#146 – Scaling startups: Growing communication, leadership, and goals | Sam Corcos & Sander Daniels

Every time a startup team doubles, it’s like you’re in a new company. This can be jarring for leadership as they see the personal and team growth that needs to come with scaling comms, processes, and goal-setting. Levels’ Co-Founder and CEO Sam Corcos sat down to talk with Thumbtack’s Founder Sander Daniels about navigating cultural changes through growth.

05:21 – Now it’s time to grow up

Scaling up is the process companies go through after they find product market fit, achieve positive gross margins and are ready to increase production.

Suddenly about four or five years in, all good things came together. We had figured out how to sign up supply, figured out how to sign up demand, hit on our revenue model. And suddenly after nobody ever having heard of us and raised that amount of money, then in 2013, over the next 18 months, we raised like 150 million dollars over three really quick rounds. And so that launched this stage three of the company that I’m talking about, which was scaling. So the period was very exciting because suddenly the world was paying attention. And we were spending our time doing things like migrating from static servers in Dallas to AWS, moving from a monolithic code base to more of a service oriented architecture, building our design systems and foundation, our brand refresh our internal values refresh, our recruiting machine. So while all that was very exciting, it was also at the same time frustrating because there were entire quarters where we would ship nothing to production because we were just focused on infrastructure building and scaling. So that is kind of like the stage of company that I have in mind when I think about scaling, you’ve found product market fit, you have positive gross margins, and now you’re really scaling up. And I remember a moment in particular when our series C investors, Tiger Global, they came to us and they said, basically to us founders, like, “Congratulations. Now it’s time to grow up.”

09:10 – Cultural change through employee turnover

It’s natural for early-stage employees to move on once the company starts growing into different stages, and new team members will contribute to the next phase of the company’s culture.

There’s cultural changes that you have to go through as you scale. The early crew at Thumbtack of eight, 10, 12 folks, we went through fire together over years and they are some of my closest friends in the entire world a decade later. That period of the company’s life was, we may never go through again in any other company’s life, and it was amazing. But after three or four years, well, turns out some of them started looking at different opportunities or the company wasn’t quite right for them at the time. And the old timers started turning over. And for me, the first time that happened, I was upset. These were some of my friends and I thought they were kind of leaving the battlefield or I just didn’t imagine a world in which my best friend engineer and number two wouldn’t be at Thumbtack. But it turns out life moves on and you hire in folks behind them and they bring different things, strengths to the team and the culture updates. And you get close with that group of folks for another two, three, four years. And then suddenly that group starts moving on as well.

15:15 – Hiring new leadership

A bigger team creates the need for more experienced leadership, but some long-time employees may need to feel included to fully embrace a new boss.

There are early folks who will say to themselves and perhaps they’re friends at the company and you. They’ll say it to you, if you’re lucky. “Hey, I’m not excited about having a new boss. Can I get a shot at being the number one?” And in these cases, there’s a range of response. It’s very role and individual specific. Sometimes the answer is, “Yeah, actually let’s give it a shot and let’s create a plan of what success looks like over the next three months. And we’re going to have regular check-ins on whether you’re on track to hitting plan and meeting expectations or not.” Or it can range to the other end of the spectrum. Like, “Hey buddy, we love everything you’re doing. But we just think that where you are right now is not exactly what we need in this role at the moment.” And those conversations, it’s a tough initial conversation. But what I have found is that in 90% of the cases, oftentimes the person goes from un-enthusiasm around having what they think of as a new boss or a new manager to great enthusiasm when they start meeting actual candidates and people who might be in that role. Suddenly their eyes widen and they think, “Oh my gosh, these people are actually really awesome.” And, “Gosh, I would love to have this person as a mentor and a partner and that I can learn from.”

18:07 – Different stages of a startup attract different people

As a company grows, you’ll realize some personalities thrive and others decide to find another small startup to maintain their ideal work environment.

Sometimes the type of person who likes a five person startup is just not the type of person who loves a 50 plus person startup. Oftentimes you have your stereotypical kind of early stage, holacracy loving engineer in the very earliest days. And then you get to 50 or a hundred and you start adding levels and performance ratings and structure and more siloed roles and responsibilities. And the early freedom loving classic, early stage startup person, it’s just not a fit. And oftentimes people are very self aware of that and they’re like, “Oh, I’m going to be at a startup until it gets to 50 and then I’m going to leave and go do my next very early stage startup.” But sometimes people aren’t as self aware of it and it takes some learning.

29:03 – Adjusting the goal setting process

Goal setting as a small team can’t operate the same as the team grows, and more corporate structures actually facilitate more creativity and ownership within departments and subteams.

So in the early days, we would basically ask teams, when people had context around everything at the company, we would basically ask teams like, hey, come up with your goals, create drafts, send them to us, and we’ll do our best to reconcile them and finalize them. And then the goals will be locked that really broke down at 50 or a hundred folks because we asked teams to develop goals. And it was clear people didn’t have the context to really properly set goals, they didn’t come back with bad goals, they were just struggled to create them in general, and they would ask us like, “What do you want our goals to be?” And so we did a pretty deliberate change to our goal setting process to have leadership first propose goals. And it would start with kind of a vision and strategy statement or pillars, and then followed by actual more tactical goals. And that felt really funny to us. We’ve thought, well, we’re not the experts in what they’re doing. Why are we setting their goals? It also felt start-uppy to be more top down like that. but what we found is by starting at the top first, and it actually unleashed the creativity of the teams and the full creative potential of teams, because it gave them boundaries within to operate. And they said, “Okay, great, the leadership is saying X, Y, and Z is a priority this quarter. Awesome, I know exactly how I fit into that. And now I’m going to go and do a week long offsite strategy session with my team and we’re going to think of the five most high impact things we can focus on this quarter to move that needle. And we’re going to propose them to the leadership and then we’re going to have a conversation about it.” And then we would get those goals back from teams, and we’d be like, “Oh, these are so great. These ideas are like so much better and more relevant than the ones we were getting in the previous process.”

37:13 – The cultural transition from startup to corporate

Creating more corporate structures like formal executive teams, top-down goal setting and performance reviews isn’t selling out, it’s setting your company up for success.

There’s this cultural transition as you go through a lot of these things from classic startup, bottoms up creative culture. And when I was younger and first starting Thumbtack, I thought the move to a more professionalized, quote unquote, top down culture was like we were selling out or something. It like didn’t feel right in my soul. But what I learned over the course of time is that it’s not at all like that, actually. It’s not a transition from bottom up to top down. It’s really like, how as leadership are you best setting your team up for success and empowering them?

38:18 – How performance reviews empower the team

At a certain point, employees want structures around feedback, expectations, career goals and compensation levels so they understand how their work fits into their career as a whole.

Another example is adding Levels and performance reviews into the team. It was all great and fine when we were 25 or even 50 people to not have formal levels and formal roles and responsibilities. But when you got to 50, 100, 200, suddenly people were hungry for that. And what we thought of as letting people navigate their own path, they thought of as, you’re not providing me any direction. What do I need to succeed in my role? What do I need to do to get to the next level in my career? Can you please tell me what you think I’m doing great at and what I’m not doing so great at so that I can celebrate and leverage my strengths and figure out and so we can talk openly about, and we can form a plan for how to improve the things I’m not so great at. All of that was liberating for folks and empowering folks. And so I, now that I’ve gone through that process, take a very different view on a lot of these more formalized processes as you scale than I did when we were first starting Thumbtack.

47:31 – The impact of employee leveling

Though crafting employee levels is a heavy lift for any company, it pays off in dividends and sets the stage for even more growth in the future.

So it’s a whole huge shebang, but at the end of it, when you do it right, gosh, again, does it unlock productivity and creativity and clarity. And suddenly people have guard rails that they can operate in and thrive in and build their career on and grow and learn. And they have this whole scaffolding and infrastructure that they can thrive in and they know what’s expected of them. You can start building your L and D programs on top of that because you actually have articulated what people need to know to succeed in their roles. And so you can build modules that help people get to their next roles and you can become true champions for their career growth. And it’s a beautiful, awesome thing when you implement it. And oh, by the way, it’s much fairer and less biased than it ever was previously. And people love that and welcome that. And so it can really be done in a way that nurtures and grows your team. It can be done in a way that’s very positive and helps people become their true selves and grow personally and professionally. So that is the payoff, but gosh, it is a huge investment upfront.

58:33 – Gaining self-awareness through executive coaching

Executive coaches offer an outside perspective on your strengths and weaknesses, which is vital to building your company and maintaining your position as a founder.

The first coaches we ever hired, they were more kind of analytic, management consultant type coaches. They had their framework, they had their 150 question survey. And they came to us founders and they said, “All right, each of you give us a list of eight, 10, 12 folks in the world who you’re closest with personally and professionally, and we’re going to administer this survey to them. They administered the survey to these folks. They got the results, they sat me down in a room after they’d gotten the results for me. And if I were ever previously under any illusions about what I was good and not good at, then they were entirely shattered during that session. And I took that information and some of it was affirming and great, but there were like one or two pieces of it that frankly, were devastating. And I kind of like went from ebullient, outgoing founder and I kind of went into like hermit mode for the next six or nine months. Really reprogramming a lot of how I operated in the office for me, how I communicated verbally to people to kind of grow up and professionalize. And I did that and came out on the other side stronger than ever.

01:01:43 – Don’t hold too dearly to old tactics

Things that worked in the beginning won’t work as you grow, and the sooner you let them go the sooner you can build new processes that support your current needs.

One mindset change I went through was again from first time founder scaliness through 50 to 150 to a thousand, was that this just changes good and healthy. And really every single thing at the company changes every time you double in size, other than the vision. Our vision at Thumbtack for what we’re building has never changed in 15 years, but every single other thing has changed multiple times. And so like, don’t hold too dear to things that were great in the past, because they oftentimes fade and aren’t quite right for the next generation of folks.

Sander Daniels: (00:06) When I was younger and first starting Thumbtack, I thought the move to a more professionalized, top down culture was like we were selling out or something. It didn’t feel right in my soul. But what I learned over the course of time is that it’s not at all like that actually. It’s not a transition from bottom up to top down. It’s really like how as leadership are you best setting your team up for success and empowering them?

Ben Grynol: (00:39)

I’m Ben Grynol, part of the early startup team here at Levels. We’re building tech that helps people to understand their metabolic health, and this is your front row seat to everything we do. This is a whole new level.

Ben Grynol: (01:04)

Scaling teams is never easy. Every time you double, it’s basically a new company. When you go from five to 10 to 20 or 25 to 50, 50 to 100, there are all of these different phases of a company. None of them are easy. They come with different complexities and different considerations. So Sam Corcos co-founder and CEO of Levels sat down with Sander Daniels, founder of Thumbtack, and the two of them discuss Sander’s outlook. And some of his experience when it comes to scaling teams. As they raised capital with Thumbtack, they got to this point where a few of them were living in a house in the Castro area of San Francisco. And next thing you know a few years later, they had raised a bunch of capital. They raised actually almost 150 million over a short period of time. And that was the insight where they thought, hey, we have to change the way that we are working, change the way that we’re thinking about some of these considerations, some of them around communication, some of them are around leadership, some of them around process.

Ben Grynol: (02:04)

The irony is that as you start scaling, the considerations from a product standpoint become different. You might focus more on shipping things like backend infrastructure than shipping actual customer facing product features, but it’s all part of the opportunity cost or the trade off of time that comes with scaling. Most importantly, the key is always figuring out team dynamics. How can everybody work together? How can the cultural anchors help to push the culture forward as new people come on board? And how can new people bring different energy or different perspectives to the company given the stage? Anyway, the two of them sat down and discussed this idea of scaling teams at different stages of startups. It was a great conversation. Here’s where they kicked things off.

Sam Corcos: (02:55)

Some of the things that I’m thinking about, almost all them are related to team scale. We’re about 50 people now. You scaled a company to something that’s bigger than we are right now, so you’ve been through a lot of these stages. I think you were the first founder that I talked to who brought up this idea of you have to really think of your company as a different company, roughly every doubling in terms of head count. Like it is a different organization and you have to treat it that way. So we’re about 50 people now, and it is a reality that the systems and processes that worked when we were 25 people have just kind of stopped working.

Sam Corcos: (03:36)

And so we are rethinking a lot of our systems and processes, and I’ve now talked to about 10 founders of similar weigh stage companies, and actually I hosted at dinner on this last week with 10 other founders with 50 employees and everyone was experiencing the same types of problems. And so I’m curious, what were the kinds of issues that you ran into when you hit that stage of about 50 people and what were some of the tactical things that you did to get to the other side of it?

Sander Daniels: (04:15)

So when I think about team scaling, just so we’re kind of base lining. When I think about my time at Thumbtack over 13, 14 years, the company went through, at least in my mind, four different stages. The first two stages were really scrappy, early days, we were building a marketplace stage one, and stage two we’re building liquidity in the marketplace. Stage one was we were figuring out how to sign up supply in our marketplace. Stage two, we were figuring out how to sign up demand. And then we were figuring out how to layer a revenue model on top of all of that. We were wandering in the wilderness. A lot of that time, it was 8, 10, 12 of us living in a townhouse together above the Castro here in San Francisco. We had raised three or four million dollars over three, four, five years. Nobody had really heard of us.

Sander Daniels: (05:19)

And then suddenly about four or five years in, all good things came together. We had figured out how to sign up supply, figured out how to sign up demand, hit on our revenue model. And suddenly after nobody ever having heard of us and raised that amount of money, then in 2013, over the next 18 months, we raised like 150 million dollars over three really quick rounds. And so that launched this stage three of the company that I’m talking about, which was scaling. So the period was very exciting because suddenly the world was paying attention. And we were spending our time doing things like migrating from static servers in Dallas to AWS, moving from a monolithic code base to more of a service oriented architecture, building our design systems and foundation, our brand refresh our internal values refresh, our recruiting machine.

Sander Daniels: (06:32)

So while all that was very exciting, it was also at the same time frustrating because there were entire quarters where we would ship nothing to production because we were just focused on infrastructure building and scaling. So that is kind of like the stage of company that I have in mind when I think about scaling, you’ve found product market fit, you have positive gross margins, and now you’re really scaling up. And I remember a moment in particular when our series C investors, Tiger Global, they came to us and they said, basically to us founders, like, “Congratulations. Now it’s time to grow up.”

Sander Daniels: (07:20)

And for us that meant two things. One was executive coaching and two was hiring execs around us to lead all the different departments. So I can talk a lot more about both of those things, but there was a whole host of beyond that internal processes that I can dive into in some detail. Like building out career ladders in Levels and moving our more informal 360 feedback process to more of a formal performance review and rating process, building our recruiting machine, continuing to refresh and realign on our internal values. Continuing to update our internal team working norms and internal team communications in a way that made sense for the next stage of size team.

Sander Daniels: (08:29)

And alongside all of those like more tactical items I mentioned, which again I can dive into, we learned as founders kind of how to run a more professional organization. We ourselves personally professionalized how we work through that period through a lot of blood, sweat, and tears in many cases. And that had a ripple on effect on a whole lot of things. One example in particular is there’s cultural changes that you have to go through as you scale. The early crew at Thumbtack of eight, 10, 12 folks, we went through fire together over years and they are some of my closest friends in the entire world a decade later. That period of the company’s life was, we may never go through again in any other company’s life, and it was amazing.

Sander Daniels: (09:45)

But after three or four years, well, turns out some of them started looking at different opportunities or the company wasn’t quite right for them at the time. And the old timers started turning over. And for me, the first time that happened, I was upset. These were some of my friends and I thought they were kind of leaving the battlefield or I just didn’t imagine a world in which my best friend engineer and number two wouldn’t be at Thumbtack. But it turns out life moves on and you hire in folks behind them and they bring different things, strengths to the team and the culture updates.

Sander Daniels: (10:41)

And you get close with that group of folks for another two, three, four years. And then suddenly that group starts moving on as well. So at this point in Thumbtack’s life, I would say it’s a, we’ve gone through that cycle a few times of like a team of culture promoters. Then they are contributing enormous amount to the company over a period of time, but then for whatever reason they move on from the company and turns out it’s not the end of the world. It is tough loss when you lose people like that. But you rebuild and you get even stronger with the next round of hires oftentimes. So, all right. That was a lot, and I just talked at you a lot. But in addition to the tactical pieces that I’m happy to dive into, there’s a lot of like culture management through turnover and over and personal growth that has to happen as the company doubles in size.

Sam Corcos: (11:53)

Yeah. There was actually one of the things you mentioned about how Thumbtack went from nobody knowing what it was to I remember years ago, having a conversation with Marco, we were just, I think it was at a dinner. And he said, “Yeah, I work at a marketplace company called Thumbtack.” And he gave this… It’s like, “Mark, everyone knows what Thumbtack is. Like, why are you giving this explanation?” He was like, “Really?” It’s like, “Yeah, really.” And I imagine that it sounds like that happened pretty suddenly, people just like suddenly everyone knew what it was.

Sander Daniels: (12:31)

Well, it’s funny because even today I still have that, it still surprised me that people have heard of Thumbtack, in a delightful way. For somehow my mind will never be able to process the idea that the world is heard of Thumbtack. And I think it might just be kind of like that early stage builder mentality. I love being in the weeds, I love building and I will always have this kind of chip on my shoulder. We still need to achieve the breakout growth that we’re always succeeding. So, yeah. I very much resonate with that comment from Marco.

Sam Corcos: (13:23)

Yeah. Yeah, one of the things that the personnel side of things is interesting. Because I’ve read in a lot of books, like Elon mentioned this in the High Growth Handbook, that around this stage seems to be a pretty common place for there to be employee turnover or changes in roles where the needs of certain areas of the company, it’s not that people are starting. It’s not that people are not capable, but it’s that the scope of what is needed has increased. And so it’s not like people have gotten worse. It’s just that the expectations and the needs have increased from people in leadership. And that it’s often a time where you hire somebody above somebody who was an early employee and you find people who are more experienced to take on those kinds of roles.

Sander Daniels: (14:24)

Yeah. I think there’s a couple dimensions here. A couple patterns [inaudible 00:14:31]. One is what you mention, as the company grows and raises more money, the stakes get higher and the scope of what’s needed from folks increases. Like I mentioned, one of the ways in which our series C investor told us to grow up was to hire execs around us who can do jobs better than we can. And so for 12, 18, 24 months, we spent our time, like half of our time going out and hiring a VP ops, a VPN, a VP design, a VP people, a VP finance on and on.

Sander Daniels: (15:12)

And yes, there are early folks who will say to themselves and perhaps they’re friends at the company and you. They’ll say it to you, if you’re lucky. “Hey, I’m not excited about having a new boss. Can I get a shot at being the number one?” And in these cases, there’s a range of response. It’s very role and individual specific. Sometimes the answer is, “Yeah, actually let’s give it a shot and let’s create a plan of what success looks like over the next three months. And we’re going to have regular check-ins on whether you’re on track to hitting plan and meeting expectations or not.” Or it can range to the other end of the spectrum. Like, “Hey buddy, we love everything you’re doing. But we just think that where you are right now is not exactly what we need in this role at the moment.”

Sander Daniels: (16:32)

And those conversations, it’s a tough initial conversation. But what I have found is that in 90% of the cases, oftentimes the person goes from un-enthusiasm around having what they think of as a new boss or a new manager to great enthusiasm when they start meeting actual candidates and people who might be in that role. Suddenly their eyes widen and they think, “Oh my gosh, these people are actually really awesome.” And, “Gosh, I would love to have this person as a mentor and a partner and that I can learn from.” And so the number one way I found to get folks bought into bringing new leaders into the company is getting them involved in the recruiting process and giving them real responsibility. Like, “Hey, can you help me source for this? Can you be the first phone screen or whatever? I would love that.”

Sander Daniels: (17:36)

And oftentimes candidates themselves find that to be a great signal because it’s like, oh, I’m not coming into a tough situation where I’m going to have to do a whole lot of change management. Instead, the CEO’s already done that change management for me, or the team’s already bought in. That’s great. So that’s one dimension of kind of what happens as you bring in more leaders. Another dimension of what she mentioned sometimes the type of person who likes a five person startup is just not the type of person who loves a 50 plus person startup. Oftentimes you have your stereotypical kind of early stage, holacracy loving engineer in the very earliest days. And then you get to 50 or a hundred and you start adding levels and performance ratings and structure and more siloed roles and responsibilities.

Sander Daniels: (18:35)

And the early freedom loving classic, early stage startup person, it’s just not a fit. And oftentimes people are very self aware of that and they’re like, “Oh, I’m going to be at a startup until it gets to 50 and then I’m going to leave and go do my next very early stage startup.” But sometimes people aren’t as self aware of it and it takes some learning.

Sam Corcos: (19:02)

Yeah. I wonder, one of the things that I’ve been thinking a lot about because we are at a stage where the needs of a lot of these leadership roles are really getting pretty significant. And I wonder how do you, in the context of something like taking ownership of things where I always try to assume that there’s a process gap or that I could have set better expectations or that there’s something that I could do first before jumping to the conclusion that there’s a personnel mismatch with the skills that are needed. How do you think about that when you approach those kinds of problems? How do you diagnose whether it’s just simply a process problem or whether it’s a personnel or experience problem?

Sander Daniels: (20:01)

In the early days, I would say it was hard diagnosed because we were not confident in ourselves. We did not have the experience ourselves to know whether the processes, the expectations that we were communicating to the team and these folks were good. Like, were we being good managers? And when we didn’t know that it was hard to know whether the problem was our management of them or whether it was kind of a personnel specific problem. Over time, we gained more and more confidence and had pattern matching to say, okay, actually the way we’re managing folks, though not perfect, is pretty good. We set clear roles and responsibilities for them, with them, through the recruiting process and upon them joining so they understand what they’re responsible for. We set up clear working norms and expectations. Hey, here’s what I expect of you in your role in the day to day, in the week to week, the month to month, quarter to quarter.

Sander Daniels: (21:11)

And I am going to like be here for you. Anything you need, come to me. I’m also going to communicate to you in our one on ones about what I expect from you that week. And if all of that structure and process is set, we learned that if things still didn’t feel right after two or three months, then it was probably more of like a personnel issue rather than a management issue. And listen, when I say personnel issue, I don’t have in mind, like this person is an under performer. For senior folks who have a good track record, that is way too gross of a generalization.

Sander Daniels: (22:09)

Instead, when you’re talking about senior folks in your org and people who can lead your team to the next level, it’s really oftentimes much more about like, are they a cultural match with your working style and the team’s working style? And so if you are setting expectations of them, communicating to them, managing them in a way that matches your company’s culture. And it’s working for many, many people, and you’re getting high velocity output from folks with that style and someone comes into the org and you’re not getting that from somebody, then I would trust that feeling after two or three months. And again, that blame is not on them or on you. Instead, it’s almost certainly just a working style mismatch. And yeah, move on.

Sam Corcos: (23:19)

Yeah. And one of the other things that we are recognizing as a source of problems right now is around company communication. A year ago, it was possible for everybody on the team to just pay attention to everything that’s happening. And that worked fine and you just looked at everything and you just knew everything. And we’re now at 50 people. This is the problem of headcount scaling linearly and communication pathways scaling polynomially. Where there is now too much communication for everyone to keep track of and we’re suffering from a context collapse problem. Where people who try to stay up to date are just overwhelmed with the amount of communication. And oftentimes people who need certain information aren’t getting it because it’s just getting drowned. Out the signal to noise ratio of communication is really low right now. So I don’t know if you figured out a good way of resolving that.

Sander Daniels: (24:32)

Yeah. The people at the company at your stage move from everybody being information provider to many, many more people being information takers. Meaning, in a high performant, very early stage company, you want everybody contributing. Everybody has something to add to the strategy, to tactics, and in that type of context, 20 people call it, that is the best way to have high velocity, high creativity output. That starts breaking down in a big way at 50 for the reason you described. And it sounds, it can be like, you feel like you’re losing something by not every person at the company contributing creatively to any part of the company strategy and tactics, but it becomes impossible. And instead it becomes really incumbent on leadership to consolidate the core messaging and information that people need to know to succeed in their role and communicate it in many different ways. In writing, in person, in group meetings, in one on ones, ad nauseum.

Sander Daniels: (26:21)

And so it was a round your size that we leaders at Thumbtack found ourselves learning to repeat things over and over again. And I remember and still today basically leaders at Thumbtack, we have our weekly leadership meeting and then we spend the rest of the week kind of just repeating the things that we said that we decided were the priorities of the week. And then once you get to bigger and bigger scale, it’s like you do your quarterly planning and you spend the entire quarter repeating the same things that you had decided at the beginning of quarter. So yeah, and then finally you find people in the team, many more people, like it’s okay that they’re information receivers and takers. And then they execute rather than everybody being a super creative contributor to the company strategy and tactics. That’s fine, that’s a normal evolution.

Sam Corcos: (27:37)

Yeah, and I was talking to a founder recently who said that he feels like his job has transitioned to chief reminding officer.

Sander Daniels: (27:45)

Exactly.

Sam Corcos: (27:45)

Because that’s what he spends all of this time doing. And I had somebody also, we were talking about strategies for keeping focused on your priorities. And you have a really visceral example that resonated with me, which is it’s almost like you have a Ouija board and you see the target in front of you, but there are these evil spirits that are pulling it to the left and to the right. And you’re like, no, just go straight. But it can’t seem to go that way and you don’t know why. And at our current stage with our current about 50 employees, it is a lot harder to get that alignment than it was in the past. And I’m not totally sure why that is, but we have found that constant repetition of our goals seems to be helping with that.

Sander Daniels: (28:45)

So one tactical item there is I recall we had this evolution in our goal setting process from pure bottoms up to first top, then bottom, then back up to top. And what do I mean by that? So in the early days, we would basically ask teams, when people had context around everything at the company, we would basically ask teams like, hey, come up with your goals, create drafts, send them to us, and we’ll do our best to reconcile them and finalize them. And then the goals will be locked that really broke down at 50 or a hundred folks because we asked teams to develop goals. And it was clear people didn’t have the context to really properly set goals, they didn’t come back with bad goals, they were just struggled to create them in general, and they would ask us like, “What do you want our goals to be?”

Sander Daniels: (29:54)

And so we did a pretty deliberate change to our goal setting process to have leadership first propose goals. And it would start with kind of a vision and strategy statement or pillars, and then followed by actual more tactical goals. And that felt really funny to us. We’ve thought, well, we’re not the experts in what they’re doing. Why are we setting their goals? It also felt start-uppy to be more top down like that. but what we found is by starting at the top first, and it actually unleashed the creativity of the teams and the full creative potential of teams, because it gave them boundaries within to operate. And they said, “Okay, great, the leadership is saying X, Y, and Z is a priority this quarter. Awesome, I know exactly how I fit into that. And now I’m going to go and do a week long offsite strategy session with my team and we’re going to think of the five most high impact things we can focus on this quarter to move that needle. And we’re going to propose them to the leadership and then we’re going to have a conversation about it.”

Sander Daniels: (31:18)

And then we would get those goals back from teams, and we’d be like, “Oh, these are so great. These ideas are like so much better and more relevant than the ones we were getting in the previous process.”

Sam Corcos: (31:31)

Yeah. It’s funny you say that because I talked to a number of founders who had made it to the other side of this 50 person stage. And the specific solutions that they came up with were often very different, but it seems like the principles of the types of problems that you have to solve at this stage, one of them is around goal setting. Almost every company implemented something like an OKR system at this stage, almost all of them. They had different acronyms that they use, but it was basically objective in goal setting. And it’s funny because when we were, I don’t know, 20 ish people, we tried to do OKRs. I shouldn’t say we tried, we did the whole process and it added a lot of overhead and really didn’t provide any value because everybody already knew what the goals were.

Sam Corcos: (32:31)

So we just did all this extra work and it didn’t bring any new alignment, so we gave up on it. But I think that once you’re at this stage, it actually does add a lot of value because it gives people clearer alignment when they aren’t fully contextually aware of everything going on. One of the other principles that it seems like everyone had the solve was around clearly articulating decision making authority. One of the founders I talked to described it as an exercise in collision management where in the past, it was just sort of implied who made what decisions. And now you have to clearly articulate it because otherwise the only way things get done is if the CEO makes the call or you have unanimous consensus across the entire organization. And because it was so implicit in the past, you might have four or five people who think they’re responsible for making a certain decision. And you have to figure out who is actually the person to make those decisions.

Sam Corcos: (33:38)

So things like coming up with racing matrices for everyone in your organization of who makes what decision. So that seems to be another principle of a type of problem that needs to be solved at this stage. Is that similar to your experience?

Sander Daniels: (33:52)

Yeah, exactly. We came up with certain principles of how we goal set that we stuck to pretty religiously over the course of time and it was a lot through trial and error, but it’s similar to what you’re saying. So every goal we set had to be, it was called a metric or a milestone, it was classified as such. And the kind of principle for any metric or milestone that we set was is this goal articulated in such a way that we can look back on it at the end of the quarter and call it a success or a failure? Oftentimes you’ll see like the way that people word or draft their goals is, it sounds nice, but it doesn’t meet that standard. You can’t look back on it at the end of the quarter and say, yes, this was a success, or no, this was a failure. Or not a failure, but like we didn’t meet it enough, for XYZ reason.

Sander Daniels: (34:54)

Relatedly, yes, we attached what we called a DRI, a directly responsible individual to every single milestone or metric. Every goal had to have a name attached to it. We didn’t do that in the early days, but then we found, okay, we need to empower our teams by adding a DRI to every goal so that they are empowered to move quickly. They have one person who they can go to move quickly. And that person is not the CEO in most every case. And then, so that was like one level of ownership that we would assign. But then within the leadership team and the exec team itself, there were similarly assigned responsibilities. This was usually less formal and known because it’s a smaller team of six, eight, 10 folks. But there were were absolutely certain decisions where we’d be like, okay, we’re all going to agree right now this is Marco’s decision to make because he’s the CEO and it spans across two or three different orgs and owners.

Sander Daniels: (36:17)

Or we would be de very deliberate about saying, all right, this decision or this goal, it’s our CFO’s to make because he or she is the person best positioned to be the leader and we trust them. So yeah, we got very explicit about the words we would use to draft goals and then who would be responsible for them.

Sam Corcos: (36:50)

Yeah. It’s funny you say that because we in the last six months have instituted DRIs. So yeah, we’re finding that it’s helping a lot in circumstances of making sure that people have clear decision making authority.

Sander Daniels: (37:06)

One thing that I’m finding in our discussion keeps coming to mind for me is there’s this cultural transition as you go through a lot of these things from classic startup, bottoms up creative culture. And when I was younger and first starting Thumbtack, I thought the move to a more professionalized, quote unquote, top down culture was like we were selling out or something. It like didn’t feel right in my soul.

Sander Daniels: (37:43)

But what I learned over the course of time is that it’s not at all like that, actually. It’s not a transition from bottom up to top down. It’s really like, how as leadership are you best setting your team up for success and empowering them, like in that goal setting process, having the leadership team provide clarity to the rest of the organization about what the priorities were, that was empowering to the team and that unlocked their creativity. Another example is adding Levels and performance reviews into the team. It was all great and fine when we were 25 or even 50 people to not have formal levels and formal roles and responsibilities. But when you got to 50, 100, 200, suddenly people were hungry for that.

Sander Daniels: (38:41)

And what we thought of as letting people navigate their own path, they thought of as, you’re not providing me any direction. What do I need to succeed in my role? What do I need to do to get to the next level in my career? Can you please tell me what you think I’m doing great at and what I’m not doing so great at so that I can celebrate and leverage my strengths and figure out and so we can talk openly about, and we can form a plan for how to improve the things I’m not so great at. All of that was liberating for folks and empowering folks. And so I, now that I’ve gone through that process, take a very different view on a lot of these more formalized processes as you scale than I did when we were first starting Thumbtack.

Sam Corcos: (39:38)

One of the things that’s interesting and kind of unexpected for me, which is very similar to what you were mentioning is we are now formalizing our performance review process. And that’s one of those things that I always thought was like big company bureaucracy, kind of thing.

Sander Daniels: (39:55)

Exactly.

Sam Corcos: (39:56)

But we’re formalizing it because it’s something that everyone’s asking for, which I wasn’t expecting. People on our team want performance reviews and they want to know how they’re doing and they want feedback and they want to improve. Which makes sense when you think about it but I had always thought of it as this top down, bureaucratic approach, but it actually really helps people understand how they’re doing.

Sander Daniels: (40:22)

Exactly. So we had culture of feedback from day one at Thumbtack. We instituted informal 360 reviews that we would do periodically from day one. But, and then once we completed those, we would all write plans for ourselves for the next six months, call it, until we got the next round of feedback. We would summarize in a document. All right, what are people saying I’m great at? What are two or three areas of improvement? And then what are one or two max things I’m really going to focus on over the next six months to try to change or improve given the feedback I got? So we always had that and we kept that more informal process for a really long time, actually.

Sander Daniels: (41:27)

We kept that process probably through like 200 folks or so. And that turned out to be a little long. Because what happened once we started getting feedback in our quarterly or semi-annual employee engagement surveys of exactly this. People would say like, “Great, I love the idea of staying flat, but in practice, it’s not working for me. I don’t know where I stand in the organization. I don’t know what’s required of me to get to the next level.” Some people would share, “I worry that because we don’t have a formalized feedback process, who gets more responsibility or promoted or pay raises can be biased or unfair in a million different ways.”

Sander Daniels: (42:32)

And so we learned through that feedback, okay, gosh, what people are really asking for is a more formalized system. And so we went through a, it was a six month almost full time effort driven by our people team to create the whole leveling and performance review and rating system needed to do it right. So the types of things this included are okay, what are like our levels going to be at Thumbtack? How many are we going to have? I think we eventually landed on 10. We’re going to have 10 levels from the beginning, a very junior entry level person, all the way up to CEO.

Sander Daniels: (43:43)

Every single org, what are the titles of the person at each level? So what is the title of a L5 engineer? Then, what are the expectations of people at each of those levels? Okay, we’re going to have two sets of expectations, actually. One is company wide norms and expectations that we have of everybody, no matter who you are, what level you’re at, what department you’re in. And what we landed on are four dimensions of evaluation. One is impact, two is expertise. Three is people skills, four is citizenship. And so no matter who you are, those are the four dimensions that you’ll get rated on.

Sander Daniels: (44:45)

But then each department is going to have its own kind of sub skills and expectations within each of those four that every department lead is responsible for drafting at every single level for every single role in their org. So that process takes like two months because you have every VP or department leadership team drafting these long documents of okay, if I’m the leader of the people organization, what do I require of an L3 sourcer, versus an L4 sourcer? And an L4 recruiter versus an L5 recruiter? And on and on and on for all the different roles.

Sander Daniels: (45:35)

And then there’s a whole process around compensation and matching compensation to all the different levels. And what are the bands for each level, and all of the different roles? And then once you actually start rolling this out, if you roll it, when you roll it out for the first time, there was a process that we went through that we called slotting. So you have to slot people into the levels the first time you ever do this, moving from an informal, non leveled structure to a formal, leveled structure. And that’s a very sensitive process. Because for the first time, you’re kind of rating people into these levels. And 95% of people are happy or understand the level that they’re at, but there’s always edge cases where you manage through tougher conversations, or just figure things out. And then once you do it for the first time, and then every subsequent time thereafter after you actually administer this and perform the reviews, then there’s a calibration period for two or three weeks during every performance cycle where the leaders get together.

Sander Daniels: (46:47)

And they basically calibrate all the ratings for the folks like is head of department X rating people the same way that head of department Y is doing it? All right, we need to actually get in a meeting room for like six hours and talk through every person individually. At your stage of 50, we’re going to talk through all 50 people and make sure that we’re all calibrating and rating these folks correctly. When it gets to 250, then you do internal department calibrations and then you do company level calibrations. So it’s a whole huge shebang, but at the end of it, when you do it right, gosh, again, does it unlock productivity and creativity and clarity. And suddenly people have guard rails that they can operate in and thrive in and build their career on and grow and learn.

Sander Daniels: (47:56)

And they have this whole scaffolding and infrastructure that they can thrive in and they know what’s expected of them. You can start building your L and D programs on top of that because you actually have articulated what people need to know to succeed in their roles. And so you can build modules that help people get to their next roles and you can become true champions for their career growth. And it’s a beautiful, awesome thing when you implement it. And oh, by the way, it’s much fairer and less biased than it ever was previously. And people love that and welcome that. And so it can really be done in a way that nurtures and grows your team. It can be done in a way that’s very positive and helps people become their true selves and grow personally and professionally. So that is the payoff, but gosh, it is a huge investment upfront.

Sam Corcos: (49:05)

Yeah, for sure. One of the things that I wonder about, circling back to the idea of directly responsible individuals, this is more of a tactical question. How did you manage to keep track of who was responsible for what? And at what level of granularity did you get to for assigning DRIs? And the reason why I ask is I’ve talked to a lot of different companies at this point to try to understand it and there seems to be two fairly distinct models. One is much more like SpaceX, they have responsible engineers, which is the same idea as a DRI and being a responsible engineer is a big deal. And there aren’t very many of them, and it’s a really, really high bar, to be a responsible engineer. I’ve also seen other companies where almost every task to the granularity of like sharing the investor update with the investors, or writing the product section of the investor update or any specific granular task has a DRI.

Sam Corcos: (50:21)

And so I’m not sure if these are compatible models, but I wonder how you thought about what is the proper level of granularity for assigning DRIs to things? And how did you manage and maintain and communicate those to people?

Sander Daniels: (50:39)

So, very tactically. When the company was small, smaller, 20, 30, 50 people, we had a single spreadsheet that housed our quarterly goals. And the rule of thumb was can a normal person read through this spreadsheet in five or 10 minutes and kind of grok it? If it took longer than that, then there way too many tasks being assigned. And the goals were way too granular. If it was a less than that then maybe the goals were a little too high level. And that worked for a certain period, but then every time the company doubled in size, there would be more and more and more tasks added that spreadsheet. And suddenly what we ended up doing is over time as the company grew and the number of tasks grew, the single spreadsheet that housed company level goals stayed the same size. And those goals became bigger and bigger and the DRIs that were attached them became kind of bigger and bigger deals, I think is how you said it in the SpaceX model.

Sander Daniels: (52:06)

And then there would be sub spreadsheets that teams or departments, first departments. And then as you the company got 250 or 500 plus, teams and sub teams would create that laddered up to that highest level spreadsheet where tasks were assigned and sub projects were assigned granularly. So for purposes of company communication, what you’re reading out on at the all hands, what you’re sharing out on at the quarterly kickoff, there’s just the one spreadsheet that has the goals. And at this point it’s like each department has one goal that you’re reading out on at the company level. And any more than that is way too much for folks to grok. There would be like sub sub tests. There even comes a point where it’s like some teams, they don’t quite make the cut for the company level goal. And it’s not because their goals aren’t are less important or anything it’s because it’s kind of like, it’s the same as it was last quarter.

Sander Daniels: (53:21)

Or it’s like an important infrastructure task that not every person at the company impacts their day to day. And so they don’t need to know, we would curate the goals, the handful of goals that we would share out with the whole company based on this is what the team really needs to know. And these are the goals that really get like the core of our latest company strategy that we want to communicate and repeat ad nauseum for the next month or whatever.

Sam Corcos: (53:50)

Got it. Yeah, because what we’re doing is we have a database and notion is what we started doing, which is basically the same as a spreadsheet. So it’s interesting to hear that we’re doing it as a, you can turn this into an academic exercise where you just end up with way too many people assigned as DRIs for every granular task, or you can treat it as a pragmatic exercise, which is write it down if it’s useful. And that’s the approach that we’ve been taking and it seems to be going pretty well. Like you add it to the database, if it’s necessary.

Sander Daniels: (54:27)

Yeah. You can kind of get a sense as an exec, like at what point in the goal setting process am I burning out by being too granular about this and just over reading documents? Because you can have like document vomit almost at goal setting time by every sub team contributing their spreadsheet. And once your eyes start glazing over and you’re not able to like give true feedback, you’ve gone a little too far.

Sam Corcos: (54:53)

Sure. One of the other things that I’m curious about is the role of founders and how that changes at different stages of complexity. This is my first time as CEO of a company, I’ve historically been on the technical side. And I’m noticing that around this stage of about 50 people, this is the point where my direct involvement in projects now creates more inflammation than it solves. And that is frustrating.

Sam Corcos: (55:33)

I was talking to another founder, who’s at the exact same stage. And he says he feels like he’s shouting into the void or that his hands are tied. And he used to be able to just solve problems directly, and now he can’t. And in fact, trying to solve them directly creates more downstream problems than it used to. And so I wonder if you have any experience with that as a source of problems and how you managed it?

Sander Daniels: (56:05)

So I distinctly remember there was a moment, and I can’t remember the exact example, but there was a moment or a period of three months or six months when suddenly we went from, hey, we’re a team and all hanging out and we’re good friends and we all talk to and treat each other like colleagues, to the voice of a founder carried weight.

Sander Daniels: (56:34)

And I was shocked and surprised, this idea that a word that came out of my mouth could have reverberations far beyond anything I had anticipated. When in my head I was just brainstorming or thinking out loud or trying to get feedback from smart folks in the room, was interpreted totally differently by other people around me. And so I had to again go through kind of a growing up exercise or professionalization of how I communicated and understand that my words had a different impact, a new impact that they didn’t previously have. And so there was kind of like a whole learning process there.

Sander Daniels: (57:25)

And that’s very tactical, but then more strategically as a leader, it became really important to learn about myself. What am I good at? What am I not so good at? For us, that’s when exec coaching was very powerful. Again, there was this period after we kind of launched into scale mode where suddenly the founders had to figure out and learn individually what they were good at and not good at. Which we did, and then we had to take those learnings and figure out as a founding team, how our strengths and weaknesses fit together, puzzle pieces and who was responsible for what? And this was like, four or five years in after having operated kind of informally. Then those roles became a little bit more formalized.

Sander Daniels: (58:22)

So the exec coaching process was one of the most powerful personal development processes I’ve ever been through. The first coaches we ever hired, they were more kind of analytic, management consultant type coaches. They had their framework, they had their 150 question survey. And they came to us founders and they said, “All right, each of you give us a list of eight, 10, 12 folks in the world who you’re closest with personally and professionally, and we’re going to administer this survey to them. They administered the survey to these folks. They got the results, they sat me down in a room after they’d gotten the results for me. And if I were ever previously under any illusions about what I was good and not good at, then they were entirely shattered during that session.

Sander Daniels: (59:10)

And I took that information and some of it was affirming and great, but there were like one or two pieces of it that frankly, were devastating. And I kind of like went from ebullient, outgoing founder and I kind of went into like hermit mode for the next six or nine months. Really reprogramming a lot of how I operated in the office for me, how I communicated verbally to people to kind of grow up and professionalize. And I did that and came out on the other side stronger than ever. But had I not had that data or gone through that exercise, I would’ve fallen on my face and never been able to scale as a founder to where I did.

Sander Daniels: (01:00:00)

And I think the key to what you’re describing is self-awareness for execs. And you need to go through a rigorous process, typically through an exec coach to understand what you’re good at. So you can double down on those things and what brings you energy because startups are decade plus long projects and so you need to stay energized, and what you’re not good at and what doesn’t bring you energy. And then you architect your exec team and your roles around those things. You focus on what you’re great at and you fill in for what you’re not great at, usually through external exec hires. So that’s kind of how we manage some of that over time.

Sam Corcos: (01:00:51)

That’s helpful. A lot of people on our exec team have coaches now, which I found started just a couple months ago. I’m hopeful that’s going to really accelerate a lot of those conversations. The last question that I have is, you were at Thumbtack until it was what? A thousand people, what was the employee count?

Sander Daniels: (01:01:16)

Yeah, yeah.

Sam Corcos: (01:01:20)

What I wish in retrospect, I had talked to more founders about what to expect at the 50 person stage, because we could have prevented a lot of inflammation that we’re experiencing right now. What are some of the things that we should be looking out for at the 150 person stage that we’re not currently thinking about?

Sander Daniels: (01:01:40)

Tactics are going to be different at every company, but one mindset change I went through was again from first time founder scaliness through 50 to 150 to a thousand, was that this just changes good and healthy. And really every single thing at the company changes every time you double in size, other than the vision. Our vision at Thumbtack for what we’re building has never changed in 15 years, but every single other thing has changed multiple times. And so like, don’t hold too dear to things that were great in the past, because they oftentimes fade and aren’t quite right for the next generation of folks. One example of that is your company values. Like, it’s okay to update and refresh your company values every two or three years, the values that were right for day one might not be quite right for day a thousand.

Sander Daniels: (01:02:58)

We held onto one of our values in particular way too long, way past its expiration date, because we thought that was one of those kind of immutable things that should never be touched. Turns out it’s totally fine and cool to update your values. And if you get to learn, you learn to use your Spidey Sense. Gosh, this thing that was working, it just feels like it’s not quite working in the way it used to. It’s fading in significance, the new generation of folks isn’t taking to it quite like the old generation of folks did. Once you see those things, there’s no need to hang on to them too long.

Sander Daniels: (01:03:43)

Get a small team together, talk about it in your exec meeting, see if there are changes to the process that need to be made. If so, get a small team on it that thinks about it for a week or two. They come back to you with a proposal about how to improve it or update it in some way, usually the change they come back to you with are really obvious. And you’re like, oh yeah, you should have changed that three or six months ago. And they’re not as big and crazy as you feared. Like, let’s go do it. Great, game on. Thanks. So, yeah, that’s kind of the mindset that we eventually landed on over the course of time that we found to be most healthy and productive.