#156 – The systems a CEO must create to scale a startup | Ale Resnik & Sam Corcos

At a fast-growing startup, a CEO must create systems to help with key performance indicators, recruiting, operations, and more. It’s the CEO’s job to push the company forward and help it become a better organization. In this episode, Ale Resnik shares the importance of finding the right co-founder, how to set the proper company strategy, and why the best-organized companies are the ones that prioritize customers.

09:12 – Find a co-founder

Ale believes one of your most important priorities in the first six months of your startup is finding an extraordinary co-founder.

You’re going to be in a situation in which you’re going to be rushed. We have real problems now. We have a lawsuit, we have this, we have… This will happen. And then you’re going to be in a rush. So since you’re already itching about it, I think this should be almost one of your most important priorities for the next six months. Is finding a co-founder, Level head of people that is extraordinary. And if you’d like to calibrate what a world class person is, I will introduce you to Flora who is out of this world. It’s a person who could be doing any function, that decided to do people. And that’s what you want. Someone that is not a HR professional by career.

10:57 – You need a good Head of People

You’re going to be spending a lot of time with your Head of People, so make sure to pick the right person for the job.

I don’t think I spent more time with any executive than I spend with my Head of People. I spend my hours daily. Who helps me manage the executives, who helps me and think about the culture, who helps me, even the relationship with my co-founders, everything. And the board then as you grow is going to be the one who leads your compensation committee. It’s everything. If you’re a good CEO, you know that people is the one who build the company. So investing in the person who builds the people function is as important as the product.

14:35 – Set the strategy

If you want to stay on course, you need to create and adhere to the right strategy. Once you set your strategy, your executives can set theirs, too.

As a CEO, you set the strategy. And the strategy is one, for example, to give you an example, for Belong is, “We will become casual positive in the next 18 months.” That’s a strategy I set. From there, that’s one. Very simple, very well understood. You don’t even have to have more than a high school degree to understand what it means. And then each of the executives clarifies their strategy. You demand that clarity, one objective. So you have a head of operations. What is the objective? “To deliver our devices timely.” Okay. How are you going to do that? “Well, we’re going to measure time to between subscription to time of device in arm as informed by our app.” So the first rating, that’s a north star metric. Then the input metric to that, obviously. You have all of the ones that go into that one. Shipping time, ideally you have one person reporting to that executive in charge of one of those. 1, 1, 1, 1, and that should make it for top performing organization.

20:19 – Don’t let things get out of control

If you feel that things aren’t well organized, you already have a massive problem. You need to take care of that issue as soon as possible so it doesn’t spin out of control.

As soon as you feel something Sam, it means that you’re in deep shit already. So, it’s like, because everyone obviously wants to make sure that their boss perceive that things are under control. So if you are hearing about it, if you are feeling that things are not well organized, in some regards you have massive problem already. So you can continue doing it without crashing. I would say at 120, you crash and you end up in layoffs. Because you end up having to reduce again, the complexity in order to get things done. And the idea of implementing it early, so you have to do that. So that you hire according to the need of the business to advance each of the executive’s first priority to advance the one strategy.

25:59 – You can’t stay involved with everything

As your company grows, you will have to be less hands-on with projects. You simply won’t have time to be as involved as you want to be.

You mentioned about the projects that you are still involved with. Unfortunately, the news that I want to break to you is that you’re not going to be very involved in projects going forward, because you’re going to be creating a lot of chaos. You can. Steve jobs did it. He was part of design and he was in product development. But it needs to be very clear what is it that you’re doing. It’s not that you’re going to be the one getting your hands dirty all the time, because if that’s what you’re doing, then you’re taking away attention from building the executive team. Building the executive team is hard. First, retaining the people, attracting the people, the philosophy, this is very highly competent and driven people, aligning them, making sure that they’re all rowing the same direction. People live. They get 20, 30 emails from recruiters every week. So that’s your job now.

29:47 – Don’t micromanage

Try not to get constantly involved in other people’s projects, because otherwise those people will feel like you don’t trust them to do their jobs.

If you’re constantly involved or when you try to get involved in actual projects, basically you’re telling to the person that is in charge, that you don’t think that they’re better than you, that they need your involvement and that complicates things. So that’s not to say that you don’t have to get involved. I think you have to get involved when you already decided that the executive has to go, and it’s a must. But basically, like the same way that the board of directors hire or fire a CEO, your job very much becomes hire, coach, mentor your executives and decide whether they are the right person. While they are in the seat, they need to have full confidence and full autonomy. And they come to you for mentorship or coaching for inspiration, for, “Why are we doing this again? I don’t remember.” Your job is to help them, organize them and to decide whether they’re the right person. That’s the end of it. If you do more, you’re probably hurting.

37:13 – Serve the customer

The most well-organized companies are the ones that are organized with the customer as their highest priority.

To me, the best organized companies are the ones that are organized with a customer in mind. For example, when you think about product teams, organize them by customer. Let’s say you have the medical community and you will have the patients and the users, right? So two different product teams, one focus on the customer, another one on the medical community. And it’s very clear why they organize that way, because they serve the customer. Then you have the classic supporting functions that none of that matters, I would say. So the people function and the finance function that you’re going to start to need. I think the supporting functions are not existed as startups. I call it supporting functions because you have them. But this is again 56, 70 it’s when you start needing a finance manager, a director of finance, even a VP finance.

39:31 – You culture will change

As the company grows, the culture shifts. So be prepared to deal with different dynamics as your organization scales.

No company has a smooth sailing path to the promised land. So one of the very important dimensions that I look for is whether they’ve been exposed to that before. So as the company grows, there’s a very different culture, I would say, in an executive team. Different things that happen, different dynamics. Like maybe culture is healthy, a lot of open, direct discussion that anyone that’s never been in that table may feel like it’s aggressive in a way. Like, it’s not a very clear, because you have personalities. Someone, because it’s very driven, and extremely good leader may have a very opposite point of view with you or with another executive. And those discussions that happen at the executive level, you cannot expose a manager to that. So think about that, who has the mentality of, “Oh, I really understand that there’s a small table and there is a larger table.”

40:50 – Look for extraordinary leaders

Hire people who can be extraordinary leaders. You want people in charge who have real authority and know what they’re doing.

The other thing that I look for in executives who reports to who is obviously extraordinary leaders for the function in terms of personality, but also someone that has the real authority. If you’re hiring a product leader, no one wants to report to an administrative product leader. They need to trust that they can do product better than you, that they already are in the position of management. So no one wants to report to an administrator. So that is the other thing. If you want to retain the top people under them, make sure that you make leaders the ones that have mastered their craft first and then are now ready to lead, so that you don’t lose the actual builders. Because if you put administrator that never codes then the engineers leave. Doesn’t have to be that they are coding, because maybe that’s not how they maximize their output. But if they don’t trust that this person can code, likely the engineer will leave. So it’s not people managers, it’s people that have real authority.

44:52 – Make sure your leaders have practical knowledge

If your leaders don’t have practical knowledge about the department they’re in charge of, the people under them won’t respect their authority.

If you say, “Okay, product has the authority over engineering and design,” that’s great. You decided to be a product led company instead of an engineering led company. But then the CPO or the VP product has direct reporting into them, right? The VP of engineering and the VP of design or the head of design ahead of engineering, whatever you want to call it. I don’t recommend that you start with VP this early, if you don’t need to. Basically, Square, for example, call it lead. So you have the product lead. Each company organizes themselves however they want. But in that sense, in terms of titles, you can call the product lead and then the engineering lead and the design lead reporting to the product lead, the product you reports to you. Fantastic. But some point, I would say at your scale, right now you can do design reports to you, product reports to you and engineering reports to you. And you make it very clear that product is a product lead company.

Ale Resnik (00:06):

It needs to be very clear what is it that you’re doing. It’s not that you’re going to be the one getting your hands dirty all the time, because if that’s what you’re doing, then you’re taking away attention from retaining the people, attracting the people, the philosophy. This is very highly competent and driven people, aligning them, making sure that they are all rowing the same direction. So that’s your job now.

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.

Building companies is inherently hard and it’s something that we tend to share the journey with members, with people who listen to this podcast. It’s not an easy thing and that’s why we revisit it all the time. We think through this topic deeply. What worked when Levels had less than 10 people is very different than what worked when we had 25 people. Now we’re at about 55 people and we’re thinking towards, what does it look like when we have north of 100 people? Well, the best way to do this is to talk to other founders, talk to different people who’ve gone through different stages of growth and get their perspective. Doesn’t always mean that exactly what they experienced will translate to Levels, but there are all these data points that we take into consideration when thinking through some of the challenges that we might have, we currently have, or we might face in the future as we build out the team.

Now it’s not to say that these are necessarily bad challenges, they’re just the reality of having a remote and [inaudible 00:02:03] team and a growing fast moving startup that’s building tech in a space. So Sam Corcos, co-founder and CEO of Levels, sat down with Ale Resnik, a multi-time founder, and currently the co-founder and CEO of Belong. The two of them talk through this idea of people operations, how we should think about different things at different stages. When is the right time to bring on ahead of people ops? How should we think through some of these things around team communications, team coordination, and decision making? All the different things that you go through. And so, much like many of these episodes where we focus on culture, this is another one, another data point where we’re sharing our learnings with you. And regardless of what our experiences were with past companies, well, Levels is a new one so it’s just like starting fresh. Here’s a conversation with Sam and Ale.

Sam Corcos (03:01):

Yeah, we’re about 50 people now, I think we’re 55. We’re definitely experiencing some growing pains that I think are just related to head count. The complexity of an organization with that many people, a lot of the things that worked before are not really working super well. There are a couple of things. One thing that we need to get better at is, we need to have a more formal system for performance management.

Ale Resnik (03:34):

Yes.

Sam Corcos (03:35):

We do it ad hoc. I would say more than half of people have formal performance management done, but the other half, we just let it slide and we don’t really pay attention. Oftentimes those are the people who are performing super well. We just don’t feel like it’s necessary, but what we’ve actually heard from a lot of those people is that they want a performance review so they can know how to improve. So we’re starting to realize that it’s not just a function for the company, it’s also a responsibility of the company to give people feedback. I’ve heard many horror stories of performance reviews and that function done poorly and I know the people side of things is something you spend a lot of time thinking about. So what are some really good ways to do that, what are some really bad ways to do that?

Ale Resnik (04:30):

Got it. All right, I think I get it where you are and what I would recommend. As you’re hitting 56, the magic number, I think [inaudible 00:04:43] talks about it a lot is 70. At 70, the shit will hit the fan. So you’re a 56 so you are almost in a perfect spot to not screw it up. The way that I would think about you as the CEO, and I think you wrote about it, so I will quote you in order to fix your problem.

Sam Corcos (05:14):

Okay.

Ale Resnik (05:17):

You have to build the fire department and you need to build in the fire department when you go to 70 people. If the company continues to do well, you’re going to be 100, right? You know how this is, right? You need to build the fire department for each function. So you need now a career professional or people, someone that you trust. It will take you time because it’s one of the most difficult hires to make. I have had the luck and privilege of working with Flora, who’s my friend and has been my partner on this for 10 years now. Was my classmate, we see eye to eye on the values and what kind of culture we want to build. This is almost a co-founder level.

I would say, hire recruit that you need to make. And it’s so much more important that you do that than you fix the actual problems of performance reviews or anything that’s happening right now, because it’s critical. You are not going to be able to scale the very basics, right? Like you’re going to have to do payroll, you’re going to have to do compliance. You’re probably using [inaudible 00:06:29] or something like that. You’re going to have to have a system for performance management, recruiting, scaling, every single one of those functions training. You’re going to have to standardized training, right?

And I had to have at some point, someone to listen to how unhappy your people are or where they’re not accomplishing at work, where they don’t feel fulfilled, right? You don’t want to be the one doing that or someone that doesn’t have experience, then you have liability management, right? One of the most important reasons why you can lose a lot of money is when your employees files a lawsuit, right? So you have to have it. That’s my recommendation. And then sooner you start, the better. It’s a very difficult hire to make. And it’s a critical for your success. So that to me is the guidance that I will give you. Then we can go into what I think you should be doing in terms of specifics. But the other one is such an important point that I would like to make that I think the tactical pales in comparison. We can talk about it if you like.

Sam Corcos (07:39):

Yeah. I have very mixed feelings about it, because getting somebody who understands the function who is deeply values aligned. I know a lot of founders and hiring the wrong head of people has been an existentially bad decision that many of those founders made, maybe the worst decision. So I’m a lot reluctant to it than I would be in other circumstances.

Ale Resnik (08:12):

Yeah. Agreed.

Sam Corcos (08:13):

So maybe the answer is, you just have to really go out of your way to get the right person.

Ale Resnik (08:19):

You have to… At least that’s why I’m saying this is a co-founder.

Sam Corcos (08:22):

Yeah.

Ale Resnik (08:23):

It’s basically, you have a co-founder to start the company and now you need someone that you’re like this, right?

Sam Corcos (08:29):

No.

Ale Resnik (08:30):

If you don’t have that, you won’t scale. So it’s existential. I get it why you’re afraid of doing it. I get it, that the downside is massive. You just cannot scale and if you continue on this path, what’s going to happen is that it was going to be such a big shit show, that it’s basically destroying the company by your omission instead of commission. You’re afraid of a mistake of commission, and then the other one is a mistake of omission, right?

Sam Corcos (09:03):

Mm-hmm. Yeah.

Ale Resnik (09:03):

So past 70, that’s it, right?

Sam Corcos (09:10):

Yeah.

Ale Resnik (09:11):

And then the other problem is that you’re going to be in a situation in which you’re going to be rushed, right? We have real problems now. We have a lawsuit, we have this, we have… This will happen, right?

Sam Corcos (09:20):

Yeah.

Ale Resnik (09:21):

And then you’re going to be in a rush. So since you’re already itching about it, I think this should be almost one of your most important priorities for the next six months. Is finding a co-founder, Level head of people that is extraordinary. And if you’d like to calibrate what a world class person is, I will introduce you to Flora who is out of this world. It’s a person who could be doing any function, that decided to do people. And that’s what you want. Someone that is not a HR professional. By a career, I didn’t mean being an HR person, right.

Sam Corcos (10:01):

Yeah, yeah. [inaudible 00:10:02].

Ale Resnik (10:01):

What I meant is, someone that has the mentality of the operator, none of the BS. And all of the, how do we help people perform? How do we create values that align the company, that attract the company, right? Okay. In any case, you understand what I’m saying? So that’s what I would say. And yes, not doing something for fear of making a mistake is not an excuse of not to do it. You have to do it regardless. Right?

Sam Corcos (10:31):

Yeah. You’re right.

Ale Resnik (10:33):

Correct. And then I agree with you, that is a extremely difficult one. Existential. You bring the wrong head of people, you bring politics, you bring this. You have to be aligned, you have to think really well about the calibration questions, spend, I would say, countless hours. Think about this thing. I don’t think I spent more time with any executive than I spend with my head of people. I spend my hours daily.

Sam Corcos (11:05):

Wow. Okay.

Ale Resnik (11:08):

Who helps me manage the executives, who helps me and think about the culture, who helps me, even the relationship with my co-founders, everything. And the board then as you grow is going to be the one who leads your compensation committee. Right? It’s everything.

Sam Corcos (11:28):

Right.

Ale Resnik (11:28):

If you’re a good CEO, you know that people is the one who build the company. So investing in the person who builds the people function is as important as the product.

Sam Corcos (11:41):

Yep. I think that’s right.

Ale Resnik (11:44):

So that’s what I would have to say about that. Then if you had tactically start improving, I recommend that you go with the software like Lattice or something like that, that helps you structure it. One thing that I’ve been doing for quite some time now is a very clear operating system in the company, basically one KPI. Each person in the company has one priority and one priority only, that’s very well defined. And everything else almost you can discuss, but it doesn’t matter if you want to be a little bit an extremist.

Sam Corcos (12:17):

Right.

Ale Resnik (12:17):

You don’t discuss anything. That’s not the first priority. And then you have one input KPI and one output KPI that informs that priority. And then each person in the company that leads people needs to turn around and do the same with their reports. So you have Sam, Clara, whomever. Each one of them has one input KPI and one output KPI that informs their priority. That the output KPI of the report needs to be an input KPI or the output KPI of the executive, and that’s it. Very simple, reduced complexity. I don’t want to hear about a lot of other things. We can discuss anything you like personally, but this basically allows people to focus on what matters and avoid making excuses.

Well, you’re going to have a lot in the company. As you grow, you’re going to have a lot of people that are masters of selling their progress, but they’re not progressing in the direction that the company needs. Either because they don’t know what the direction is or because they couldn’t make progress in that direction. And it’s easy to, that’s why you start seeing, this is yellow, this is red, this is green. And I have seven green things and three red. Cool, but the three red are the only ones that I care about. So all the others is the gravy. And you don’t want gravy in the turkey, I wanted the turkey to now be dry. Very simple. And then you put that into Lattice, which is an operating system, let’s say for performance. Straightforward, right?

Sam Corcos (13:59):

Yeah. It’s interesting you say that, because we are now kicking off a major initiative to have everyone outline their objectives and KPIs. We did a big OKR process about two months ago. Just been really helpful in top level objectives. And now the big initiative is doing them at the function level and then at the individual level. So that’s all being done right now.

Ale Resnik (14:25):

Yeah. And it’s important that you don’t say, objectives. That you say, objective.

Sam Corcos (14:31):

Right.

Ale Resnik (14:32):

That’s what I suggest, right?

Sam Corcos (14:34):

Yep.

Ale Resnik (14:34):

As a CEO, you set the strategy. And the strategy is one, for example, to give you an example, for Belong is, “We will become casual positive in the next 18 months.” That’s a strategy I set. Right? From there, that’s one.

Sam Corcos (14:50):

Right.

Ale Resnik (14:52):

Very simple, very well understood. You don’t even have to have more than a high school degree to understand what it means. And then each of the executives clarifies their strategy. You demand that clarity, one objective. So you have a head of operations. What is the objective? “To deliver our devices timely.” Okay. How are you going to do that? “Well, we’re going to measure time to between subscription to time of device in arm as informed by our app.” Right? So the first rating.

Sam Corcos (15:29):

Right.

Ale Resnik (15:29):

That’s a north star metric. Then the input metric to that, obviously, you know. You have all of the ones that go into that one. Shipping time, ideally you have one person reporting to that executive in charge of one of those. 1, 1, 1, 1, and that should make it for top performing organization.

Sam Corcos (15:52):

Right. Yeah. I wonder, because it’s been interesting for us. I think we’ve had two different initiatives in the past. We tried to do OKRs and objectives mapping when we were smaller. I think once when we were about 12 and another when we were about 25 people and it was a lot of effort, and it was a complete waste of time.

Ale Resnik (16:17):

Yeah.

Sam Corcos (16:18):

It was like, everyone already knows what everyone else is doing. The goals are obvious. Why did we just spend multiple weeks writing out things that everyone already knew? But it seems like there’s some size threshold where the complexity is just too high and you have to do it. And it seems like this is about that size. Is that your experience as well?

Ale Resnik (16:40):

Well, think about the fact that you as a CEO, you have… I don’t know. If you’re managing things well, you’re going to have six reports, right? When your team is seven, that’s your team. So everyone knows exactly what you’re doing. Worst case scenario, you’re 12, 13, 14, right? So everyone at least heard you talk with the six people or the 13 report to you, whatever it is at that moment. Right? And you’re talking whatever every single day, you know what the priorities are if you’re a good CEO, because then the other question is there are CEOs that don’t even know what’s important. So they all aligned and everyone likes each other. You know them, their names and the name of their pets, where they live, right? When you have 56, you still know the names of everyone. You already don’t have any idea what everyone is doing during their day. Right?

And it has to be more self-selected right. Like, people need to start saying, “Okay, what is my priority? How do I organize my day? I don’t see Sam working every day. I don’t know what he’s doing. He doesn’t talk to me on Slack.” Right? So you have six people that report to you. Those six people have, if you are 50, at least need to have six, seven people on average reporting to them, right? This starts to be more important. I would say at 56, it’s still not. You’re not going to crash if you don’t do it. But it starts being a very important alignment. The way that I do it as CEO with Flora, my VP people is, we do a monthly offsite of a day that people prepare for and out of which we get the KPIs as scorecards for each of the executives.

And then the executives needs to do the scorecards of their direct reports. Then the executives reports every week, the progress on their scorecard, what is the KPI? Why does it matter? Right? And reports out to the entire company. So they put their KPI, their target, their quota for that KPI. So the minimum threshold acceptable, the target for that KPI. And they report it to the entire company every week. And that helps. I think each of the executives start understanding, right? How to organize their time, what they need to focus on, and more importantly, you’re giving a lot of permission to people to drop things. That’s the number one thing. People need to have… The reason why the first priority matters is because it gives everyone permission to say, “I don’t have time for that. I cannot do that.” Then you get a PhD on your first priority, right? You go 3, 4, 7 day layers deep on how to solve that. Instead of getting superficial updates about seven dimensions, seven verticals, you go seven layers deep on one.

Sam Corcos (19:35):

Yeah. I’m two… How many people is Belong now?

Ale Resnik (19:38):

We have 205.

Sam Corcos (19:42):

Five. What was the point? Because we’re, to your point of, you couldn’t get away with it without crashing when you’re 56, which is true. Things are still getting done, but we’re definitely feeling the pain of not having it. And so I’m wondering when, because you’ve been through this before, you’ve found that several companies that have scaled to having a lot of people, what was the point that you implemented this kind of system?

Ale Resnik (20:11):

It’s 57 or 60. Meaning, that is the moment in which, as soon as you feel something Sam, it means that you’re in deep shit already. So, it’s like, take, because everyone obviously wants to make sure that their boss perceive that things are under control. So if you are hearing about it, if you are feeling that things are not well organized, in some regards you have massive problem already. So you can continue doing it without crashing. I would say at 120, you crash and you end up in layoffs, right?

Sam Corcos (20:52):

Yep.

Ale Resnik (20:52):

Because you end up having to reduce again, the complexity in order to get things done. And the idea of implementing it early, so you have to do that. Right? So that you hire according to the need of the business to advance each of the executive’s first priority to advance the one strategy.

Sam Corcos (21:11):

Right. Got it. So one of the other questions that I have is really about, it’s a question around organizational design. We’re noticing that we have several organizational units and some of them, there’s actually an essay that somebody sent me about Uber’s engineering teams and they have, I think it was project teams and platform teams.

Ale Resnik (21:44):

Yeah.

Sam Corcos (21:45):

And the difference is that project teams are largely cross-functional, they generally stay as a unit across multiple projects, and platform teams are like consultancies where you go to them with a task and they help you deliver on the task. And they go from team to team, and they solve different problems. And we have this now across many organizations like product design and engineering is like one unit that works cohesively together. Our research team is more like a consultancy where the marketing team might need some help from research. The product team, the design team, all of these different teams might come to research with a different request. And then there’s more like an API model. I’m not sure this is a good thing or a bad thing. It’s something that I’m recognizing. And I’m not really sure how to manage that as these organizations get bigger. And especially how when you’re small, everyone’s a generalist. When you get bigger, people and organizations start to specialize. It’s that middle stage where we are right now, that’s getting a little bit tricky.

Ale Resnik (22:58):

Yeah. And again, I think you are already at the stage in which you need to start thinking about specializing, in my opinion. You can still have a research team or what you call it, a team of platform or project team, I don’t remember which one, that basically reports to you and that’s the business operations team that I’m now at this stage, I’m already starting to assemble. But it’s extremely important that you have your lieutenants and the lieutenants have a complete mandate with the first priority. Right? Because this team of generalists, you can have it. I would say at your stage, it’s already a luxury, right? What really matters is that you start having an organizational design that serves the customer well and serves the company well as informed by the first priority. And that is led by competent executive, right?

And you start having a real leadership team. Start thinking about, who are your leaders? Who do you meet with? What’s a small group of people that are… And then you can have multiple groups, right? For example, at Belong, we have a small group of people, six, seven people. Then we have a larger group of people, 14 that is leaders that are up and coming. Then we have a group of 40 people that are able and leads someone. Right? I’d say this, at this stage is precisely when you go from everyone advancing the company to, you have a product, you have engineering, you have operations, you have people, you have finance. Then on top of that, I think it’s not a bad idea to have one to start. And you can decide how many you need, people that work on what’s called business operations.

I am a big fan of, this is a topic that really divides the waters. I am very big fan of that, of people that can go and work as the zero to one for teams. Because if you had, let’s say an operations team there, focus on the first priority. They might have a very big pain that they can’t attend to right now. But then you have the business operations team that reports to you and you tell them, “Hey, I spoke with Josh. Josh is focused today on activations, but he really has a really big pain on returns. So can you set the foundation on zero to one?” That’s the generalist, but right now this is really the time in which the CEO needs to assemble the executive team, right?

Sam Corcos (25:46):

Yeah.

Ale Resnik (25:46):

You need your team of lieutenants competent, extremely competent people that are mission driven, that are hungry, very hard. I would say at Belong, it became… You mentioned about the projects that you are still involved with. Unfortunately, the news that I want to break to you is that you’re not going to be very involved in projects going forward, because you’re going to be creating a lot of chaos. You can. Steve jobs did it, right? He was part of design and he was in product development, right?

But it needs to be very clear what is it that you’re doing. It’s not that you’re going to be the one getting your hands dirty all the time, because if that’s what you’re doing, then you’re taking away attention from building the executive team. Building the executive team is hard, right? First, retaining the people, attracting the people, the philosophy, this is very highly competent and driven people, aligning them, making sure that they’re all rowing the same direction. People live. They get 20, 30 emails from recruiters every week. So that’s your job now.

Sam Corcos (27:08):

Yep. It’s funny you say that about chaos creation, because that’s one of the other items I had here, it’s how the role of a CEO changes as a company scales. And there seems to be some pretty distinct stages here. We’re definitely going through one of them right now. And one of the specific things that I’m noticing is that a year ago, when I got involved in projects, it would typically get things unstuck and it would get them moving very quickly. And now when I get involved in a project, it usually creates more problems than it solves.

Ale Resnik (27:46):

Yeah.

Sam Corcos (27:47):

And I don’t totally know why that is, but it definitely seems to be true.

Ale Resnik (27:52):

It’s because, there are two things. The answer to that is, if you have people that are competent, obviously they don’t want to have you involved. Creates a lot of unnatural tension, right? I’ll flip it back to you. Imagine having your board members working on projects with you and your direct reports. How well would you be performing? Right? And it’s not that you’re hiding things from them. You definitely want them working with you. You want their guidance, right? You don’t want them hands on, solving funnel issues, right? That’s not going to be the way in which they add the most amount of value and it’s not going to allow you as CEO to develop your full potential, right? Same happens with your direct reports. Direct reports want to grow, want to develop their own team culture and morale, and want to report to you what’s happening truthfully and ask you to unstuck specific things about relationships, about resources, about headcount, about try to find the strategy, continue defining the culture, set the bar for talent, right?

The good executives want that, right? Like, “Hey, this is not acceptable.” That’s how a CEO does. I don’t want to be problem solving with you every single day, right?

Sam Corcos (29:18):

Yeah.

Ale Resnik (29:19):

There will come a time in which they may ask for your guidance. A good CEO needs to be the top journalist. The one that basically could do any of the functions, at least at 80%, if you hire really well, you have someone that’s much better than you at that function. But at least that person that is much better than you trusts your advice. And you’re the top journalist because you’re competent, otherwise you are not the best CEO, probably. So if you’re constantly involved or when you try to get involved in actual projects, basically you’re telling to the person that is in charge, that you don’t think that they’re better than you, that they need your involvement and that complicates things.

So that’s not to say that you don’t have to get involved. I think you have to get involved when you already decided that the executive has to go, and it’s a must. But basically, like the same way that the board of directors hire or fire a CEO, your job very much becomes hire, coach, mentor your executives and decide whether they are the right person. While they are in the seat, they need to have full confidence and full autonomy. And they come to you for mentorship or coaching for inspiration, for, “Why are we doing this again? I don’t remember.” Your job is to help them, organize them and to decide whether they’re the right person. That’s the end of it. If you do more, you’re probably hurting.

Sam Corcos (31:10):

One of the other founder CEOs that I talked to, who’s scaled a company to, I think more than 1,000 people at this point. So this is the stage when the role becomes primarily about influence rather than action. Is that a fair characterization?

Ale Resnik (31:35):

Yes. I like that, primarily. But again, most of your actions now are type one, right? Irreversible. So you hire a VP people, you fire a VP sales, you hire, right? It does not influence, that is a lot of action. But it’s difficult for you to wake up in the morning and say, “Oh, what was my job again?” Okay. Your job right now is to be talking with recruiters. But with 700 BP people, that’s not easy. Right? Definitely, it’s not advancing the product.

Sam Corcos (32:13):

Right.

Ale Resnik (32:14):

Which is painful, but it’s what you should be doing. The best majority of my time, I dedicate to either internal alignment meetings, external recruiting, that’s the end of it. Mostly, that’s mostly what I do. One-on-ones, executive meetings, recruiting and product reviews. I do product reviews. So the way that I do it is, and that’s already controversial. So it’s not that everyone really loves it, but I do do product reviews. That’s the way in which I get involved with the product, meaning before we push, I need to review and I need to give feedback about everything that we’re pushing. That’s on me. That’s my style. You could decide that you want to be involved in before we move to production, before we… Sorry, before we move to design, right? Like you want to see wire frames, whatever. Each CEO has its own style. But to me is, we don’t push product that I didn’t see.

Sam Corcos (33:19):

Right. That makes sense. Yeah. I wonder, one of the other aspects that we’ve been really thinking through more deeply is reporting structure. In the early days, we hired very senior, very early, which was a huge advantage for us and our ability to move quickly. People who are senior don’t really need a lot of direct management.

Ale Resnik (33:48):

Yeah. True.

Sam Corcos (33:52):

Many of the people who lead functional units would work pretty much autonomously and just report back to me asynchronously. And when we do our one-on-ones, which would often be monthly, we mostly talk about, what’s going on in the world, because we don’t really need to talk about what they’re doing in their job because they’re performing so well.

Ale Resnik (34:14):

Right.

Sam Corcos (34:14):

I think at some point I had 20 direct reports on paper, which were all of these functional leaps, which didn’t feel like 20. Because again, I wasn’t really spending a lot of time directly managing them because everyone was performing. I wonder, we’re now more than 50 people. That number of direct reports, it became clear about three or four months ago, was not tenable. The number of problems that would get escalated was now more than I could handle. And we’ve changed the way that we do reporting. And I’ll mention some of those things, but I think what might seem like an obvious question, but was not as obvious to me at the time. How do you decide who reports to whom and what is the goal of the reporting structure?

Ale Resnik (35:10):

That’s a very good question, actually. Very. Yes, 20 people right now [inaudible 00:35:18]. No, not going to work.

Sam Corcos (35:20):

Yeah.

Ale Resnik (35:21):

So yes. At the beginning, everyone is performing and you talk about the world because again, few people, a lot of alignment, everyone likes each other, loves each other like brothers and sisters, right?

Sam Corcos (35:34):

Right. Yeah.

Ale Resnik (35:35):

You really like them, otherwise why the hell are you working together? They are sold on the mission. 77 person still likes the mission. Yeah. At 151, you hire employees, right? So this is their day job basically. So they love it, they like Levels, they like help. But… So you could not obviously manage 20 people. The goal of the reporting structure to me is to maximize the customer satisfaction and the value that we provide to customers. So that’s how I organize the structure, basically. One of the things that I try to avoid is organizing the big company and pushing that organizational structure to the customer because customers feel that, right? Let’s say you decide that you need an onboarding team and an activation team. Sorry, an activation team and a customer service team, to give me an example.

Well, why do you need two teams? And to be very clear, is it for the purpose of you scaling or for the purpose of serving the customer well? Do people really want to talk with two people? They want to talk with an activation specialist and then with a customer service concierge or? You get the point. So to me, the best organized companies are the ones that are organized with a customer in mind, right? For example, when you think about product teams, organize them by customer. Let’s say you have the medical community and you will have the patients and the users, right? So two different product teams, one focus on the customer, another one on the medical community.

And it’s very clear why they organize that way, because they serve the customer. Then you have the classic supporting functions that none of that matters, I would say. So the people function and the finance function that you’re going to start to need. I think the supporting functions are not existed as startups. I call it supporting functions because you have them. But this is again 56, 70 it’s when you start needing a finance manager, a director of finance, even a VP finance, right? You need a VP people or a head of people. And I don’t believe in supporting, so I ask them to be very proactive in helping their partners in the team think about the business and elevate their thinking from performance to use of resources, to, you name it. So be careful how you choose them. Finance is very similar to people in that regard, you choose the wrong person, kills the company.

By customer, you have the supporting functions and then you have the functions that are necessary for the company to run. So call it operations, for example. So who reports to who? That’s a more complicated question to answer. What I can tell you from that is that the dynamics of an executive team, meaning a leadership team of typically six to eight people, tops, that’s already a large one. As the company goes through challenges and no company has a smooth sailing path to the promised land, right? So one of the very important dimensions hat I look for is whether they’ve been exposed to that before. So as the company grows, there’s a very different culture, I would say, in an executive team. Different things that happen, different dynamics. Like maybe culture is healthy, a lot of open, direct discussion that anyone that’s never been in that table may feel like it’s aggressive in a way.

Like, it’s not a very clear, because you have personalities. Someone, because it’s very driven, and extremely good leader may have a very opposite point of view with you or with another executive. And those discussions that happen at the executive level, you cannot expose a manager to that. So think about that, who has the mentality of, “Oh, I really understand that there’s a small table and there is a larger table.” And then the other thing that I look for in executives who reports to who is obviously extraordinary leaders for the function in terms of personality, but also someone that has the real authority. If you’re hiring a product leader, no one wants to report to a administrative product leader. They need to trust that they can do product better than you, that they already are in the position of management. So no one wants to report to a administrator. So that is the other thing.

If you want to retain the top people under them, make sure that you make leaders the ones that have mastered their craft first and then are now ready to lead, so that you don’t lose the actual builders. Because if you put administrator that never codes then the engineers leave. Doesn’t have to be that they are coding, because maybe that’s not how they maximize their output. But if they don’t trust that this person can code, likely the engineer will leave. So it’s not people managers, it’s people that have real authority. I could be doing your job and mine, so I choose to do mine basically.

Sam Corcos (42:26):

Yeah. Something that we’ve really narrowed in on, we ended up writing a memo on this, as I’m sure you’d expect. We’re thinking a lot about the goal of reporting. And one of the big recognitions that we have is that reporting is really important for managing performance. We add situations where, when you’re totally flat, it’s very hard for people to hold others accountable for delivery of things. If they don’t really have any authority to take action against it, they can give that person feedback and say, “Hey, you agreed to this thing, but you didn’t do it.” And so, when it comes to groups of people that work together consistently, I think the rule of thumb that we came up with is, if the majority of the output of your function is directly related to another function. So in our case, most of what design does goes into product, most of what engineering does goes into product.

Ale Resnik (43:42):

Yeah.

Sam Corcos (43:43):

And if product doesn’t have the authority to make changes on the design team or really do anything, change who’s working on what, then they’re toothless in the ability to deliver on their own goals.

Ale Resnik (43:59):

Right.

Sam Corcos (44:00):

And so I found that, that was an important principle that we realized, is that a lot of reporting really comes down to giving people authority to manage performance across the organization. Is that your experience as well?

Ale Resnik (44:18):

Yes. [inaudible 00:44:20] and go do more than that. You need a person, it comes to that point. I know that we all try to extend the face of, we’re all working together as much as possible, we’re flat. I don’t know any example of a company that it’s flat, that really delivers over time. So yeah, my favorite phrase for that is, the dog with two owners doesn’t hunger.

Sam Corcos (44:50):

Yeah, yeah.

Ale Resnik (44:50):

So you really need… Like if you say, “Okay, product has the authority over engineering and design,” that’s great. You decided to be a product led company instead of an engineering led company. But then the CPO or the VP product has direct reporting into them, right? The VP of engineering and the VP of design or the head of design ahead of engineering, whatever you want to call it. I don’t recommend that you start with VP this early, if you don’t need to. Basically, Square, for example, call it lead, right?

So you have the product lead. Each company organizes themselves however they want. But in that sense, in terms of titles, you can call the product lead and then the engineering lead and the design lead reporting to the product lead, the product you reports to you. Fantastic. But some point, I would say at your scale, right now you can do design reports to you, product reports to you and engineering reports to you. And you make it very clear that product is a product lead company.

Sam Corcos (45:55):

Right.

Ale Resnik (45:56):

So either you want to work here or not, but that’s how it is.

Sam Corcos (46:01):

Yep.

Ale Resnik (46:01):

Over time, what that means is that the product lead is going to be the one who has the engineering and design lead reporting into them. And yeah, it’s nice to make it a group, but that’s not how accountability works, right?

Sam Corcos (46:17):

Right.

Ale Resnik (46:18):

In organizations, there is no accountability, many to many. Even two to one is already a big problem. It’s a real [inaudible 00:46:29] for organizations. A well function organizations has accountability connections of one to one. One person to one person with one priority. When you complicate that system, you’re really set up for failure.

Sam Corcos (46:45):

Yeah. Yeah. But there’s, an interesting going back to org design. My co-founder Andrew shared article with our team. It’s an article written back, I think in the ’70s that makes the case that the structure of your organization determines the product and how, if you hire a lot of-

Ale Resnik (47:10):

Yeah, for sure.

Sam Corcos (47:10):

If you hire a lot of research people, your product is going to become research focused.

Ale Resnik (47:16):

For sure.

Sam Corcos (47:16):

If you structure it around product verticals, you’re going to end up with more of those product verticals.

Ale Resnik (47:22):

So this all comes from you, actually. From the CEO, right?

Sam Corcos (47:25):

Mm-hmm.

Ale Resnik (47:25):

It’s, are we a product led company? And how do we develop product, right? Do we think about the inputs and then execute? Do we don’t think about the inputs that much and test? Do we run experiments all the time in order to understand what works? All of that defines what kind of product you are, right? What kind of company you are.

Sam Corcos (47:50):

Right.

Ale Resnik (47:51):

In the case of Belong, we are a company that thinks very well about the future. We want to see what the product we want to build. Don’t care that much about feedback in the beginning, put that product out and then very high quality from the beginning. And then I carry from the meaning collect feedback from that product once we have altered reality in a certain way. And then collect the feedback and then say, “Oh, I guess we could have done it better.” Right?

Sam Corcos (48:23):

Uh-huh.

Ale Resnik (48:23):

Right. So that we think very, very thoroughly about what we build first.

Sam Corcos (48:33):

Yeah. So the-

Ale Resnik (48:34):

Without regard to a lot of feedback, also. We don’t listen to our customers, and this is very controversial, what I’m saying. But we don’t listen to our customers a lot to understand what to build. Instead, we listen to customers to understand what to build, butt we don’t let our customers dictate what we build, right?

Sam Corcos (48:54):

Yeah. It’s like the concept of data informed, instead of data driven.

Ale Resnik (48:59):

It’s data informed and basically observing the vast majority information to your neural network.

Sam Corcos (49:06):

Right.

Ale Resnik (49:06):

And the neural network of your leader to then have a certain epiphany about where the world should go with your product and then put it out in the world, and then collect feedback that from there.

Sam Corcos (49:18):

Yeah. The last question that I have is forward looking, which is, we’re 55-ish, 54-ish people now, something like that. One of the things that’s been very consistent across founders that I’ve talked to probably on the order of 25, 30, maybe more at this point, who are all right around the 50 person stage is the two things that consistently break are around goals and prioritization, which OKRs in some similar system tends to solve and decision making. What are the things that we should expect to see when we get 150, 200? Are there different types of problems that we should be looking out for now that, I think that if we had invested in better alignment on goals six months ago, we would’ve avoided a lot of unnecessary pain. So what are some of the things that we have to look forward to as we scale up and add more people that attention now will really be dividends later on?

Ale Resnik (50:40):

Make recruiting and not for the lower levels, build your recruiting machine and become the head recruiter of your company, and allocate the best majority of time to that. The rest to basically developing the philosophy and alignment for these people that you’re recruiting. It’s the CEOs that don’t do that… The best CEOs are doing that, perpetual. And they understand that the team builds the company, not you. You build the tea. Your job is to build six people. These six people build their teams, those people build the company. When you don’t recognize that, that’s how it works, you are in for a massive amount of pain. When you recognize that, that’s the job, then make sure that you have the checkpoints in place. That’s what I call it, checkpoints. Like for example, once you hire your six executives, you are going to have people that really want to grow really fast and they want to build their teams and augment their output, right?

So that’s when you need to start being involved on, okay, what’s our philosophy of recruiting. What is our cultural ratios? How do we plan annually and quarterly? How many engineers we want to have for each salesperson? How many content writers you want to have all the ratios? What’s the sales efficiency? That’s why you do it, so you add the checkpoints. You make sure that you are the one approving the head count, making sure that the teams… In a way, micromanaging certain aspects, which is the ones that can break the company. So let’s say you hire six people in this, in terms of six people hire 10 each, you’re going to be in trouble, right? So you need to micromanage that. Making sure that you as a CEO, you are approving the head count, you as a CEO, you are approving the promotions.

You as a CEO, you are approving, right? Then let them run and align them on the philosophy. But don’t tell them obviously what to do. Align them on the philosophy. This is what to build, this is why, this is how my thinking is evolving all the time, every day. Basically that. It’s not you who builds a company, it’s you build a team, the team builds a company. And if you want to operate like you were operating at 30, at 150, you’re in for an enormous amount of pain.

Sam Corcos (53:30):

Yeah.

Ale Resnik (53:32):

So it’s good that you’re doing all this and that you’re trying to see ahead of what’s happening. And we’ll say that build those six people, build backup plans for those six people, align them all the time, be constantly recruiting for those six people, and then implement the system and the checkpoints in order to make sure that things don’t get out of whack to the point that’s too late, and then you need to pull back too hard.

Sam Corcos (54:01):

Awesome.

Ale Resnik (54:02):

I will also add a checkpoint on burn. Meaning, also when you hire your VP finance, there’s going to be a tendency on, “Oh, they take care of that.” No.

Sam Corcos (54:15):

Right.

Ale Resnik (54:17):

No, you, every month you’re signing with your name and your reputation and your blood, every dollar that comes out of the company. So you need to get a report that’s well crafted. What did we spend the money on? What is our projection of burn for the next six months? What are we spending money on? What are the list of subscriptions that we have? Every single detail. It seems there are certain things that everyone tells you, hire your team, doesn’t run. Yes. That there are five things that you should micromanage. Like you’re managing a very small business. Burn is one, head count is another one, promotions and raises, making sure that you’re not having long term commitments. Don’t let your head of legal get you into seven year contracts. Right?

Flexibility, nimble, low burn, sign. Don’t let executives sign contracts that you haven’t reviewed, or your head of legal reviewed and gave you a memo on, right? Those are the things that yeah, people say, “Okay, I hire my six people. I trust them.” Yes, but there are specific things that are the same as when you were alone with a $100,000 in the bank, right? Burn, head count, contracts, all of that, you still need to do with your own eyes every month to make sure that things are happening exactly the way you want. Because you are the only one who can do it.