The Weekly: Edition #65 - October 2nd, 2020
Incentives, Speed, and Focus
"Everybody wants results, but not everybody wants to do what that takes." - Frank Slootman
Frank Slootman, CEO of SnowFlake, is an overnight success, twenty years in the making. Having served as CEO of Data Domain, then CEO of ServiceNow, Slootman is no stranger to leading software businesses in hyper growth mode. One hit wonders come and go, but Slootman has scaled 3 publicly traded companies to hundreds of millions in annual revenue. His matter-of-fact management style and extreme focus on what matters most stand out in his recent piece, "Amp It Up!".
Last week, we shared our thoughts on the advantages of a speedy culture in an organization. Slootman's focus on eliminating enterprise 'slack' puts a new spin on increasing efficiency and illustrates how he's been able to replicate his success as an executive at three different cloud-based software firms. Not every piece of advice will line up with your organization's ethos. But there's no denying Slootman's prowess at simply getting things done. His emphasis on picking the right incentives, picking up the pace, and focusing on what matters most has served as the recipe for dominant success multiple times. The advice is easily implemented, but not for everyone - or every employee.
Incentives
"Few things drive home a performance culture like the compensation philosophy. In our case, the company had to earn it first, so that the bonus pool could be funded. Each quarter we would fund the pool, depending how well we did that period. Then the process of allocation started. Managers were not allowed to 'peanut-butter' out the money with everybody getting the same share of the pool. We insisted on a bell shaped distribution. We did not always pay full bonuses and I would personally explain why in our quarterly all hands meetings."
"It is not that we worried about bonuses for substandard performers, but that we were under-bonusing our A players. And to pay A players more, managers had to take that money from the other end of the performance spectrum. It allowed us to be informed of who the strong performers were as well as those not in good standing. Each employee had a money conversation each quarter with their manager relating to performance. These were in lieu of written performance reviews. When it came time to separate with a person, it was a lot easier, cheaper and quicker when there was a below-average bonus history."
Slootman is adamant that a culture of high-performance requires a willingness to be honest about an employee's relative contribution to the team as well as a willingness to compensate them commensurately. As a leader, you tend to get what you incentivize.
Speed
"Going faster, maintaining higher standards and with a narrower aperture. Sounds simple? The question is how you go about amping up your organization. How much faster do you run? How much higher are your standards? How hard do you focus? It is a performance ‘triad’ because they amplify each other. The compound effect can be electrifying. Without leaders driving the tempo in an organization, it will naturally settle into a lethargic pace. If you have ever worked in or with government, you have seen extreme examples of this. There is no urgency about anything, other than quitting time. It’s suffocating being in such organizations, as if everybody is swimming in glue."
An organization will not accelerate itself without a leader's prompting - if this were possible, there would be no need for leadership! Lethargy naturally creeps in and leadership is required to inject energy into the organization for it to overcome this inertial tendency. The key to Slootman's approach is his combination of both the carrot (incentives) and the stick (set the pace and don't waiver).
Focus
"The fastest way to move a dial is narrow the focus. People naturally resist focus because they can’t decide what is important. Therein lies a problem: people can typically tell you after some deliberation what their top three priorities are, but they struggle to decide on just one. They may also be incorrect about their priorities, so there is potential for misallocation of resources. What is too much and what is too little focus? Do you ever even discuss this? Most teams are not focused enough. I rarely encountered a team that employed too narrow an aperture. It goes against our human grain. People like to boil oceans. Just knowing that can be to your advantage."
"At the company level and as a CEO, I worked to create blinding clarity and singularity of purpose. You lack focus at the top, it will be much more so at the bottom."
A carrot and stick approach doesn't carry an executive far without a crystal clear vision for the business. "Blinding clarity," "singularity of purpose" - these phrases sum up Slootman's adherance to an extreme form of focus. If employees can't explain their organization's purpose this simply, leadership isn't performing its most critical job - setting priorities. Slootman's success is repeatable, but not easy. The playbook is clear, but not always well-received. It just takes the right mix of people, incentives, and focus.
Amp it up! (Frank Slootman, CEO of Snowflake)
+ "Bottom line: There is room up in organizations to boost performance by amping up the pace and intensity. Considerable slack naturally exists in organizations to perform at much higher levels. The role of leadership is to convert that lingering potential into superlative results."
Amazon built one of the most efficient warehousing systems in the world by embracing chaos (Quartz)
+ "First, random storage makes finding the toothpaste faster in an era of on-demand efficiency. If there were a dedicated “toothpaste shelf” and someone ordered toothpaste, a “picker”—how Amazon refers to employees who gather items—would need to travel there, whether he were 10 feet or 100 yards away from that location. But if the warehouse stores toothpaste in 50 different locations, there’s a much better chance that there’s a tube close to some picker. There’s also a greater chance that the second item the customer ordered is also nearby."
Companies step up distribution automation under pandemic strains (Wall Street Journal)
+ "More than half of warehouse operators responding to a recent survey by Honeywell Intelligrated, Honeywell International Inc.’s warehouse automation business, said they were more willing to invest in automation as a result of the pandemic. E-commerce companies showed the biggest shift, with 66% saying they were more willing to do so, followed by food and beverage companies and logistics providers, at 59% and 55%, respectively."
A deep dive on Uber (MBI Deep Dives)
+ "American Automobile Association estimates the cost of owning and operating a car in the US is 75 cents/mile. If you are using a public transit, it costs 27 cents/mile. Uber trip costs $1.6/mile globally and costs close to ~$2/mile in the US, indicating just how much Uber needs to improve its cost structure to make it a viable alternative to car ownership."
The inside story of biotech's Barnum and his covid-19 cures (Fortune)
+ "And so one of the planet’s richest medical doctors, who made a $6.7 billion fortune developing breakthrough treatments for cancer and diabetes, seeks to battle the pandemic. The weapons in his arsenal: the cancer treatments he has spent the past decade and a half developing. He’s aiming them at all aspects of the coronavirus, from a vaccine to treatments for mild cases to therapies targeted toward patients on ventilators."
Disney to lay off 28,000 U.S. theme park workers and others as covid-19 takes its toll (Skift)
+ "Walt Disney Company will lay off roughly 28,000 U.S. employees in its theme parks division, the company said on Tuesday, as its resorts struggled with limited attendance and the continued closure of California’s Disneyland due to the coronavirus pandemic. About two-thirds of the laid-off employees are part-time workers, the company said in a statement."
The cheating scandal that ripped the poker world apart (Wired)
+ “The Plaintiffs have reason to believe the mechanisms through which these myriad acts of wire fraud were carried out by Mr. Postle, John Does 1–10 and Jane Does 1–10 involved Mr. Postle's cellular telephone being grasped by his left hand while concealed under the poker table and/or Mr. Postle's baseball cap being imbedded [sic] with a communications device creating an artificial bulge in its lining (that is notably absent in photographs of the same baseball cap on Mr. Postle when he is not playing on Stones Live Poker).”
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