Keith Rabois on the Role of a COO and How to Hire the Best

Posted in: Startups, Venture Capital, Video Notes, PayPal, hiring, first round, keith rabois, khosla ventures, PayPal Mafia, square

[vcrow][vccolumn width="1/1"][vccolumntext]keith-video-notes-2

Outline:

  1. The Role of a COO and Scaling Your Startup
  2. Hiring the Right People
  3. Are You Writing or Are You Editing?
  4. When Editing Turns Into Micro-Managing
  5. Hiring Diversity (Or Not)
  6. Hiring “A” Players
  7. How to Hire For Functional Roles You Know Nothing About

The Role of a COO and Scaling Your Startup

Keith has a reputation for coming into companies that are growing exponentially and helping them grow even faster. At Square, Keith was the COO. What is the role of a COO at a 20 person startup?

“Emergency Room Triaging”

  • There is always something broken at a startup (things are very chaotic)
  • Some problems appear to be fatal but are more like a cold (will get fixed on their own)
  • Some look like a cold but may actually be fatal (critical to identify, must get fixed)
  • The COO’s job is to keep the company focused on what really matters, and fix the things that may be fatal down the line
  • There is also lots of hiring (more on that later)

This is important when a company is scaling because you cannot built on top of those things that may end up being fatal. A company built on a broken infrastructure (co-founder issues, hiring too soon too fast, etc.) will get exposed when a certain level of scale is reached.

You have to find the right person to manage it to put the concrete down to leave it stable. You have to constantly fix things. Over time you lay the foundation and everything is fixed so you can build on top of it.

Hiring the Right People

When Keith leaves a company three or four people have to come in to do the same job that he’s done. He gets a tremendous amount done. Which is only possible by hiring the right people. Easier said than done...

What does Keith look for when hiring?

1. Finding the Barrels

There are two categories of good people: there is ammunition and there is barrels. You can add all the ammunition you want, but if you only have five barrels in your company you can literally only do five things simultaneously. If you add one barrel you can suddenly do a sixth, if you add another you can do seven. So finding those barrels that you can shoot through is key.

What is a barrel?

A barrel is is someone that can take an idea from conception to live and it’s almost perfect. They can pull people with them, they can motivate people, they can edit themselves. Those are the kind of people that are really hard to find. The ratio of ammunition to barrels is also important; but Keith believes that whenever you do find a barrel you should hire instantly regardless of whether you have the money, or even a role in mind.

Barrels are resourceful.

2. Relentlessly Resourceful

Every marginal person that you hire you should be someone who is relentlessly resourceful.

Paul Graham said it best:

Not merely relentless. That's not enough to make things go your way except in a few mostly uninteresting domains. In any interesting domain, the difficulties will be novel. Which means you can't simply plow through them, because you don't know initially how hard they are; you don't know whether you're about to plow through a block of foam or granite. So you have to be resourceful. You have to keep trying new things.

Some people are just relentlessly resourceful. For example, one of Keith’s former interns at nineteen years of age was better than 80% of Square at “just getting stuff done.” He spotted it on the intern’s second day on the job.

Keith describes how he wanted to reward people who were working late by bringing them smoothies - at nine o’clock at night (which proved to be more difficult than expected). The HR group, Keith’s executive assistant, people tried and the smoothies always seemed to come warm or late, and not much of a reward. So one day Keith asked the intern to do it, and at nine o’clock the smoothies were there - cold and on time. That’s when Keith learned that he can give that intern real stuff to do and had the confidence that they will get done.

Are You Writing or Are You Editing?

Hiring barrels is hard, but there’s also the challenge of defining the role that you’ve given them - particularly as it relates to parts (or ideally, all) of what used to be your role. How do you give the barrel the level of trust, the responsibility, the level of ownership that they need for performing their task while simultaneously maintaining the right amount of control?

Keith describes how he finds the right balance by using a metaphor that @Jack taught him during his time at Square:

Your job as an executive is to edit - not to write. Every time you do something you should think through and ask yourself: am I writing or am I editing? and you should immediately be able to tell the difference.

It’s okay for an executive to write once in a while... But if you’re writing on a consistent basis in marketing, legal, product, customer acquisition, recruiting, and so on, there is a fundamental problem with that team. Writing relates to doing the actual work product as opposed to reviewing it and making suggestions, leaving comments, editing.

Every time that you do something you should say to yourself: am I writing or am I editing -- and get in a position where you’re editing.

When Editing Turns Into Micro-Managing

There is a two-fold test that you can use to know if more editing is required - even at the risk of micro-managing - and when it’s okay to step back, leave the work product as is, and let the employee figure out the improvements along the way.

1. Is the task critical?

When President Eisenhower was asked what was the hardest part of his job he gave a surprising answer: “learning to sign a bad letter.” When you are the President of the United States you can’t be spending your time fixing up every little thing.

In the grand scheme of things when something is not that important, you may want to allow the mistake to go through so people can learn from it. If on the other hand the task is important to your business - it must be edited - so you have to provide the extra feedback even at the risk of micro-managing.

2. Knowing what you don’t know

Knowing what you don’t know is incredibly important. Knowing that your employee knows the distinction is key.

There are people who just know what they don’t know and there are people who don’t. Until someone shows the propensity to distinguish between those things you can’t let them run amuck.

People find themselves in a position where they’re not sure about something all the time. It can be about a line of code, a sensitive client email, about information that’s confidential, or is it not? You want your employees to make those decisions. Even if they’re wrong, they don’t always have to ask (asking for forgiveness, not for permission). But for the employee to have the freedom to make those decisions, you have to be confident that when something is critical and just on the edge, they’ll make sure to proceed only after clarifying - knowing when to ask. This relates to an employee’s own time as well, knowing when to clarify before proceeding, as some decisions - particularly in the beginning - may be irreversible later on.

Once someone shows that they do know the difference between what they know and what they don’t know you can give them a long rope and let them run.

Hiring Diversity (Or Not)

In the early days of PayPal, Max Levchin and Peter Thiel had some unorthodox hiring practices. One of them is quite contrarian to the general advice people get: hiring people that are like you. Diversity is important, and there are times when it is not. Diversity of thought can slow you down and at an early-stage startup, speed is your most valuable weapon. When people are similar and there are enough common bonds that they actually make better decisions and don’t spent nearly as much time on communication (arguing).

Diversity of thought is most valuable at later stages of a company's life. “As you get into the uncharted territory where you don't actually have any intellectual background you need perspectives from people that are very different from you. At that point, it's actually quite valuable to have people that are diverse.” Levchin shares, in another great interview conducted by First Round Capital.

How similar should people at early-stage teams be?

Generally speaking you want to hire people that share first principles, which involve strategy, people, and culture.” Keith remarked.

If people don’t agree on first principles then they can get themselves into infinite loops by arguing, not seeing eye to eye, and having debates that may very well be beneficial, but not at the expense of slowing down decision making at the startup. That said, if you’re generally aligned on first principles then the application of them and the best way to execute against the principles is a really robust and vigorous debate, which is really helpful.

Hiring “A” Players

Steve Jobs said it, now we hear that a lot. So as a startup you want to hire the best of the best - the top 5% of talent - and they have to be excited about what you’re doing, you have to find them, and together you have to be in agreement on first principles (and a compensation package). Does that mean that you actually get to hire anybody?

When Vinod Khosla joined the Board at Square he said something that has stuck with Keith since, which he now really believes in: “Ultimately, the team you build is the company you build.”

You think that you’re building a technology company, you’re focused a lot on the product, but ultimately what you’re really building is a team and the quality of that team will dictate the outcome. That mentality leads you to focus more on the quality of the people.

How do you build a team full of A players when your company headcount gets to the hundreds?

You can’t. It’s impossible to have a team of all truly A players when the company grows to a certain scale. At that point, what you can do is define what an A player is so that you can actually execute against it. This means that you hire people earlier in their careers when they’re a little less proven. The sort of people that may develop into extraordinarily rare talented people, that if you wait until they’re proven, you’ll be competing with the Googles and Facebooks of the world, or startups with more resources and funding. So hire interns.

Another option is hiring somebody with very different experiences from the role you’re actually looking for, but where you think that the skill-set they’ve acquired is transferable. Keith does that a lot, which he says is because the raw abilities are harder to teach, and are quite rare when compared to the actual skill or discipline necessary for the role. So you take the raw skill - teach the discipline - and end up with a true A player.

Another option is hiring people that others companies won't touch.

How to Hire For Functional Roles You Know Nothing About

Go get coffee with the five best people at a particular role so you know what a world class person in that role looks like.

For example, imagine that you’re hiring a CFO and you’ve never worked with one. How do you know what does a world class CFO look like? Network limitations aside, go get coffee with the top five CFOs in Silicon Valley, take notes, and try to figure out what they have in common. Then when you start interviewing look for those qualities in perspective hires.[/vccolumntext][/vccolumn][/vcrow]