# articles

## board management - Matt Levine

### Who controls a company?

A reader, knowing how [fond](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjAtMDYtMjQvdGltZS10by1kby1hY3RpdmlzbS1pbi1yZXZlcnNlP2NtcGlkPUJCRDA0MTEyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQxMSZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Bbb4cc926) I [am](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMDktMDEvcHV0dGluZy1tZW1lLXN0b2Nrcy1saWtlLWdhbWVzdG9wLWluLXRoZS1pbmRleD9jbXBpZD1CQkQwNDExMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA0MTEmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96Be2663722) of [this](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMTAtMDUvdGhlLWJvYXJkLWNhbi10LWZpcmUteW91LWlmLWl0LXF1aXRzP2NtcGlkPUJCRDA0MTEyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQxMSZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B3c9cc0e5) [sort](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMTgtMDUtMjQvY29tcGFueS1pc24tdC1zdXJlLWlmLWl0LWZpcmVkLWl0cy1jZW8_Y21waWQ9QkJEMDQxMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDExJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B49b141f6) [of](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL25ld3NsZXR0ZXJzLzIwMTktMDItMDEvbW9uZXktc3R1ZmYtY2l0Z28taXNuLXQtc3VyZS13aG8taXRzLWJvc3MtaXM_Y21waWQ9QkJEMDQxMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDExJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B1d36bd99) [thing](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMTgtMDctMjQvcGFwYS1qb2huLXMtcG9pc29uLXBpbGxlZC1wYXBhLWpvaG4_Y21waWQ9QkJEMDQxMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDExJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bdcb6432a), sent me three articles in _Bicycle Retailer and Industry News_ with the following perfect sequence of headlines:

- "[Scott Sports replaces CEO 'to refresh' brand](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmljeWNsZXJldGFpbGVyLmNvbS9pbnRlcm5hdGlvbmFsLzIwMjQvMDMvMjkvc2NvdHQtc3BvcnRzLXJlcGxhY2VzLWNlby1wYXJ0LWRldmVsb3BtZW50LXJlZnJlc2g/60e87ce39a995a4b1a2deb96B8b5aeae8)" (March 29)
- "[Beat Zaugg says he's still CEO of Scott Sports](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmljeWNsZXJldGFpbGVyLmNvbS9pbnRlcm5hdGlvbmFsLzIwMjQvMDQvMDEvYmVhdC16YXVnZy1zYXlzLWhlcy1zdGlsbC1jZW8tc2NvdHQtc3BvcnRz/60e87ce39a995a4b1a2deb96Ba292b191)" (April 1)
- "[Police called to Scott Sports headquarters](https://link.mail.bloombergbusiness.com/click/35003841.260818/aHR0cHM6Ly93d3cuYmljeWNsZXJldGFpbGVyLmNvbS9pbnRlcm5hdGlvbmFsLzIwMjQvMDQvMDQvcG9saWNlLWNhbGxlZC1zY290dC1zcG9ydHMtaGVhZHF1YXJ0ZXJz/60e87ce39a995a4b1a2deb96Bef3edc89)" (April 4)

Honestly that's all you need to know, but the details are pretty good too. From the April 1 story:

> Industry veteran Beat Zaugg, who has been an owner of Scott Sports since 1998, says he remains the brand's CEO, a minority shareholder and chairman of its parent company board, despite a news release Friday saying that the board had fired him.
> 
> "This announcement was made to destabilize the company and its employees," Zaugg told BRAIN on Monday; he said the announcement had been made via a PR agency that works for Scott's majority shareholder — Korea's Youngone — not Scott Sports. …
> 
> However, the PR firm responded to BRAIN later on Monday with a statement from the Scott Corporation board insisting that Youngone representatives have a majority on the board and had voted to terminate Zaugg.
> 
> "We understand that it may be difficult for Mr. Zaugg to accept his termination (given his long-standing role as CEO). But this is ultimately irrelevant as a matter of law: the ultimate decision body of a company is the board of directors and the board is clearly entitled to terminate the employment with the CEO," the statement read in part. …
> 
> Zaugg conceded that Youngone controls a majority of the board, but said the board did not terminate him correctly. "So far they did it wrong," he told BRAIN, without elaborating. "This has to be my secret for the time being," he said.  

Every dispute of this kind has a paragraph like that: Generally the dispute is between the majority shareholder and the chief executive officer, and the CEO can't usually deny that (1) the majority shareholder owns a majority of the shares and (2) that ultimately gives them the power to fire him. So the CEO is reduced to saying "well, sure they _could_ fire me, but they have to follow proper procedures, and they forgot to send the notice of the board meeting by registered mail so nyah nyah nyah nyah nyah here I still am." Usually the CEO stands on some minor, debatable point of procedure. This is the first time I've seen a CEO stand on a _secret_ point of procedure. I like this guy's style.

Also the April 4 story contains a tantalizing hint that the Swiss police might _regularly_ be involved in disputes like this:

> Fribourg police spokesperson Bertrand Ruffieux told Euro Day France: "Nothing serious happened. We intervened in a civil matter, a dispute between managers. In this type of case, the police are called to the scene to find a way to open a discussion, and for people to understand each other. But there are no injured or anyone arrested."

Like you call the Swiss police and the Corporate Disputes Unit shows up with sirens blaring and they get out the bullhorn and shout "we have a copy of your bylaws right here! Don't do anything rash! A quorum of your board of directors is on the way!"

## decay

[The Tragic Tale of DEC, the Computing Giant That Died Too Soon | Hacker News](https://news.ycombinator.com/item?id=25319539)
[The Tragic Tale Of DEC, The Computing Giant That Died Too Soon - Digital.com](https://web.archive.org/web/20220719072235/https://digital.com/digital-equipment-corporation/)

[Netflix's Annual Reports (10-Ks) used to be a work of art. What happened? | Hacker News](https://news.ycombinator.com/item?id=26043294)
[Netflix's Annual Reports (10-Ks) used to be a work of art. What happened? | KAY SINGH](https://singhkays.com/blog/netflix-annual-reports-work-of-art/)

## detecting changes

[I keep a WTF notebook (2021) | Hacker News](https://news.ycombinator.com/item?id=40078106)
[Why you need a "WTF Notebook"](https://www.simplermachines.com/why-you-need-a-wtf-notebook/)

## dogfooding

[Why doesn't Stripe use Stripe Billing? | Hacker News](https://news.ycombinator.com/item?id=33191307)
[Elon Musk on X: "Should I step down as head of Twitter? I will abide by the results of this poll." / X](https://twitter.com/elonmusk/status/1604617643973124097)

## downsizing

[Maybe getting rid of your QA team was bad | Hacker News](https://news.ycombinator.com/item?id=38645856)
[Maybe Getting Rid of Your QA Team was Bad, Actually. | by David Caudill | Medium](https://davidkcaudill.medium.com/maybe-getting-rid-of-your-qa-team-was-bad-actually-52c408bd048b)

[More product, fewer product managers | Hacker News](https://news.ycombinator.com/item?id=38652619)
[Kitemaker blog - More product, fewer PMs](https://kitemaker.co/blog/more_product_fewer_pms)

[Amazon's Silent Sacking | Hacker News](https://news.ycombinator.com/item?id=38818319)
[Amazon's Silent Sacking - Justin Garrison](https://justingarrison.com/blog/2023-12-30-amazons-silent-sacking/)

## downsizing - stories

[Pixar to undergo 20% layoffs in 2024 | Hacker News](https://news.ycombinator.com/item?id=38961080)
[As Disney pushes toward streaming profitability, Pixar to undergo layoffs in 2024 | TechCrunch](https://techcrunch.com/2024/01/11/as-disney-pushes-towards-streaming-profitability-pixar-to-undergo-layoffs-in-2024/)

[Stellantis uses 'mandatory remote work day' to cut 400 white-collar jobs: 'It was a mass firing of everybody that was on the call'](https://finance.yahoo.com/news/stellantis-uses-mandatory-remote-day-225053112.html)

[Tesla conducting more layoffs, including entire Supercharger team | Hacker News](https://news.ycombinator.com/item?id=40209382)
[Tesla conducting more layoffs, including entire Supercharger team | Electrek](https://electrek.co/2024/04/29/tesla-conducting-more-layoffs-including-entire-supercharger-team/)

## equity management

[Stripe faces $3.5B tax bill as employees' shares expire | Hacker News](https://news.ycombinator.com/item?id=35058846)
[Stripe Details $3.5 Billion Tax Bill in Latest Fundraising Round - Bloomberg](https://www.bloomberg.com/news/articles/2023-03-06/stripe-details-3-5-billion-tax-bill-in-latest-fundraising-round)

[Peloton - A call for action [pdf] | Hacker News](https://news.ycombinator.com/item?id=30283918)
[BW_Peloton_Presentation_Feb072022.pdf](https://www.blackwellscap.com/wp-content/uploads/2022/02/BW_Peloton_Presentation_Feb072022.pdf)

## growing in role

[On Becoming a VP of Engineering | Hacker News](https://news.ycombinator.com/item?id=36721080)
[On Becoming a VP of Engineering, Part 1: The Path to VP | Honeycomb](https://www.honeycomb.io/blog/becoming-vp-of-engineering-pt1)

## improvements

[How the US Air Force Ditched the Average and Saved Lives | Hacker News](https://news.ycombinator.com/item?id=31957255)
[How the US Air Force Ditched the "Average" and Saved Lives](https://mannhowie.com/average-pitfall)

[Toyota Kata - Wikipedia](https://en.m.wikipedia.org/wiki/Toyota_Kata)

## keeping things the same

[A Japanese factory that designs clothes on a 40-year-old computer [video] | Hacker News](https://news.ycombinator.com/item?id=36662392)
[40年前のパソコンが現役！機械と手仕事で伝統を守りながらはんてんを作る日本の工場 - YouTube](https://www.youtube.com/watch?v=zWJZFQHklBg)

## large-scale politics

[The day Steve Jobs dissed me in a keynote (2010) | Hacker News](https://news.ycombinator.com/item?id=30613967)
[The day Steve Jobs dissed me in a keynote | Derek Sivers](https://sive.rs/itunes)

[Founder's syndrome - Wikipedia](https://en.wikipedia.org/wiki/Founder's_syndrome)

## leadership changes

[Should I step down as head of Twitter? I will abide by the results of this poll | Hacker News](https://news.ycombinator.com/item?id=34045423)

[New Year, New CEO | Hacker News](https://news.ycombinator.com/item?id=29880115)
[Signal >> Blog >> New year, new CEO](https://signal.org/blog/new-year-new-ceo/)

[YouTube CEO Susan Wojcicki is stepping down | Hacker News](https://news.ycombinator.com/item?id=34821873)
[YouTube CEO Susan Wojcicki is stepping down](https://www.engadget.com/youtube-ceo-susan-wojcicki-is-stepping-down-172115390.html)

[6 things to know about new YouTube chief Neal Mohan](https://www.fastcompany.com/90851828/neal-mohan-new-youtube-chief-6-things-to-know)

[Sheryl Sandberg stepping down as Facebook COO | Hacker News](https://news.ycombinator.com/item?id=31586885)
[Facebook parent Meta COO Sheryl Sandberg is stepping down](https://www.cnbc.com/2022/06/01/facebook-coo-sheryl-sandberg-says-she-is-stepping-down.html)

[Google exec fired after female boss groped him at drunken bash, suit says | Hacker News](https://news.ycombinator.com/item?id=34575768)
[Google exec fired after a female boss groped him at drunken bash](https://nypost.com/2023/01/28/google-exec-fired-after-female-boss-groped-him-at-drunken-bash/)

[John Carmack Leaves Meta | Hacker News](https://news.ycombinator.com/item?id=34022484)
[John Carmack - I resigned from my position as an executive... | Facebook](https://www.facebook.com/100006735798590/posts/i-resigned-from-my-position-as-an-executive-consultant-for-vr-with-meta-my-inter/3467566940144465/)

[Shoichiro Toyoda, who turned Toyota into global automaker, has died | Hacker News](https://news.ycombinator.com/item?id=34802160)
[Shoichiro Toyoda, who turned Toyota into global automaker, dies at 97 - The Mainichi](https://web.archive.org/web/20230306034729/https://mainichi.jp/english/articles/20230214/p2g/00m/0bu/043000c)

[Bayer is getting rid of bosses and asking staff to 'self-organize' | Hacker News](https://news.ycombinator.com/item?id=40102779)
[Pharmaceutical giant Bayer is getting rid of bosses and asking staff to 'self-organize' to save $2.15 billion | Fortune Europe](https://fortune.com/europe/2024/04/11/pharmaceutical-giant-bayer-ceo-bill-anderson-rid-bosses-staff-self-organize-save-2-billion/)

[GitHub gets a new CEO | TechCrunch](https://techcrunch.com/2021/11/03/github-gets-a-new-ceo)

## making changes

[Twitter's pivot to x.com is a gift to phishers | Hacker News](https://news.ycombinator.com/item?id=39991173)
[Twitter's Clumsy Pivot to X.com Is a Gift to Phishers - Krebs on Security](https://krebsonsecurity.com/2024/04/twitters-clumsy-pivot-to-x-com-is-a-gift-to-phishers/)
- if you do it wrong, outsiders WILL exploit it

[Cyberpunk 2077's Rough Launch Led To A Massive Structural Overhaul At CD Projekt Red - GameSpot](https://www.gamespot.com/articles/cyberpunk-2077s-rough-launch-led-to-a-massive-structural-overhaul-at-cd-projekt-red/1100-6519510/)

[I worked in Amazon HR and was disgusted at what I was seeing with PIP plans | Hacker News](https://news.ycombinator.com/item?id=38471744)
[Former Amazon HR Worker: Performance-Improvement Process Gave Me PTSD](https://www.businessinsider.com/amazon-hr-performance-improvement-plans-pip-pivot-had-to-quit-2023-11)

[Why is everything so hard in a large organization? | Hacker News](https://news.ycombinator.com/item?id=28692026)
[do not look into laser with remaining eye: why is everything so hard in a large organization?](https://graphthinking.blogspot.com/2021/09/why-is-everything-so-hard-in-large.html)

[Changes at Basecamp | Hacker News](https://news.ycombinator.com/item?id=26944192)
[Changes at Basecamp](https://world.hey.com/jason/changes-at-basecamp-7f32afc5)

[When everything is important but nothing is getting done | Hacker News](https://news.ycombinator.com/item?id=31481888)
[When Everything is Important But Nothing is Getting Done](https://sharedphysics.com/everything-is-important/)

[Nobody ever gets credit for fixing problems that never happened (2001) [pdf] | Hacker News](https://news.ycombinator.com/item?id=39472693)
[Repenning/Sterman CMR su01 r2 - Sterman_CMR_su01_.pdf](https://web.mit.edu/nelsonr/www/Repenning=Sterman_CMR_su01_.pdf)

[Mike Crittenden](https://critter.blog/2021/05/10/resistance-increases-exponentially-with-the-size-of-a-change/)
(2021) Resistance increases exponentially with the size of a change.

[Jo Meenen](https://www.cutemachine.com/switch-book-summary/)
Switch Book Summary
How to Change Things When Change Is Hard
good tips here

[Morgan Housel](http://www.collaborativefund.com/blog/the-full-reset/)
(2017) The Full Reset
understand the power of starting clean

## making decisions

[Feynman on group decision-making at Los Alamos (1985) | Hacker News](https://news.ycombinator.com/item?id=30298732)
[Extract of Richard P. Feynman's "Los Alamos from below"](https://web.archive.org/web/20120504025716/http://cs.au.dk/~danvy/lafb.html)

[Don't Feed the Thought Leaders | Hacker News](https://news.ycombinator.com/item?id=27467999)
[Don't Feed the Thought Leaders - Earthly Blog](https://earthly.dev/blog/thought-leaders/)

[Decision matrix | Untools](https://untools.co/decision-matrix)

[Second-order thinking | Untools](https://untools.co/second-order-thinking)

[Stacked changes: how FB and Google engineers stay unblocked and ship faster | Hacker News](https://news.ycombinator.com/item?id=29255195)
[Graphite](https://web.archive.org/web/20211117185155/https://graphite.dev/blog/post/DThX8ffP1gmxWJChEv0y)

[Our Company Is Doing So Well That You're All Fired | Hacker News](https://news.ycombinator.com/item?id=39471568)
[Our Company Is Doing So Well That You're All Fired - McSweeney's Internet Tendency](https://www.mcsweeneys.net/articles/our-company-is-doing-so-well-that-youre-all-fired)

[What are the most effective methods for scoping problems across multiple departments?](https://www.linkedin.com/comm/advice/1/what-most-effective-methods-scoping-problems)

[Sam Knuth](https://opensource.com/open-organization/17/9/exercise-in-transparent-decisions)
A 3-step process for making more transparent decisions

[Robert Ecker](https://team-coder.com/boosting-the-quality-of-team-decisions/)
(2015) Boosting the Quality of Team Decisions
pros and cons of voting, consensus and strong leadership

[Mike Crittenden](https://critter.blog/2021/01/13/audience-friendly-goals/)
(2021) Audience friendly goals

[Seth Godin](https://seths.blog/2009/05/ignore-sunk-costs/)
(2009) Ignore sunk costs
> * When making a choice between two options, only consider what’s going to happen in the future, not which investments you’ve made in the past. The past investments are over, lost, gone forever. They are irrelevant to the future.

[Mike Crittenden](https://critter.blog/2021/01/05/dont-bring-problems-bring-solutions-is-bull-crap/)
(2021) “Don’t bring problems, bring solutions” is bull crap

[Cate McGehee](https://www.portent.com/blog/content-strategy/best-thing-ever-heard-ideation-brainstorming.htm)
(2017) The Single Best Thing I’ve Ever Heard About Ideation and Brainstorming

[Raph Lee](https://lob.com/blog/understand-design-build-a-framework-for-problem-solving)
(2019) Understand, Design, Build: A Framework for Problem-Solving

[Greg Kogan](https://www.gkogan.co/blog/reject-first-ideas/)
(2017) Reject the First Ideas

## making decisions - event storming

[Alberto Brandolini](http://ziobrando.blogspot.com/2013/11/introducing-event-storming.html)
(2013) Introducing Event Storming
EventStorming is a workshop format for quickly exploring complex business domains.

## making rules

[Alex Naoumidis](https://www.themindsetapp.com/musk-letter/)
(2018) Elon Musk reveals his productivity rules in a letter he sent to Tesla employees
> - Get of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.
> - Also get rid of frequent meetings
> - Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value.
> - Don’t use acronyms or nonsense words for objects
> - Communication should travel via the shortest path necessary to get the job done
> - A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels
> - If following a “company rule” is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.

[Mike Crittenden](https://critter.blog/2021/02/15/beware-of-exception-debt/)
(2021) Beware of exception debt

[Dominik Krejcik](https://domk.website/blog/2021-01-31-cult-of-best-practise.html)
(2021) The Cult of Best Practice

## Matt Levine - Changes

### Ethics (from Matt Levine)

U.S. public companies generally have codes of ethics, which they make public. A company's code of ethics says that its executives and employees are supposed to act ethically, sets some guidelines about what counts as ethical or unethical behavior, and has some procedures to enforce those guidelines.

Why do companies have codes of ethics? Part of the answer is that the code of ethics is a management tool. The company's directors and officers want its employees to act ethically, for whatever reason (personal morality, management of legal and reputational risk, etc.). So they have a set of policies telling employees what not to do, and the employees read the policies and know what not to do, and if they do it the company can fire them.

Another part of the answer is that the code of ethics is an advertising tool. "We are an ethical company, see, we have a code of ethics," the company can say, to potential shareholders or customers or employees. And then those potential shareholders or customers or employees can read the code and say "oh yes you are ethical" and support the ethical companies and avoid the unethical ones.

A third, most obvious part of the answer is that having and publicizing a code of ethics is essentially required by law. U.S. [Securities and Exchange Commission rules](https://www.sec.gov/rule-release/33-8177) created after the Sarbanes-Oxley Act require a public company "to disclose whether it has adopted a code of ethics that applies" to its senior officers, and, if not, explain why not; the rules also require the company to make the code of ethics public. In theory I suppose you could just about satisfy this requirement by adopting a code of ethics that says "we will try to act ethically when appropriate" and leaving it at that, or by publicly disclosing "we do not have a code of ethics because we generally trust our senior officers to act ethically when appropriate," but I feel like you'd get some pushback for either of those approaches. Also listing standards for the stock exchanges have further requirements for codes of ethics, including that they apply to employees (not just senior officers) and contain an enforcement mechanism; saying "we don't have a code of ethics and here's why" is not an option under these rules.

So if you are a public company you have to write a code of ethics and make it public, and it has to be good enough to meet your listing requirements. But those requirements are pretty general and leave a lot of room for different approaches. So you might ask, in writing a code of ethics: How good should it be? Should it require your employees to be just barely ethical enough, or should it hold them to a very high standard?

There are obvious reasons to make the standards high and specific. As a management tool, there are advantages to telling your employees to be very ethical: That will minimize legal and reputational risk, plus it is, you know, the ethical thing to do. As an advertising tool, the advantages are even more obvious: If you are trying to impress shareholders with your code of ethics, you will impress them more if it's very ethical.

This last point is particularly salient these days as so many investors are focused on environmental, social and governance issues; having a good code of ethics is a good way to respond to ESG investors' demands. If your investors say "we care about diversity," you can say "so do we, see, our code of ethics says that everyone has to respect diversity," and the investors will be happy. The SEC requires you to tell shareholders about your code of ethics, so you might as well use the opportunity to tell the shareholders what they want to hear.

But there are also obvious reasons to make the standards low and generic. As a management tool, for instance, sometimes you might want to have the flexibility to prioritize profits over ethics. (Not _you_, of course, but someone might!) Also, if you have very high ethical standards, sometimes your employees might violate them, and then what? It is all well and good to write on a piece of paper "we have zero tolerance for lying," but then when your extremely effective head of sales gets caught in a little lie do you have to fire her?

But the biggest problem with a strict and specific code of ethics is that [everything is securities fraud](https://www.bloomberg.com/opinion/articles/2021-02-03/goldman-sachs-goes-to-supreme-court-hedge-funds-won-on-gamestop-kkpoe6ws). If someone at your company does something bad and the stock goes down, your shareholders will sue, claiming in essence that you didn't tell them that you were doing the bad thing. Technically, though, securities law does not require companies to disclose every bad thing; for the most
part it penalizes active lies, not passive omissions. So the shareholders will not say "you didn't tell us about the bad thing"; rather, they will say "you actively lied to us, saying or implying that you were not doing the bad thing." Codes of ethics [are _very helpful_ to the shareholder plaintiffs here](https://www.bloomberg.com/opinion/articles/2020-05-01/it-doesn-t-pay-to-be-too-ethical), meaning that they are dangerous for the company, and the more strict and detailed they are the more dangerous they are. If your code of
ethics says "executives are expected to act ethically where appropriate," and your chief executive officer is revealed to be a sexual harasser and the stock drops, you can say "well that vague statement couldn't possibly have induced anyone to buy our stock" and maybe win the shareholder lawsuit. If your code of ethics says "we have zero tolerance for sexual harassment of any kind and we hold everyone
accountable immediately," then it will be easier for shareholders to argue that they were deceived.

The last few years in the financial markets have involved (1) a huge growth in the size and salience of ESG investing and (2) a huge growth in the volume and creativity of everything-is-securities-fraud lawsuits, which kind of cut in opposite directions. You could imagine companies _paring down_ their codes of ethics to avoid getting sued all the time, or _beefing up_ their codes to seek favor with ESG investors.

But there is an actual answer, which is "beefing up":

> Over the past decade, corporate scandals have proliferated. These scandals, along with the emergence of the #MeToo movement and Environmental,
> Social, and Corporate Governance (ESG) mandates, have increased the
> scrutiny of corporations' ethics culture. How have companies responded
> in terms of the language appearing in their public ethics documents? We
> compare the Code of Ethics in 2008 versus 2019 for a sample of S&P
> 500 firms. For the vast majority of firms, their Code of Ethics
> lengthened, with the average 2019 code having 29 percent more words
> (about 1,760 words) than the 2008 average. The language of the codes has
> also changed. Words such as bribery, corruption, sustainability, speak
> up, bullying, slavery, and human rights all saw significantly higher
> usage in the later period. We review possible reasons for the dramatic
> changes, and suggest what questions remain about the motivations behind
> them. Whether the changes we observe are primarily intrinsically
> motivated or simply market responses to public pressures is yet to be
> determined. What is clear from our findings is that society seems to be
> entering a new age of increasingly moral-or, at least,
> moralized-corporate governance.

That is the abstract to "[How Have Corporate Codes of Ethics Responded to an Era of Increased Scrutiny?](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3887743)"
by Tim Loughran, Bill McDonald and James Otteson. The point I want to
make here is that beefing up your corporate code of ethics is _costly_, and in some loose sense _binding:_
The more things that are clearly prohibited by your code of ethics, the
more likely you are to get sued if someone does them. If your code of
ethics says "we will not use slavery" and you use slavery you will
definitely, definitely get sued!

And
companies are incurring these costs. Possibly out of, like, intrinsic
corporate morality, but I'm not a big believer in intrinsic corporate
morality. More likely it is because shareholders, loosely speaking,
demand that they have these policies, and so the companies are doing
what shareholders want. And because everything is securities fraud,
if companies don't follow those codes, the shareholders can sue. In some
rough and approximate sense, shareholders have found a binding way to
make companies more ethical.

## mergers and acquisitions - business model change

[Twitter Blue for $8/Month | Hacker News](https://news.ycombinator.com/item?id=33424607)
[Elon Musk on Twitter: "Twitter's current lords & peasants system for who has or doesn't have a blue checkmark is bullshit. Power to the people! Blue for $8/month." / Twitter](https://web.archive.org/web/20221101174507/https://twitter.com/elonmusk/status/1587498907336118274)

[They can and will ruin everything you love | Hacker News](https://news.ycombinator.com/item?id=37959540)
[They can and will ruin everything you love](https://www.welcometohellworld.com/they-can-and-will-ruin-everything-you-love/)

## mergers and acquisitions

[Tesla engineers were on-site to evaluate the Twitter staff's code, workers said | Hacker News](https://news.ycombinator.com/item?id=33387722)
[Elon Musk Twitter takeover: Layoffs are imminent - The Washington Post](https://www.washingtonpost.com/technology/2022/10/29/elon-musk-twitter-takeover/)

[Business Insider blows the roof off of Elon Musk's Twitter - Louder With Crowder](https://www.louderwithcrowder.com/elon-musk-weekly-updates)

[What are the worst M&A decisions that has destroyed shareholder value and parent companies are still struggling from today? : stocks](https://old.reddit.com/r/stocks/comments/13uebwu/what_are_the_worst_ma_decisions_that_has)

## money management - bankruptcy

[Matt Levine: Johnson & Johnson's (JNJ) Bankruptcy Didn't Work - Bloomberg](https://www.bloomberg.com/opinion/articles/2023-01-31/matt-levine-johnson-johnson-s-jnj-bankruptcy-didn-t-work)

[WeWork Goes Bankrupt | Hacker News](https://news.ycombinator.com/item?id=38172437)
[WeWork Files for Bankruptcy, Capping Co-Working Company's Downfall - Bloomberg](https://www.bloomberg.com/news/articles/2023-11-07/wework-goes-bankrupt-capping-co-working-company-s-downfall)

## money management - investing

[I have never read a business plan or balance sheet | Hacker News](https://news.ycombinator.com/item?id=30318634)
[Paul Graham on X: "I have never read a business plan or a balance sheet." / X](https://twitter.com/paulg/status/1492682253612113921)

## money management

[Babel is used by millions, so why are we running out of money? | Hacker News](https://news.ycombinator.com/item?id=27114718)
[Babel is used by millions, so why are we running out of money? · Babel](https://babeljs.io/blog/2021/05/10/funding-update.html)

## organizational unrest

[Ask HN: What are examples of companies dying due to many people quitting? | Hacker News](https://news.ycombinator.com/item?id=32831701)

## organizational unrest - unions

[Microsoft could soon have its first union | CNN Business](https://edition.cnn.com/2022/12/06/tech/microsoft-zenimax-union/index.html)

[Bandcamp's Entire Union Bargaining Team Was Laid Off | Hacker News](https://news.ycombinator.com/item?id=37938636)
[Bandcamp's Entire Union Bargaining Team Was Laid Off](https://www.404media.co/bandcamps-entire-union-bargaining-team-was-laid-off/)

[Bandcamp Unionizes | Hacker News](https://news.ycombinator.com/item?id=35188953)
[Bandcamp United - Home](https://www.bandcampunited.org/)

## organization types

[Difference Between Line and Line & Staff Organization (with Comparison Chart) - Key Differences](https://keydifferences.com/difference-between-line-and-line-staff-organization.html)

## responding to trends

[The Manager Squeeze: How the New Workplace Is Testing Team Leaders](https://www.gallup.com/workplace/510326/manager-squeeze-new-workplace-testing-team-leaders.aspx)

[Sriracha hit revenue of $150M a year with no sales team or ad spend | Hacker News](https://news.ycombinator.com/item?id=27658471)
[X](https://twitter.com/TrungTPhan/status/1409185044501987340)

[Nintendo Will Pay Its Workers 10% More | Hacker News](https://news.ycombinator.com/item?id=34700883)
[Nintendo Will Pay Its Workers 10% More - GameSpot](https://www.gamespot.com/articles/nintendo-will-pay-its-workers-10-more/1100-6511268/)

[Technology Trends in 2022 - Keeping Up [Full Book for Managers]](https://www.freecodecamp.org/news/technology-trends-in-2022-keeping-up-full-book-for-managers)

## scaling - low-quality offerings

[One kitchen, hundreds of internet restaurants | Hacker News](https://news.ycombinator.com/item?id=32615110)
[#17: One kitchen, hundreds of internet restaurants - by pb](https://peabee.substack.com/p/17-one-kitchen-hundreds-of-internet)

## scaling

[Kevin J. Delaney](https://qz.com/846530/something-weird-happens-to-companies-when-they-hit-150-people/)
(2016) Something weird happens to companies when they hit 150 people

[David NiuMark Roberge](https://hbr.org/2017/03/how-morale-changes-as-a-startup-grows)
(2017) How Morale Changes as a Startup Grows
how company's culture changes

[Hicham Amine](https://medium.com/startup-grind/how-to-grow-a-startup-the-5-best-tips-ive-ever-learned-2a5c8da160d8)
(2017) How to Grow A Startup: The 5 Best Tips I’ve ever learned.

[Eric Jorgenson](https://medium.com/@ericjorgenson/why-growing-past-20-employees-is-so-damn-hard-and-what-you-can-do-about-it-e37cb302db58)
(2017) Why Growing Past 20 Employees is so Damn Hard (and what you can do about it)

[David Brown](https://www.inc.com/david-brown/what-happens-when-a-founder-leaves-a-company-how-to-stay-grounded-continue-to-grow.html)
(2017) How to Stay Grounded and Maintain Your Vision at Your Company
There are four fundamental elements of running a business, and not only is vision the first, it's also the one that the others are built on.
As startup businesses start to scale, the vision can easily get lost.

[Michael Lopp](https://randsinrepose.com/archives/the-old-guard/)
(2014) The Old Guard

## taking risks

[Zillow lost money because they weren't willing to lose money | Hacker News](https://news.ycombinator.com/item?id=29333217)
[Zillow did not have metallic balls | Steven Buccini](https://www.stevenbuccini.com/zillow-offers)

## venture capital

[Jessica Livingston (2015) | Hacker News](https://news.ycombinator.com/item?id=36449894)
[Jessica Livingston](https://www.paulgraham.com/jessica.html)

# guides

## admitting failure

[Groups never admit failure | Hacker News](https://news.ycombinator.com/item?id=29488641)
[Groups Never Admit Failure](https://nav.al/failure)

[The U.S. Air Force just admitted the F-35 stealth fighter has failed | Hacker News](https://news.ycombinator.com/item?id=26251060)
[The U.S. Air Force Just Admitted The F-35 Stealth Fighter Has Failed](https://www.forbes.com/sites/davidaxe/2021/02/23/the-us-air-force-just-admitted-the-f-35-stealth-fighter-has-failed/)

## changing the environment

[Doors of McMurdo | Hacker News](https://news.ycombinator.com/item?id=34002411)
[Doors of McMurdo](https://brr.fyi/posts/doors-of-mcmurdo)

## how organizations change

[What Are the Three Phases of Organizational Change? | Bizfluent](https://bizfluent.com/info-8236354-three-phases-organizational-change.html)

[How a startup loses its spark | Hacker News](https://news.ycombinator.com/item?id=37098483)
[How a startup loses its spark](https://blog.johnqian.com/startup-spark)

[Companies that had successful pivots | Hacker News](https://news.ycombinator.com/item?id=29746370)
[fikrikarim/companies-with-successful-pivot: List of startups/companies that had successful pivots](https://github.com/fikrikarim/companies-with-successful-pivot)

## making decisions

[The SAFe Delusion | Hacker News](https://news.ycombinator.com/item?id=33384577)
[The SAFe Delusion - Information for decision-makers considering the SAFe framework](https://safedelusion.com/)

[Hard choice model | Untools](https://untools.co/hard-choice-model)

[Understanding the Innovator's Dilemma | WIRED](https://www.wired.com/insights/2014/12/understanding-the-innovators-dilemma)

## money management - investing

[How to Fund a Startup](https://paulgraham.com/startupfunding.html)

[How to Be an Angel Investor](https://paulgraham.com/angelinvesting.html)

## ranking employees

[What Is 'Stack Ranking' and Why Is It a Problem?](https://lattice.com/library/what-is-stack-ranking-and-why-is-it-a-problem)

# text

## board management

be very VERY careful on how you frame the bylaws to make the board
- it's very easy for someone to abuse a poorly worded document
- all the [rules of being legally safe] apply just as much here

## buying a business

When an owner auctions off his business, exhibiting a total lack of interest in what follows, you will frequently find that it has been dressed up for sale. If owners behave with little regard for their business, their conduct will often contaminate attitudes and practices throughout the company.

HOW TO EVALUATE BUSINESSES:
A bird in the hand is worth two in the bush.
1. How certain are you that there are birds in the bush?
2. When will they emerge and how many will there be?
3. What is the risk-free interest rate (yield on long-term bonds)?
Answer these three questions, and you'll know the maximum value of the bush - and the maximum number of birds that should be offered for it.
This applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants.
Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.

## changemaker coursera

People need to understand WHY they're doing something uncomfortable and unpleasant

- This requires the changemaker to share that importance of the unrelated thing(s)

Principles of human-centered design solutions

1. stay focused - wicked challenges are nasty and easy to get distracted from
    - Have a narrow frame of reference
    - Dig deep, don't go broadly
2. encourage wild ideas - Any idea, no matter how silly or wild or impossible, could be the start of something big
3. have 1 conversation at a time - it creates focus on details
4. defer judgment - no idea is bad when brainstorming
5. be visual - use images to evoke feeling
    - People take on what they FEEL
        - Thus, adoption comes from feeling the benefit to doing that thing instead
        - It's pushing against habit, so it has to be a strong feeling to work

How to make a solution

A understand

- This requires empathy
- Analyzing systems
    - Who does what and how?
    - Who decides what?
    - Who gets what?
    - Who connects to whom?
    - Why are we doing what we're doing?

B observe

C create context

D create ideas

E prototype

- Must be 3 things:
    - economically doable
    - Technically doable
    - People want it
- Exists with several main variables
    - People - desires, reactions, etc
    - Process - methods and systems
    - Place - location, site, region, etc

F test

- This requires several things to succeed
    - Authenticity to own your mistakes
    - Have a code of ethics that you abide by
    - Clarify that it's ALL experimental (i.e., in constant beta)

LEADERSHIP POINT:
never do for others what they can do for themselves
this gives them power that you're stripping from them by otherwise
this is REALLY critical when the power dynamic is uneven (leadership, nursing homes, variable strengths, etc)

## crisis management

Always, always, have a disaster protocol in place. It is a boss's duty to get to the scene as quickly as humanly possible. If you delay showing your face in public after a disaster, recriminations, anger and blame set in.

## diversity - old tPA

An influential organization will cross cultural boundaries
- The rapid information society we live in ensures large organizations become well-known very quickly
- Form a vision with its global effect in mind
- Developed parts of the world often forget the myriad opportunities and risks from the developing world

### Many cultural risks will damage an organization on every level

Avoid favoritism towards family members
- Draft a family employee policy
- Define their roles and responsibilities very clearly
- Treat them like every other member of the team
- Don't hire your children right out of college
    - Let them work elsewhere in the world for a few years for them to gain much-needed experience

One of the most significant organizational risks is to connecting revenue to financial success
- Revenue doesn't consider profitability, inventory management, and cash flow
- Revenue also doesn't factor a product's marketability or the organization's debts

#### Bringing together multiple unrelated groups always has risks

Uncertainty will easily cripple morale and inspire fear, so boldly negotiate and discuss
- Don't pay too much additional for your hires (5% is fine, but 20-30% loses their value)

Avoid merging perceived equals
- A merger sounds fortunate but overlooks the two group cultures
- Look for irreconcilable differences in who has unspoken power in the groups

Make sure all the cultures complement each other
- Combining a group from related products, technologies or numbers leads to enormous conflicts

Acquisitions are unequal power dynamics and adapting is more challenging
- Don't let the concessions and clarifications from the acquired group give them all the power
- On the other hand, don't disrespect the acquisition's talents or work environment

## downsizing

[Meta and Salesforce are looking to re-hire some workers they just laid off | Hacker News](https://news.ycombinator.com/item?id=37644831)
[Big Tech Wants to Rehire You. Should You Go Back?](https://www.businessinsider.com/salesforce-meta-big-tech-companies-rehire-workers-employees-laid-off-2023-9)
- make sure to downsize with the expectation that you've LOST that talent

[Greg Brockman quits OpenAI | Hacker News](https://news.ycombinator.com/item?id=38312704)
[Greg Brockman on X: "After learning today's news, this is the message I sent to the OpenAI team: https://t.co/8x39P0ejOM" / X](https://twitter.com/gdb/status/1725667410387378559)
- when you eject ppl, others may follow if it's unethical

## exit strategy

### Someday you'll want to retire, so make an exit plan

Consider stepping aside and retiring or going part-time
- Don't wait to spend time with your family
Don't let boredom force your hand
Find [other ways to recharge yourself](fun)
Hire a replacement with the right qualifications
- Have specific goals for your successor
- Don't make the decision alone
- Evaluate their personalities as thoroughly as you would with resumes
- The entire organization will be uneasy, so take time to adjust your protégé into the role
If you're selling or leaving the company, ease everyone's fears by taking everything slowly and transparently communicating everything

Good leaders are willing to own up to their technical inability
They listen to other people and have a team of great counsel for their decision-making

## finding problems

Use a system called the Five Whys to make incremental investments and evolve a startup's processes gradually. The core idea of Five Whys is to tie investments directly to the prevention of the most problematic symptoms. The system takes its name from the investigative method of asking the question "Why?" five times to understand what has happened (the root cause).

At the root of every seemingly technical problem is a human problem. Five Whys provides an opportunity to discover what that human problem might be.

Chronic problems are caused by bad process, not bad people, and remedy them accordingly.

Managers and employees can fall into the trap of using the Five Blames as a means for venting their frustrations and calling out colleagues for systemic failures.

We routinely asked new engineers to make a change to the production environment on their first day.

"If our production process is so fragile that you can break it on your very first day of work, shame on us for making it so easy to do so."

Everyone came through it with a visceral understanding of our values.

Ask teams to adopt these simple rules:
1. Be tolerant of all mistakes the first time.
2. Never allow the same mistake to be made twice.

There are problems waiting to be solved, once you realize that you have all the tools and all the permission you need, then opportunities to contribute abound.

## growth engines

THE THREE ENGINES OF GROWTH:

(1) = The Sticky Engine of Growth

(2) = The Viral Engine of Growth:

Depend on person-to-person transmission as a necessary consequence of normal product use. Customers are not intentionally acting as evangelists; they are not necessarily trying to spread the word about the product. Growth happens automatically as a side effect of customers using the product. Viruses are not optional.

The viral engine is powered by a feedback loop that can be quantified. It is called the viral loop, and its speed is determined by a single mathematical term called the viral coefficient. The higher this coefficient is, the faster the product will spread. The viral coefficient measures how many new customers will use a product as a consequence of each new customer who signs up.

For a product with a viral coefficient of 0.1, one in every ten customers will recruit one of his or her friends. This is not a sustainable loop. Imagine that one hundred customers sign up. They will cause ten friends to sign up. Those ten friends will cause one additional person to sign up, but there the loop will fizzle out. By contrast, a viral loop with a coefficient that is greater than 1.0 will grow exponentially, because each person who signs up will bring, on average, more than one other person

Companies that rely on the viral engine of growth must focus on increasing the viral coefficient more than anything else, because even tiny changes in this number will cause dramatic changes in their future prospects.

Many viral products do not charge customers directly but rely on indirect sources of revenue such as advertising. This is the case because viral products cannot afford to have any friction impede the process of signing customers up and recruiting their friends. This can make testing the value hypothesis for viral products especially challenging. The true test of the value hypothesis is always a voluntary exchange of value between customers and the startup that serves them. A lot of confusion stems from the fact that this exchange can be monetary, as in the case of Tupperware, or nonmonetary, as in the case of Facebook. In the viral engine of growth, monetary exchange does not drive new growth; it is useful only as an indicator that customers value the product enough to pay for it. If Facebook or Hotmail had started charging customers in their early days, it would have been foolish, as it would have impeded their ability to grow. However, it is not true that customers do not give these companies something of value: by investing their time and attention in the product, they make the product valuable to advertisers.

Each customer pays a certain amount of money for the product over his or her "lifetime" as a customer. Once variable costs are deducted, this usually is called the customer lifetime value (LTV). This revenue can be invested in growth by buying advertising. Suppose an advertisement costs $100 and causes fifty new customers to sign up for the service. This ad has a cost per acquisition (CPA) of $2.00. In this example, if the product has an LTV that is greater than $2, the product will grow. The margin between the LTV and the CPA determines how fast the paid engine of growth will turn (this is called the marginal profit). Conversely, if the CPA remains at $2.00 but the LTV falls below $2.00, the company's growth will slow.

(3) = The Paid Engine of Growth

Startups that employ an outbound sales force are also using this engine, as are retail companies that rely on foot traffic. All these costs should be factored into the cost per acquisition.

The startup had an "unlimited" pricing plan, its most expensive, that cost only a few hundred dollars per month. The NGO literally could not make the purchase because it had no process in place for buying something so inexpensive. Additionally, the NGO needed substantial help in managing the rollout, educating its staff on the new tool, and tracking the impact of the change; those were all services the company was ill equipped to offer. Changing customer segments required them to switch to hiring a sizable outbound sales staff that spent time attending conferences, educating executives, and authoring white papers. Those much higher costs came with a corresponding reward: the company switched from making only a few dollars per customer to making tens and then hundreds of thousands of dollars per much larger customer. Their new engine of growth led to sustained success.

Advertising that is targeted to more affluent customers generally costs more than advertising that reaches the general public. What determines these prices is the average value earned in aggregate by the companies that are in competition for any given customer's attention. Wealthy consumers cost more to reach because they tend to become more profitable customers. Over time, any source of customer acquisition will tend to have its CPA bid up by this competition.

Successful startups usually focus on just one engine of growth, specializing in everything that is required to make it work.

I strongly recommend that startups focus on one engine at a time.

ENGINES OF GROWTH DETERMINE PRODUCT/MARKET FIT

Product/market fit to describe the moment when a startup finally finds a widespread set of customers that resonate with its product:

Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter - you're going to fail.3

To many entrepreneurs it implies that a pivot is a failure event - "our startup has failed to achieve product/market fit." It also implies the inverse - that once our product has achieved product/market fit, we won't have to pivot anymore. Both assumptions are wrong.

If a startup is attempting to use the viral engine of growth, it can focus its development efforts on things that might affect customer behavior - on the viral loop - and safely ignore those that do not. Such a startup does not need to specialize in marketing, advertising, or sales functions. Conversely, a company using the paid engine needs to develop those marketing and sales functions urgently.

What really matters is not the raw numbers or vanity metrics but the direction and degree of progress.

Overarchitecture failure, in which attempting to prevent all the various kinds of problems that could occur wound up delaying the company from putting out any product.

Friendster effect, suffering a high-profile technical failure just when customer adoption is going wild.

## investing in new ventures

We receive hundreds of business ideas every month, often directly via our website. We employ a gatekeeper - a corporate development assistant - whose job it is to record, log and classify all ideas as they arrive. She then passes them on to our experts. They read through and research the best of them. A tiny number are passed to our investment professionals - whole teams of them. So that our own vested interests don't blind us to new opportunities, none of the committee runs a Virgin business on a day-to-day basis. They ask some very tough questions. They will rigorously push and pull your business plan about to see if there is a profitable business underneath.

We look at spending plans, income forecasts, the marketing budget, and when the company is likely to break even. We work out our exit strategy - will it be a sale, or a flotation on a stock market? And, above all, we look at the key managers who will be running the business. This is the holy grail for us, because it's the people that make a great business idea work.

We sign up as branded venture capitalists (occasionally, as unbranded investors), take a stake in the company, and then look for a return on that investment after about two to five years.

A basic understanding of the business, gleaned by immersing yourself in every little detail for months or even weeks, is often enough to get you started. The volume of information you'll need to hack through will be high - so find some friends to help you - but the underlying business model is always fairly simple.

When you're first thinking through an idea, it's important not to get bogged down in complexity. Thinking simply and clearly is hard to do. It takes concentration and practice and self-discipline.

My plans acquire detail as I test them against questions that on the face of it are really quite simple - and more to do with emotions than figures. If we create the best health club in town, will existing gym users go to all the bother of transferring their membership to us?

Virgin's business aim has been to find a strong position in a game-changing market.

We put ourselves out there, searching for new opportunities. And we know that they are more likely to come our way if we get ahead of ourselves and prepare the ground first.

Virgin's normal rate of return in business is around 30 per cent.

## making changes

Whenever a control/check/restriction is put in place
A. consider its COSTS along with its benefits
B. imagine all the people who would be most adversely affected by the change

BEAT CHANGE TO THE PUNCH:
Carl Jung: "If there's a fear of falling, the only safety is deliberately jumping."
Scan trade publications and talk with peers to discover new technologies, business practices, or processes that might help you do your job better.

This is a book about the right question:
NOT : "How do we use the cool new tools to support our existing structure?",
but "How do we become an organization that thrives because of the new marketing?"
NOT : "How do we use this new marketing to maintain business as usual?",
but "How can our business itself be altered?"

Ask not what the new marketing can do for you.
Ask what you can do to thrive with the new marketing.

MEATBALL : a commodity, a branded item of little differentiation and decent quality.
You can't grow with meatballs because they're ubiquitious.
Stop making meatballs, and start making something that goes very well with hot fudge and marshmallow sauce.

Nimble, intelligent organizations that are poised and prepared, ready to be propelled by the fresh tactics of the new marketing.

Old toy fairs : the manufacturers would show the sellers the commercials 9 months in advance. The commercials that got the best reception led to toys getting made. The rest were cancelled.

We make what people buy. If it doesn't sell, it doesn't get made.

Business growth comes from satisfying the people who can best leverage your ideas.

New marketing doesn't demand better marketing. It demands better products, better services, and better organizations.

Marketing doesn't support the organization. The organization supports marketing.

Making noise is fun, but making noise is not where the highest returns lie.

Critical-Mass Checklist:
1. Do more users benefit the other users by bringing down prices or increasing the power of communication?
2. Are we falsely relying on the masses to solve problems that are obvious when we have small numbers of customers?
3. How can we lower the number of users we'll need before the benefits of critical mass kick in?
4. Does style matter? Are we betting people will become our customers because "everyone else is doing it"? If so, how do we realistically cross that chasm?

During times of change, the very last people you need on your team are well-paid bureaucrats, note takers, literalists.

The compliant masses don't help so much when you don't know what to do next.

What we must have are indispensable human beings. We need original thinkers, provocateurs, and people who care.

If you make your business possible to replicate, you're not going to be the one to replicate it. Others will. If you build a business filled with rules and procedures that are designed to allow you to hire cheap people, you will have to produce a product without humanity or personalization or connection. Which means that you'll have to lower your prices to compete. Which leads to a race to the bottom. Indispensable businesses race to the top instead.

Win by being more ordinary, more standard, and cheaper. Or win by being faster, more remarkable, and more human.

It's factory work because it's planned, controlled, and measured. It's factory work because you can optimize for productivity. These workers know what they're going to do all day-and it's still morning.

If we can put it in a manual, we can outsource it. If we can outsource it, we can get it cheaper.

The only way to get what you're worth is to stand out, to exert emotional labor, to be seen as indispensable, and to produce interactions that organizations and people care deeply about.

Paradigms are mental models that constrain our thinking and are often based on assumptions so strong we don't notice them. New paradigms cause disruption and uncertainty, even calamity, and are nearly always received with coolness, hostility, or worse. Vested interests fight against the change, and leaders of the old are often the last to embrace the new. Consequently, a paradigm shift typically causes a crisis of leadership.

Fine-tune your radar and move quickly to seize the opportunities for influence as a new business paradigm takes hold.

Profound changes favor the newcomer.

Throw away some of your detailed plans.

Leaders manage chaos the way a kindergarten teacher manages her students.

Planning must allow for a high degree of learning on your part. The great examples have adopted their strategies as they learned what worked and what did not work for the overall community.
- Taking cues from your lead users
- Building critical mass
- Supplying an infrastructure for collaboration
- Take your time to get the structures and governance right
- Make sure all participants can harvest some value. (Some do it for fun, philosophical reasons, for profit, fulfill unmet needs, reputation, career prospects.)
- Abide by community norms
- Let the process evolve
- Hone your collaborative mind 

## making changes - failures

[John Riccitiello steps down as CEO of Unity | Hacker News](https://news.ycombinator.com/item?id=37825292)
[John Riccitiello steps down as CEO of Unity after pricing battle | VentureBeat](https://venturebeat.com/games/john-riccitiello-steps-down-as-ceo-of-unity-after-pricing-battle/)
- this was from a bad idea (connects to NAG IP)

## making changes - successes

[Barnes and Noble's surprising turnaround | Hacker News](https://news.ycombinator.com/item?id=34165960)
[What Can We Learn from Barnes & Noble's Surprising Turnaround?](https://www.honest-broker.com/p/what-can-we-learn-from-barnes-and)
- a great manager can turn an apocalyptic situation around
- (haven't read back half of article, which has the core content)

## making decisions

What's the most critical factor in any business decision you'll ever have to make? Basically, it boils down to this question: If this all crashes, will it bring the whole house tumbling down like a pack of cards?

When we're faced with a problem, we get together promptly to look for the answer to a single question: 'Is there a way out?' And we then go right to the endgame and ask: 'What is the ideal way out of this problem for everyone?' You need to become 100 per cent focused on trying to find that way out. If it's a major problem, give it 100 per cent of your time and energy until it is sorted. Work night and day to resolve it, and try to delegate everything else that is going on. If, having done this, you fail to resolve the problem, then at least you know you've done everything in your power you can. Move on.

Some academics suggest that CEOs have, at best, a minor impact on corporate performance.

The more power you give a single individual in the face of complexity and uncertainty, the more likely it is that bad decisions will get made.

Use methods of aggregating collective wisdom.

The more important the decision, the more important it is that it not be left in the hands of a single person.

A bad business usually prevails over a good management.

Google's ambitions are startling, and the hurdle for potential acquisition targets is high: they must pass a "toothbrush test", meaning that their services must be potentially useful to most people once or twice every day.

## mergers and acquisitions

Always ensure that you want to fight and ought to fight on a larger competitor's ground. If he is anxious to buy you, determined to park his tanks on your ground, maybe you should let him - for the right price.

If your competitor is smaller, try to hire him or buy him or join with him. If he won't budge, take drastic action and smash him. If that won't work, then learn to be friends and collude against the wolly mammoths together.

when an executive leaves, they "step down" to lose face
- however, everyone in the industry knows it's a proper quitting due to incompetence
- the only time this DOESN'T happen is when they want to make an example of that person

## messaging - old tPA

### Organizations only succeed with a well-communicated vision

The message must bring a passion for serving a higher purpose beyond self-interest
- Procedures and tasks change with culture and situation, but a vision won't move
- The purpose must form into something to specifically help someone
- The more straightforward and focused the message is, the farther and quicker it will travel
- The vision will carry itself far beyond the individual and into future generations when expressed correctly

Members of the organization should have more than enough training to succeed at working toward the vision
Everyone in the organization must be devoted wholly to the organization's vision
- The organization's principles should require members to adapt or leave
- Members must feel their input contributes to the collective vision

Ask all of the members what they think, not just the highest-ranking
Keep budget items for new communication channels
- Choose your communication channels carefully
- Use visuals to communicate more clearly
- Promote the organization more effectively with a young social media advisory board

Roll out products and services as an overall experience
- Advertise the ceremonious occasion with a fanfare
- Publicly put old and discontinued products to rest like a eulogy of a great idea that ran its course
- Invalidate and learn from dysfunctional products and services publicly to ensure the situation doesn't repeat itself

## optimizing flow

The one envelope at a time approach is called "single-piece flow" in lean manufacturing. It works because of the surprising power of small batches. When we do work that proceeds in stages, the "batch size" refers to how much work moves from one stage to the next at a time.

In process-oriented work like this, individual performance is not nearly as important as the overall performance of the system.

Instead of working in separate departments, engineers and designers would work together side by side on one feature at a time. Whenever that feature was ready to be tested with customers, they immediately would release a new version of the product, which would go live on our website for a relatively small number of people. The team would be able immediately to assess the impact of their work, evaluate its effect on customers, and decide what to do next. For tiny changes, the whole process might be repeated several times per day.

In School of One, students have daily "playlists" of their learning tasks that are attuned to each student's learning needs, based on that student's readiness and learning style.

There are assessments built into each activity so that data can be fed back to the teacher to choose appropriate tasks for the next playlist.

The longer we worked, the more afraid we became of how customers would react when they finally saw the new version. As our plans became more ambitious, so too did the number of bugs, conflicts, and problems we had to deal with. Pretty soon we got into a situation in which we could not ship anything. Our launch date seemed to recede into the distance. The more work we got done, the more work we had to do. The lack of ability to ship eventually precipitated a crisis and a change of management, all because of the trap of large batches.

Lean production solves the problem of stockouts with a technique called pull. When you bring a car into the dealership for repair, one blue 2011 Camry bumper gets used. This creates a "hole" in the dealer's inventory, which automatically causes a signal to be sent to a local restocking facility called the Toyota Parts Distribution Center (PDC). The PDC sends the dealer a new bumper, which creates another hole in inventory. This sends a similar signal to a regional warehouse called the Toyota Parts Redistribution Center (PRC), where all parts suppliers ship their products. That warehouse signals the factory where the bumpers are made to produce one more bumper, which is manufactured and shipped to the PRC. The ideal goal is to achieve small batches all the way down to single-piece flow along the entire supply chain. Each step in the line pulls the parts it needs from the previous step. This is the famous Toyota just-in-time production method.8

The amount of just-in-case inventory [called work-in-progress (WIP) inventory] is reduced dramatically.
- THIS WAS ALSO A TERRIBLE THING DURING COVID, WHEN THERE WAS NO BACKUP FOR ANYTHING

One of the most important discoveries of the lean manufacturing movement: you cannot trade quality for time. If you are causing (or missing) quality problems now, the resulting defects will slow you down later. Defects cause a lot of rework, low morale, and customer complaints, all of which slow progress and eat away at valuable resources.

## organizational unrest - unions

unions are inevitable if the workers are feeling mistreated
- the situation has effectively become so bad that everyone would rather pile their work together and get measured on an arbitrary "hours/days of service" metric than be measured on their individual achievements
- they distrust their employer so badly that they are more open to trusting a union rep than the person who cuts their check
- it's the combination of having a significant portion of lousy workers, mixed with bad management, mixed with bad pay structures
- if an organization even has talks of unionizing, it's time for the management to do some severe soul-searching

## proposing changes

Bright spots solve the "Not Invented Here" problem. Some people have a
knee-jerk skeptical response to "imported" solutions. Imagine the public
outcry if an American politician proposed that the United States adopt
the French health care system. (Or vice versa.) We all think our group
is the smartest. By looking for bright spots within the very village he
was trying to change, Sternin ensured that the solution would be a
native one.
They weren't experts. They didn't walk in with the answers. All they had
was a deep faith in the power of bright spots.
- HOW TO MAKE CHANGES: AVOID THE RISKS OF EVERYONE THINKING IT'S [INSERTOUTSIDER]'S IDEA

## reinvention

Reinventing the business design by using customer-centric and profit-centric principles has great rewards. Customers return. Profits grow. Employee morale rebounds.

Reinvention is about the customer and profitability, but ultimately it is about creativity, about designing a business model that is unique. Perhaps the most important benefit of studying any reinventors and how they discover or create the profit zone in their industries is grasping how the creative process works in business (how business designs change every 5 years), what discipline (in customer and profit thinking) it requires, and how extraordinary its outcomes can be.

Business design innovation drives financial improvement, which drives increased valuation, which drives value growth.

Business design innovation requires major nonincremental moves. Making such moves inevitably leads to major errors.

Management is trying to perfect yesterday's business design.
The opportunity has passed them by, yet they believe that if they can only get a little bigger or do a little better, they can still win.
They are fighting yesterday's war.
The battle meanwhile has moved on to an opportunity space redefined by new customer priorities.

Be on the lookout for what the next metrics revolution will be.

Understanding the fundamentals of business design innovation is perhaps the best preparation for an uncertain future.

## scaling

George Soros knew how to handle randomness by keeping a critical open mind and changing his opinions with minimal shame. (Which carries the side effect of making him treat people like napkins.)
- It helps to have no human connection in the upper echelon of management: makes it easier to do things in the interests of the organization or yourself

Practically all the company's
leaders were now in New York.. Over these men Rockefeller pre-
sided as absolute master. His preeminence was never questioned. In
spite of this, however, he made it a rule never to act without con-
sulting his colleagues and never to take an important step without
unanimous agreement of all the directors. There probably has
never been another such board of directors. They met daily. A ma-
jority could be assembled at a moment's notice for any important
action. They operated behind closed doors. They denied every-
thing and talked outside about nothing. As early as 1876 they
formed the habit of lunching together each day, at 140 Pearl
Street. William Rockefeller perhaps established and developed
the custom. Oddly enough, it was not John D. Rockefeller who
sat at the head of the long table, but Charles H . Pratt. On Pratt's
right sat Flagler, on his left Rogers.

Rockefeller expected these leaders to divest themselves of
details. Each plant, each corporation, was organized as a unit.
Its managers were given wide discretion and held accountable for
successful operation. These divisional chiefs were expected not to
trouble the minds of the leaders with small details. Rockefeller
set up a system of sifting committees, which were empowered to
handle all ordinary problems. Only the major question reached
the general staff. There was a committee on marketing, a crude
oil committee, a manufacturing committee, with departments deal-
ing with making refined products, developing new products. Com-
mittees covered all the functions of the vast business

Rockefeller's hatred of waste ran through the whole enterprise.
For the first time a business had been organized on the principle
of assembling the best brains in the industry and putting them to
work on all of its countless problems. The problem of waste was
one of these. Rockefeller saw that the waste of a few pounds which
would not be noted in a small business, when multiplied many
times in a huge concern, would amount to a large sum yearly

Could it collapse overnight? Almost certainly not: we've built it to contain any amount of damage, by organising it into around 300 limited companies. I think we've proved that a branded group of separate businesses, each with limited liability for its own financial affairs, makes sense.

Although the combined Virgin Group is the largest group of private companies in Europe, each individual company is generally relatively small in its sector. And so we have the advantage of being the nimble 'underdog' player in most markets.

## scaling - old tPA

### Every organization grows through a life cycle

The larger the organization grows, the less hands-on and responsive the leader's role becomes
Changes are always definite and clear in large organizations
1. The situation is "unfrozen" from its static format by reducing certain requirements
2. A social movement arises with some confusion and inefficiency as everyone adjusts to a new way of doing things
    - These changes must come from an open system which combines internal feedback and external signals
3. New standards are "frozen" as everyone agrees to the new changes

Each organization travels through four periods
1. Formation period - a new organization started, a founding vision without formal definitions
2. Rapid growth period - organization adds direction and coordination to keep growing and ensuring success
3. Mature period - growth slows to match the pace of the industry
4. Declining period - often involves laying off workers and reorganizing
5. Successful reorganization creates a new Formation period

## sivers - Execution - by Larry Bossidy and Ram Charan

Execution:
- the missing link
- the main reason companies fall short of their promises
- the gap between what a company's leaders want to achieve and the ability of their organizations to deliver it
- a system of getting things done through questioning, analysis, follow-through. meshing strategy with reality, aligning people with goals, achieving results promised
- a central part of a company's strategy and the major job of any leader in business

The cause : strategies most often fail because they aren't executed well. Things that are supposed to happen don't happen.

Unless you translate big thoughts into concrete steps for action, they're pointless. Without execution, the breakthrough thinking breaks down, learning adds no value, people don't meet their stretch goals, and the revolution stops dead in its tracks. What you get is change for the worse because failure drains the energy from your organization. Repeated failure destroys it.

Execution must be a core element of an organization's culture.

Execution is a systematic process of rigorously discussing hows and whats, questioning, tenaciously following-through, and ensuring accountability.

Linking rewards to outcomes.

Includes mechanisms for changing assumptions as the environment changes and upgrading the company's capabilities to meet the challenges of an ambitious strategy.

Execution is a systematic way of exposing reality and acting on it. Most companies don't face reality very well.

You need robust dialogue to surface the realities of the business.
You need accountability for results - discussed openly and agreed to by those responsible - to get things done and reward the best performers.
You need follow-through to ensure plans are on track.

Which people will do the job, and how will they be judged and held accountable?
What human, technical, production, and financial resources are needed to execute the strategy?
Will the organization have the ones it needs two years out, when the strategy goes to the next level?
Does the strategy deliver the earnings required for success?
Can it be broken down into doable initiatives?

Strategy takes account of people and operational realities. People are chosen and promoted in light of strategic and operational plans. Operations are linked to strategic goals and human capacities.
The leader of the business and his leadership team are deeply engaged in all three. THEY are the owners of the processes - not the strategic planners or HR or finance staffs.

The leader has to be engaged personally and deeply in the business. Execution requires a comprehensive understanding of a business, its people, and its environment.
Only the leader can make execution happen, through deep personal involvement in the substance and details of execution.
The leader must be in charge of getting things done by running the three core processes: picking other leaders, setting the strategic direction, and conducting operations.

How could would a sports team be if the coach spent all his time in his office making deals for new players, while delegating actual coaching to an assistant?
Only a leader can ask the tough questions that everyone needs to answer, then manage the process of debating the information and making the right trade-offs.

Dialogue is the core of culture and the basic unit of work. How people talk to each other absolutely determines how well the organization will function.

Far too many leaders avoid debating about people openly in group settings.

Micromanagers rarely know as much about what needs to be done as the people they're harassing.

The leader who boasts of his hands-off style or puts faith in empowerment is not dealing with the issues of the day, not confronting the people responsible for poor performance, or searching for problems to solve, then making sure they get solved.

The leader who executes assembles an architecture of execution puts into place a culture and processes for executing, promoting people who get things done more quickly and giving them greater rewards. His personal involvement in that architecture is to assign the tasks and then follow-up. This means making sure that people understand the priorities, which are based on comprehensively understanding the business, and asking incisive questions. The leader who executes often doesn't even have to tell people what to do - he asks questions so they can figure out what they need to do. Coaching them, passing on experience as a leader, educating them to think in ways they never thought before. This helps them expand their own capabilities for leading.

Passionate about getting results.

Execution has to be embedded in the reward systems and in the norms of behavior that everyone practices.

The gap between the desired and actual outcome in everything from profit margins to the selection of people for promotion. Close the gap and move the bar still higher.

The leader doesn't just sign off on a plan. He wants an explanation, and will drill down until the answers are clear.

(story about leader who messed up) : Joe did all the right things. By the standards of execution, he did almost nothing right. The gap between goals and outcome reflected a chasm between Joe's ambitions and the realities of the organization. Though he chewed out his execs when they didn't make numbers, he never asked WHY they didn't make them. An execution-savvy leader would have asked that right away. Then focused on the cause.

Stretch goals can be useful in forcing people to break old rules and do things better. They're worse if unrealistic or if the people who have to meet them aren't given the chance to debate them beforehand and take ownership of them.

Involve all the people responsible for the strategic plan's outcome - including the key production people - in shaping the plan.
Ask people about the hows of execution : how, specifically, they are going to achieve their projected demand on a timely basis.

Set milestones for the progress of the plan, with strict accountability for the people in charge. Make an agreement it will be X% complete by Y date, and Z% of the people would be trained in the process.

Set plans to deal with the unexpected.

Especially when a business is making major changes, the right people have to be in the critical jobs, and the core processes must be strong enough to ensure that resistance is dissolved and plans get executed.

Executives couldn't get info about profit by customer, product line, or channel, so they had no way of making good decisions about where to allocate resources.

Innovator's Dilemma : companies with the greatest strength in a mature technology tend to be the least successful in mastering new ones.

Listening to tomorrow's customers as well as today's and planning for their needs.

Monday-morning conference calls : an ongoing operating review : performance for the previous month compared with the commitments people have made. Early warnings of problems instill a sense of urgency. People who fall short have to explain why, and what they are going to do about it.

Show me an organization that's wringing its hands, listening to rumors, anxious about the future, and I will show you leadership that behaves the same way. People imitate their leaders.

Develop a compensation system that links rewards to performance, along with a web-based set of evaluation tools to help managers sharpen their assessments of their people.

7 essential behaviours that form the first building block of execution:
* - know your people and your business
* - insist on realism
* - set clear goals and priorities
* - follow through
* - reward the doers
* - expand people's capabilities
* - know yourself

Tough questions : good people like to be quizzed, because they know more about the business than the leader.
When you probe, you learn things and your people learn things. Everybody gains from the dialogue. You dignify the leadership at the management level by allowing them to expound on the business.

Both parties came away with a clear agreement about what the manager needed to do to make the business better. Tough questions got the manager to see the realities of his business more clearly and connected them with the external environment. The dialogue schooled them in how to think about the business in a more rigorous and analytical way. Encouraging and motivating the plant team, creating energy.

As a leader, you have to show up. You've got to conduct business reviews. You can't be detached and removed and absent.

After a business review, write the manager a formal letter summarizing the things he agreed to do, but also write a personal note to say, "Great job. Things could be better and you need to work on it, but otherwise things are going great."

The personal connection is especially critical when a leader starts something new.

The leader's personal involvement, understanding, and commitment are necessary to overcome this passive resistance. Announce the initiative. Define it clearly. Define its importance in the organization. You can't do that unless you understand how it will work and what it really means in terms of benefit. Then follow-through to make sure everyone takes it seriously. You can't do this if you don't understand the problems that come with implementation: talk about them with the people doing the implementing, and make it clear - again and again - that you expect them to execute it.

Realism is the heart of execution, but many organizations are filled with people who are trying to avoid or shade reality. Why? Because it makes life uncomfortable. People want to hide mistakes, or buy time to figure out a solution rather than admit they don't have an answer at the moment. They want to avoid confrontations. Nobody wants to be the messenger that gets shot, or the troublemaker that challenges the authority of her superiors.

Embracing realism means always taking a realistic view of your company and comparing it with other companies.

Focus on 3 or 4 priorities.
Simplify things so that others can understand them, evaluate them, act on them, so what they say becomes common sense.

Many corporations do such a poor job of linking rewards to performance that there's little correlation at all. They don't distinguish between those who achieve results and those who don't, either in base pay or bonuses.

"When I see companies that don't execute, the chances are they don't measure, don't reward, and don't promote people who know how to get things done. Salary increases in terms of percentage are too close between the top performers and those who are not. There's not enough differentiation in bonus. Leaders need the confidence to explain to an employee why he got a lower-than-expected reward."

Otherwise, people think they're involved in Socialism. That isn't what you want when you strive for a culture of execution. Make it clear to everybody that rewards and respect are based on performance.

COACHING
Coaching is the single most important part of expanding others' capabilities.
The difference between giving orders and teaching people how to get things done.
Good leaders regard every encounter as an opportunity to coach.
Observe a person in action then provide specific useful feedback. Point out examples of behavior and performance that are good or need to be changed.

When the leader discusses business and organizational issues in a group setting, everybody learns. Wrestling with challenging issues collectively, exploring pros and cons and alternatives, deciding which ones make sense increases people's capabilities both individually and collectively - if it's done with honesty and trust.

Ask the questions that bring out the realities and give people the help they need to correct problems.

4 core qualities that make up emotional fortitude:
* - authenticity
* - self-awareness
* - self-mastery
* - humility

Most efforts at cultural change fail because they are not linked to improving the business' outcomes.

CREATE A CULTURE OF GETTING THINGS DONE:
* - Tell people clearly what results you're looking for.
* - Discuss how to get those results.
* - Reward people for producing the results.
* - If they come up short, provide additional coaching, withdraw rewards, give them other jobs, or let them go.

We don't think ourselves into a new way of acting, we act ourselves into a new way of thinking.

When people violate one of the company's basic values, the leader must step forth to publicly condemn those violations. Anything less is interpreted as a lack of emotional fortutide.

The beliefs that influence specific behaviors are more likely to need changing.

If they believe others who do less than they do will get the same rewards, that belief will drain their energy.

EXAMPLE OLD BELIEFS:
We are in a commodity business. We can't grow at market rates. Profits follow revenues. Each leader owns all resources - control is key. My peer is my competitor. People aren't accountable.
EXAMPLE NEW BELIEFS:
We can grow faster than the market - profitably and using capital efficiently. We can increase productivity every year. We are committed to our clients' success. Collaboration is key.

An agenda for attitude change.

Behaviors are beliefs turned into action.

This is less about individual behavior than about norms of behavior: the accepted, expected ways groups of people behave.

The foundation of changing behavior is linking rewards to performance and making the linkages transparent.
A business's culture defines what gets appreciated and respected and rewarded. It tells the people in the organization what's valued and recognized, and in the interest of trying to make their own careers more successful, that's where they will concentrate. If a company rewards and promotes people for execution, its culture will change.

People love to give rewards. They love to be loved. But they don't have the emotional fortitude to give honest feedback and either withhold a reward or penalize people.

The process has to have integrity: the right information must be collected and used, based on behavior and performance criteria.

If you did the same job this year, you're rated lower because you didn't get any better and everyone else did. You've got to realize, the company is improving, everyone's got to improve the job they do, and if you're staying the same, you're falling behind.

Other leaders design rewards for new behaviors of execuation but implement them brutally. They don't take the important steps of helping people to master the new required behaviors. They don't coach. They don't teach people to break a major concept down into smaller critical tasks that can be executed in the short term, which is difficult for some people. They don't conduct the dialogues that surface realities, teach people how to think, or bring issues to closure.

These are the meetings where there's no robust debate and therefore nobody states their misgivings. Instead they simply let the project they didn't like die a quiet death over time.

Leaders who create disproportionate awards for high performers and high-potential people are creating social software that drives behaviors : people work harder and differentiating themselves.

They let people who normally don't have much contact with one other exchange views, share info and ideas, and learn to understand the company as a whole.

Spread the leader's beliefs, behaviors, and mode of dialogue throughout the organization. Other leaders learn to bring these beliefs and behaviors to the lowest-level meetings and interactions, including coaching and feedback. It becomes their beliefs, behaviors and dialogue as well.

How to work together in constructive debate. No one person has all the ideas or all the answers. If we have a problem in one place, people will respond by getting together and finding a solution, not by sitting around and moaning that they don't have a solution or deciding to engage a consultant.

Practicing such constructive debates over time builds confidence in people to tackle unfamiliar issues as they arise.

Robust dialogue ends with closure. At the end of the meeting, people agree about what each person has to do and when. They've committed to it in an open forum. They are accountable for the outcomes.

Robust dialogue brings out reality, even with that reality makes people uncomfortable, because it has purpose and meaning. It's open, tough, focused, and informal. The aim is to invite multiple viewpoints, see the pros and cons of each one, and try honestly and candidly to construct new viewpoints. This is the dynamic that stimulates new questions, new ideas, and new insights, rather than wasting energy on defending the old order.

To build an execution organization, the leader has to be present to create and reinforce the social software with the desired behaviors and the robust dialogue.

You hire a talented person, and they will hire a talented person.

What are the three non-negotiable criteria for the job?

Every business needs a discipline that is embedded in the people process, with candid dialogues about the matches between people and jobs, and follow-through that ensures people take the appropriate actions.

Most people know someone in their organization who doesn't perform well, yet manages to keep his job. The usual reason is the person's leader doesn't have the emotional fortitude to confront him and take decisive action. Such failures can do considerable damage to a business. If the nonperformer is high enough in the organization, he can destroy it.

Many jobs are filled with the wrong people because the leaders who promote them are comfortable with them. It's natural for leaders to develop a sense of loyalty to those they've worked with over time, particularly if they've come to trust their judgements, but it's a serious problem with the loyalty is based on the wrong factors. For example, the leader may be comfortable with a person because that person thinks like him and doesn't challenge him, or has developed the skill of hiding the boss from conflict.

The most important question : how good is this person at getting things done?
There's very little correlation between those who talk a good game, and those who get things done.

You're searching for people with an enormous drive for winning. People who get their satisfaction from getting things done.
You can easily spot the doers by observing their working habits. They're the ones who energize people, are decisive on tough issues, get things done through others, and follow-through as 2nd nature.

Never finish a conversation without summarizing the actions to be taken.

GETTING THINGS DONE THROUGH OTHERS
Getting things done through others is a fundamental leadership skill. Indeed if you can't do it, you're not leading.
Some smother their people, blocking their initiative and creativity. They're the micromanagers, insecure leaders who can't trust others to get it right because they don't know how to calibrate them and monitor their performance. They wind up making all of the key decisions about details themselves, so they don't have time to deal with the larger issues they should be focusing on, or respond to the surprises that inevitably come along.
Others abandon their people. They believe wholeheartedly in delegating: let people grow on their own, sink or swim, empower themselves. They explain the challenge (sometimes at such a high level of abstraction that it amounts to superficiality) and toss the ball entirely into their people's court. They don't set milestones, and they don't follow through. Then, when things don't get done as expected, they're frustrated.
Both types reduce the capabilities of their organizations.

The 80-hour-week is actually a major weakness. "You have to come in here less, but your performance can't change. It must be as good as it is now. Learn how to get things done through others."

Follow-through is the cornerstone of execution. It ensures that people are doing the things they committed to do, according to the agreed timetable. It exposes any lack of discipline and connection between ideas and actions, and forces specificity.

Never finish a meeting without clarifying what the follow-through will be, who will do it, when and how they will do it, what resources they will use, and how and when the next review will take place and with whom.
Never launch an initiative unless you're personally committed to it, and prepared to see it through until it's embedded in the DNA of an organization.

Look for energy and enthusiasm for execution. Does the candidate get excited by doing things, or just talking about them? Is her life full of achievement and accomplishment?
What does this person want to talk about? The thrill of getting things done, or keeps wandering back to strategy or philosophy?
Does she detail the obstacles she had to overcome?
Does she explain the roles played by the people assigned to her?
Does she seem to have the ability to persuade and enlist others in a mission?

If you sit down with your boss, and your boss hasn't said something about your weaknesses, go back! Otherwise you're not going to learn anything.

The leader sits down with the person and discusses the appraisal. At the end I'll say, "Now I'm going to give you the last line. You've heard what I think. What would you like to add to this?"

Instead of debating the quality and performance of individuals, they became more focused on how we can help so-and-so overcome this gap in knowledge or experience or capability, or where we should move him.

If you have leaders with the right behavior, a culture that rewards execution, and a consistent system for getting the right people in the right jobs, the foundation is in place for operating and managing each of the core processes effectively.

PEOPLE PROCESS

A robust people process does 3 things:
Evaluates individuals accurately and in depth.
Provides a framework for identifying and developing the leadership talent - at all levels and all kinds - the organization will need to execute its strategies down the road.
Fills the leadership pipeline that's the basis of a strong succession plan.

One of the biggest shortcomings of the traditional people process is that it's backward-looking, focused on evaluating the jobs people are doing today.
Far more important is whether the individuals can handle the jobs of tomorrow.
The shift in skill mix that will be required for the new environment.

Make Strategy Milestones: (EXAMPLES:)
Near-Term (0-2 years): * expand product selection, *launch new initiative to expand services to installed base, *secure new expertise in technology
Medium Term (2-5 years): *engage and evaluage alliance partners, etc.
Long Term (5+ years): *become pioneers of leapfrog technology, *build more useful alliances, *develop low-cost sourcing ideas

Leadership Assessment Summary:
Y-axis is "PERFORMANCE" : top = "exceeds standard", bottom = "below standard"
X-axis is "BEHAVIOR" : top = "exceeds standard", bottom = "below standard"
Make a square & put people in these.

Continuous Improvement Summary:
Like a traditional performance appraisal, but not only captures key performance highlights (good & bad) but includes clear specific useful information on development needs. Helps the individual become a better performer.
List of skills on left. 1-5 score on right to match up to each.
Below, summary of "performance highlights", "targets missed", "challenges", "summary strengths", "development needs", "development plan", "potential next moves (long term) & also (short-term)"

Focus on what needs to be done to retain critical people and replace those who leave unexpectedly, are promoted, or fail.

Retention Risk Analysis looks at a person's marketability, potential for mobility, risk a business faces if s/he leaves. If she's been in her existing job too long, she's likely to feel blocked from moving upward, and susceptible to headhunter calls.

Succession depth analysis determines whether the company has enough high-potential people to fill key positions. Looks at whether there are high-potential people in the wrong jobs and whether key people will be lost if a job is not unblocked for them.

When a key person does leave, the process provides a needed replacement within 24 hours.

Identifying high-potential and promotable people avoids two dangers. One is organizational inertia - keeping people in the same jobs for too long. The other is moving people up too quickly.

Why would an assessment be sent back? Maybe the words are lukewarm. The assessor says a person is doing "wonderfully", and under development needs puts "none". Who is this manager kidding? How can a leader help a person when he tells her she's got no development needs? I tell these people, "Go back and do the assesment you've been asked to do."

Sometimes important issues are omitted in the assessments and then brought up in the meeting. Why weren't they on the sheet? How does the manager know about them? Don't talk to me about things you haven't talked to her about. If she's got a problem, put it on the sheet and have her acknowledge it.

When several people who've watched the same person over time pool their observations in robust dialogue, subjective views become objective.

Even the best people process doesn't always get the right people in the right jobs. It can't make everybody a great peformer.
Some managers have been promoted beyond their capabilities and need to be put into lesser jobs. Others just need to be moved out.

HR has to be linked to stragegy and operations, and to the assessments that the managers ultimately make about people.
Demand that the company use ALL of its capabilities to make money.
"I want bigger margins than anybody else, and to accomplish this, we have to have great people and train them better and faster than everybody else.
We need to have educational programs that are focused on key business issues and problems, the things that matter.
HR's role is to help me solve those problems."

The HR person not only has to be well trained in the craft : how to teach people, develop them, make them interested in staying with us, and know what's important for building momentum and morale in an organization - but also must have the same characteristics as any business leader has. Business acumen, understanding how a company makes money, thinking critically, a passion for results, linking strategy and execution.

Forces executives to really drill down and identify what the critical jobs are.

The right people are in the right jobs when information about individuals is collected constantly and leaders know the people, how they work together, and whether they deliver results - or fail to.
It's the consistency of practice that develops expertise in appraising and choosing the right people.
The people process begins with one-on-one assessments, but when developed and practiced as a total process, it becomes incredibly effective as an execution tool.

Strategic plan must be an action plan that leaders can rely on to reach objectives. In creating it, ask whether and how your organization can do the things needed to achieve its goals.
Start with identifying and defining the critical issues behind the strategy.
Bad stratgegy is disconnected from both external and internal realities. Didn't test its critical assumptions to see if they were robust, and had no alternative plan for what to do if one or more of them proved wrong.

Substance of any strategy is summed up by its building blocks : 1-6 key concepts and actions that define it.
Pinpointing the building blocks forces leaders to be clear as they debate and discuss the strategy. Helps judge whether it's worth doing and exploring alternatives.
If building blocks are clearly defined, the essence of even the most complex strategy can be expressed on one page.

Keep strategy up-to-date, reviewing the plan 3 times a year, and refining it as conditions change.

To be effective, a strategy has to be constructed and owned by those who will execute it, namely the managers.
They know the biz environment and capabilites because they live with them. They're in the best position to introduce ideas, to know which ideas will work in their marketplace and which ones won't.

Stragegic plan must answer these questions:
* - What is the assessment of the external environment?
* - How well do you understand the existing customers and markets?
* - What is the best way to grow the business profitably, and what are the obstacles to growth?
* - Who is the competition?
* - Can the business execute the strategy?
* - Are the short term and long term balanced?
* - What are the important milestones for executing the plan?
* - What are the critical issues facing the business?
* - How will the business make money on a sustainable basis?

The strategic plan must explicitly state the external assumptions that management is making.

Milestones bring reality to a strategic plan. If the business doesn't meet milestones as it executes plan, leaders have to reconsider whether they've got the right strategy after all.

The reason your managers have been in on the plan from the beginning : because they helped build it and they own it, they carry it around in their heads all the time.

Strategy Review:
* - How well versed is each business unit team about the competition?
* - How strong is the organizational capability to execute the strategy?
* - Is the plan scattered or sharply focused?
* - Are we choosing the right ideas?
* - Are the linkages with people and operations clear?

Focus not on what the competition has done in the past, but what they're up to and likely to do next.
* - What are our competitors planning to do to serve their customer segments and prevent us from serving them?
* - How good are their sales forces?
* - What are our competitors doing to increase market share?
* - How will they respond to our product offerings?
* - What do we know about the background of our competition's leadership?
* - What do we know abou their leader and his motivations, and what does that mean for us?
* - What acquisitions will our key competitors make that will affect us?
* - Could a competitor form an alliance and attack our segment?
* - What new people have competitors added that alter the competitive landscape? 

## staying profitable

A lack of frugality was accepted as the norm in her company. "We're not very careful about our dollars," she said. "We stay in the best hotels, the annual sales meeting is in a fancy Florida resort, we eat well, we don't buy our airline tickets far enough in advance to save on the fare. We've come to think that this is how it's meant to be." She described the very human, organizational consequences of several years of corporate life in the land of illusion, the land of the "perpetual profit zone." Once formed, these organizational habits are extremely hard to break. As the profit zone moves, they can prove fatal.

Wal-Mart employees double up in budget hotels when they travel.

Profitability is a game of inches.

Transition to efficient company was effective.
It drove return on sales up from a negative 4 percent to a positive 6 percent and kept it there.
The same psychology could have been created 5 years earlier, but, until the crunch came, it wasn't pursued.