Claire Hughes Johnson on Leading Leaders

I. Session Takeaways

Date: March 2024

A. Universal Truths

• Every decision you make is stage dependent. At each stage you’ll need to balance two criteria:
  • 1) What do the first principles tell me I need to do in my specific context?
  • 2) What does my own capacity and bandwidth enable me to do?
• These two criteria are competing. The reality is you will constantly have to make tradeoffs between applying best practices/exactly what the first principles say and what your resources enable you to do
• This means choosing which things at the company will be excellent at and which will just be OK

Claire on trade offs between “ideal” and what bandwidth enables

“Because if you're in a high growth, high pressure startup environment, how can you possibly do all these practices? Like, right? It just feels insane. And so you have decisions to make about where you choose to put that capacity and bandwidth. And it's really hard because it's your company and you want it to be all the things, but you cannot be. So what are you going to make truly excellent and why? I'm not to say that the other things will be bad, but they may not all be your ideal, right? As you grow fast, nothing is your ideal.”

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• Claire noted this was particularly difficult for Patrick and John Collison at Stripe. Initially, they wanted everything to be done perfectly and in Stripe's style and approach. When Claire came in, she had to get them comfortable with not reinventing areas of business Stripe didn’t need to reinvent. As founders, come up with your mental framework for where you will and will not compromise.

Example: Performance Management at Stripe. Being OK with "just OK"

When Claire joined Stripe, they didn’t have a performance management process in place. The initial instinct was to design it from a first principles basis. Claire pushed the Collisons and articulated that it wasn’t an area of the business they needed to architect from the ground up to be amazing. Instead, she pushed them to roll out something basic that would get them 80%-90% of the way there. This was uncomfortable because they wanted everything at Stripe to be excellent. Eventually, they took Claire’s approach and it was effective. They were able to launch performance management quickly. Claire estimated it would have taken another 12 months to launch performance management the Stripe way.

Claire on trade offs between “ideal” and what bandwidth enables

“There's a perfectly fine vanilla thing we could roll out pretty quickly that I think would get us 80 or 90 percent of the way there.  And there was a big trust leap from them, which was like, Oh, we don't love that idea of doing something that's just fine or good. I think that if they wanted to do it their way, it would have taken us another year. So you're going to make choices like that.”

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• Building a startup requires psychological resilience - it's hard and things will always break.

‍Claire on the resilience required to build a company

“It's a complete shit show. I had a woman I mentored at Stripe who went on to be a head of product at a fast growing startup. She called me one day. She's like, how did you live with yourself? Everything is broken all the time. And I was like, yeah. The psychological resilience to get up in the morning and know that you're going to be beat up all day long with stuff that is really broken and terrible. It’s the hardest part.”

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B. Alignment and High Performing Teams

Question: We feel we can make decisions as founders. Why bring on executives?

• You can’t run everything. There is not enough time and eventually you become the bottleneck
• Do not think of executives as a way to lead the company by dividing and conquering functions
• In the early days, think of leaders as a way to scale the decision making unit of the founding team 
• With strong alignment on principles and decision making, you can collaboratively lead the company
• As you scale, this “unit” will become a bottleneck again and you’ll need to push down decision making

Example: Scaling Decision Making at Stripe

Early Stripe

• Stripe was run by Patrick, John, and Billy Alvarado (COO). They would make decisions together
• Primary mechanism were open-ended offsites with no agendas that happened over the weekend

When Claire Joined

• Claire joined the company and the core team expanded to Patrick, John, Billy, and Claire (PBJC)
• The organization was functionally divided, but decision making happened centrally in this unit
• For any big decision, a decision would only be made with a discussion, a Slack, or a memo first
• They had an internal philosophy for decision making was that “four heads are better than one”
• They were able to maintain speed because they invested time upfront in learning each other's preferences and styles. Over time, trust gets built. Both of these combine to shortcut time needed for “alignment” meetings

Stripe at Scale

• As the company scaled, PBJC became the bottleneck. Teams would look to them for decisions
• To solve this, they had to push decision making down into the organization to enable speed
• When this happens, the next layer of leaders becomes critical - if you don’t hire well, it breaks

Claire on decentralizing decision making

“As you get bigger, You have to push more decision making out of the executive team. [Our centralized approach] was actually really great for us for a while. This high alignment, lots of communication every day, keep running [approach that I described]. And then all of a sudden it was not good because we had a bunch of people who were supposed to be in charge of stuff, looking at us and being like…we're going to wait until you guys have your meeting. That's what kills velocity. We didn’t empower people below us”

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Question: How to drive decision making alignment with your leaders?

• Make things that are implicit, explicit so that assumed context is never the barrier to successful decision making. Something you assume is obvious or unimportant is in fact important to someone else. This is important within your leadership time. Define these upfront with your leaders, so you remain aligned

Claire on making the implicit, explicit with your leadership team

“I’m a big believer in making things that are implicit, explicit. I teased out in the early days there were a few things the founders in particular [cared about]. I tried to open up and have an explicit conversation with Patrick, for example, where I said, look, I see you being quite sensitive about any outreach to prospects or customers….What I teased out was, you care about this type of communication, it's going to a lot of people, and it reflects on the company, and so I will not make a decision that to me feels actually small and I'm capable of making until you and I agree on how we make sure the quality is where it needs to be.”

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• Leaders don’t want you in their business making every decision, but they do want to be aligned. It is key to align with them upfront on what success looks like, how you plan to make decisions, and where you want them to involve you. Also set the norm that you will be very involved if they are not doing a good job.

Claire on setting norms with your leaders

“They don't want you in their business making every decision but they like being aligned with their boss about what's important in their job and what success is. Most humans want to succeed. They want to meet the goal. And so aligning with them on what's most important is critical. And then you saying if you're not succeeding, I want to know. And if I observe you not succeeding, I'm going to get more involved.”

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Question: How to drive decision making alignment with your company?

• Scaling decision making requires rules and principles. This is like a successful sports game, which has a clear definition of winning, rules for the team to play by, and a clear timeframe to play/win within. As a company, define the rules and what it means to win. This is key to driving alignment.

• Document principles, norms, how you make decisions, what defines winning, and what you are actually working on to “win.” Combined, these resemble a “tech stack” for operating your company
• This “stack” can not only be used at a company level, but also at a team and individual level. If the whole company has a clear understanding of stack, alignment becomes built into the operating system.

The Operating "Stack"

Question: How to drive accountability without giving off the feeling of “micromanagement”?

• Be transparent with the company about goals. Track and score them (Red, Yellow, Green)
• If metrics are not tracking, set the norm that you (or the leader) will be all over them to learn/address it
• Track metrics in dashboards. Set the norm that you look at these regularly and follow up as needed
• Set the expectation with teams that digging into details and surfacing issues is everyone’s job
• Claire has an expectation with her teams that if something is off track, she expects them to tell her

Claire on setting the “norm” of digging into the details

“Be transparent about what our goals are and we'll track and score them as red, yellow, green. Guess what? We didn't open that market. We said we were going to. What happened? And I'm not blaming anybody, but I'm going to learn from it. I'm going to learn. The other thing is metrics, which I'm going to track. I'm going to have dashboards and they're not going to be every single piece of data in the company. They're going to be the ones that matter. And we're going to examine them on the right cadence. If something is off, I'm in your business.”

“I have an expectation with my team, which is if one of our goals is off track, I expect you to be the one to tell me.  But if you don't tell me, we're going to have a conversation about it. It goes back to your guidelines and the whole stack.”

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• Create rituals that normalize double clicking into the details and holding teams accountable

Example: Stripe's “Spin the wheel” Ritual

• Stripe held a biweekly meeting with 20 people where they would go through key dashboards
• In the meeting, they would go through roadmap, what was on/off track, and how they would address issues
• They also created a ritual called “spin the wheel” where one person was selected randomly to present their dashboard and talk about the details of what was going on in their team/surface area. They would do it for two teams per week. Over the course of a few months, everyone would speak
• This made it clear that everyone was expected to be close to the details of their organization and team

Claire on the ritual of “spin the wheel”

"We had a section we called spin the wheel…we wouldn't tell people ahead of time, but one of those people in that room was going to have to present their dashboard and talk about some details about what was going on in their section of the company. Over the course of a few months, we'd hear from most people cause we'd do two spin the wheels per meeting. It was a little bit cheeky because [it showed] we're not just tracking the company metrics that matter, but we expect you to have metrics that matter. We expect them to be live, you to have access to them, and you to be able to speak to what's happening in your section.”

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Question: What makes a good manager versus a good leader?

• Management and leadership are different. People innately gravitate towards one or the other.
• Managers are great at building processes and systems. Claire is a natural manager. If you give her a project, she’s wired to break it down into parts, to assign ownership, to motivate the team, and to get the team to reach a goal. Leaders are great at setting ambition/vision and inspiring people to follow.
• Identify where people fall on each of these spectrums and help them invest in the other. Most exceptional ICs exhibit leadership traits, but not management traits. For these ICs that become managers, you’ll likely need to invest in helping them build a foundation management toolset
• Claire believes the best managers have both management and leadership skills. They are great at organizing teams and resources but also exhibit leadership skills such as setting the bar high for people

Question: What should I tell young managers that struggle to hold people accountable?

• The unlock for Claire was that people actually want to be held to high standards. In her case, the more she raised her standards, the more her teams wanted to work for her and be part of her organization
• The best managers are those that both 1) drive high devotion (e.g., they care about you) and 2) have high standards (e.g., they demand excellence). Try to clarify this principle with your young managers. 

Claire on the how to frame management to young managers

“The big unlock for me was actually people want to be held to high standards. So the more I was actually raising my standards, the more my teams seemed to want to work for me. There's this framework that is somewhat ancient, which is [you want to be a leader with] high standards and high devotion. So if you think of a two by two, which is low standard, high standard, low devotion, high devotion, you want to be in the upper right corner, which is high devotion. I really care about you, but I have high standards. If you think about that environment in your life or any teacher you've loved. They really cared about you succeeding, but they were never letting you off the hook. If you didn't do the work, you were going to hear about it from them. If it wasn't your best work, you were going to hear about it.”

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C. Hiring and Onboarding Executives

Question: What are best practices for onboarding executives? Should they really not execute for 60-90 days?

• At 40-50 people, your executives are likely “player coaches” and not the established leaders you might hire later in your company's journey. The planning and execution cycles at the company are also much faster at this stage. This means they need to start executing much earlier than a leader coming into an organization with 500+ people.
• This does not mean it is a good idea for a leader to make wholesale changes from day 1 before learning about the business. Best practice is to shorten a leader’s learning window and set up a daily 15 minute standup with the person to align, get their feedback, and start agreeing on a plan.
• If they want to make big changes on day 1, this is a red flag. Great leaders leverage their experience, but also think from first principles. As a result, they rarely perfectly replicate old processes in new situations.

Claire on leveraging the daily standup during the first couple of months

"We realized what worked for us was a daily standup…And if they're good, they're going to wait and they're going to study [the business] and they're going to decide do I need to change this thing or is this actually a learning? You want to touch base with them a lot in the beginning. Answer their questions, hear their observations, and give them expectations." 

Claire on shortening the learning cycle in early growth

"At this stage of 50 people, you have builder leaders. And if they're builder leaders and they're at that stage of 50 people, they are going to do stuff sooner.  But what you want to do with the daily stand up is say, I'd like you to listen and learn for X period. Agree with them. But it could be short. They're gonna meet everybody in their team in two days. And then say, let's meet every day and you tell me what you want to start doing. Let’s align on it before you dive in."

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D. Performance Management, Calibration, and Psychological Safety

Question: How do you fire people and maintain psychological safety?

• Don’t wait too long to give feedback. If you notice someone underperforming, take action. Voice your concerns directly with them and put a timeline on it. Tell them you are watching, share feedback, and say you are hoping they will improve. Otherwise, it will feel like a surprise when they are fired.

• If you give regular feedback, this enables you to ask the person to leave while they retain the ability to “own the messaging” of their departure. To the company, they can say I’m leaving. In the background, you’ve given regular feedback and have agreed that it is best for everyone if they left. You can say:
  • “Hey X, even if we gave you another month, you're not going to meet expectations.  And I think you should consider leaving if you want to. Can we work on an announcement by Friday” 

• Use your judgment on the timeline for this process. Some employees will act quietly while others will cause issues in the broader organization. Timeline should be shorter for employees you expect will cause problems after you communicate your desire for them to leave.

• At Stripe, 98% of people who were fired announced their own departure. For the 2 percent that were fired, a leader would send a message that “X is no longer with us, please direct all work to Y.” They would not go into details, but employees close to the details would know.

Question: How to handle an executive you know is not the right fit, but is hitting their goals?

• If you have questions about an employee's performance your intuition is almost always right
• As soon as you have this intuition ask yourself what data and information do I need to validate it?
• This will help you validate the root issue and let you have an open conversation with your leader
• Raise your concerns directly to the leader - this will lead to discussion and potential changes

Claire on dealing with a sales leader that is hitting goals, but not the right fit

“If your intuition is there's a problem, there's probably a problem like 98% [of the time]. And so you've got to sit with that and say, okay, if I think something's off, what data, what information do I need to validate that?

I have a hypothesis. I'm going to listen to it and I need to examine it.  And understand what's the root issue?  Is it that they're not talented? They're not ambitious? They have the wrong team? I would start to come up with what's the root issue and how do I figure out if that thing is in fact the issue. The sooner you tell the person, and I say to people; “I’m happy that we're meeting the sales goals this quarter but I'm worried that we're not being ambitious enough and I wonder what role you're playing in that. Are you ambitious about goals?” Put it out there with a question. This will often create illuminating responses.”

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Question: How to deal with employees who react negatively to performance review feedback?

• Performance review feedback should never be a surprise. If you feel like you are going to surprise someone, start delivering feedback to them now. You can say something like, “I’m worried I am going to surprise you with some feedback, so let’s talk about it now” 

• Also, remember you are not giving feedback on them as a person. You are giving feedback on the work

Claire on delivering feedback on the work, not the person

“The product that you designed and launched last week. Now that I'm looking at it, I'm worried that the product wasn't as good as I expected it was going to be. And I want to talk about it. And so you're both standing there. I always picture it as like two people standing and looking at art next to each other. The analogy I use is weird. It's like looking at a piece of art. But it seems to work for people. It's my opinion. I don't like this piece of art because I don't understand what's happening. And the other person's going, Huh? I think that's a “tree”.  Fine, but at least you're talking about it. You're looking at the work product and you're saying why don't we see the same thing? Let's try to see the same thing. And let's see how we then get to a place where we're seeing the same thing.  Start as soon as you know you have something to say to people.”

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Question: How do you deal with toxic individuals at your company? Do you tolerate it?

• For employees that are contributing to a toxic work environment it is very rare that they will change
• Stripe initially tolerated it and became less and less tolerant over time as the team/resources built out
• It becomes problematic at scale because these individuals have large blast radius’ in the organization
• If you ask these people to leave you can say, “You really helped build us to this point, but it's not working. You seem unhappy, it's impacting everyone around you, and I think you need to leave”