary skill sets, it is also important to understand that the styles of working will nevertheless be different. Having open and honest conversations is very important. There is no right answer. It is the intent to work with each other and make the relationship successful that holds the key.