(2024-09-01) Graham Founder Mode

Paul Graham on Founder Mode. At a YC event last week Brian Chesky gave a talk that everyone who was there will remember... The theme of Brian's talk was that the conventional wisdom about how to run larger companies is mistaken. As Airbnb grew, well-meaning people advised him that he had to run the company in a certain way for it to scale. Their advice could be optimistically summarized as "hire good people and give them room to do their jobs." He followed this advice and the results were disastrous.

So far it seems to be working. Airbnb's free cash flow margin is now among the best in Silicon Valley. (hmmm cf (2023-11-14) Brian Chesky's New Playbook)

The audience at this event included a lot of the most successful founders we've funded, and one after another said that the same thing had happened to them

what they were being told was how to run a company you hadn't founded — how to run a company if you're merely a professional manager. But this m.o. is so much less effective that to founders it feels broken. (management)

In effect there are two different ways to run a company: founder mode and manager mode. Till now most people even in Silicon Valley have implicitly assumed that scaling a startup meant switching to manager mode.

The way managers are taught to run companies seems to be like modular design in the sense that you treat subtrees of the org chart as black boxes. You tell your direct reports what to do, and it's up to them to figure out how. But you don't get involved in the details of what they do. That would be micromanaging them, which is bad. (micromanagement)

in practice, judging from the report of founder after founder, what this often turns out to mean is: hire professional fakers and let them drive the company into the ground.

Founders feel like they're being gaslit from both sides

VCs who haven't been founders themselves don't know how founders should run companies, and C-level execs, as a class, include some of the most skillful liars in the world.

another prediction I'll make about founder mode is that once we figure out what it is, we'll find that a number of individual founders were already most of the way there

Curiously enough it's an encouraging thought that we still know so little about founder mode.

I also have another less optimistic prediction: as soon as the concept of founder mode becomes established, people will start misusing it. Founders who are unable to delegate even things they should will use founder mode as the excuse. Or managers who aren't founders will decide they should try act like founders.

Martin Cagan: Coaching Founder Mode. So this article is really about how that founder can stay and thrive as her company scales.

The Two Major Management Styles

There are two very well-known management styles:
The Delegator (referred to as “Manager Mode” in the essay)
The Micromanager (which we’ll refer to here as “Micromanager Mode”)

neither of these styles of management are what we see in the strongest product companies

– The Delegator / Manager Mode

The delegator rarely even tries to understand each area of the business, but rather attempts to lead by a “divide and conquer” approach

Many people confuse delegation with empowerment, but as you’ll see below, empowerment requires far more than the act of delegation, otherwise you are likely setting up the teams to fail.

Yet ironically, these teams rarely feel trusted or empowered; they complain that they lack any real understanding of the larger picture, the product vision

There are many examples of the professional manager, but in his essay Paul cites one of the most egregious: John Sculley.

delegating down the organization without any real understanding of the company’s products

Contrast that with Steve Jobs, who was involved in every detail of his company.

learned about manufacturing, and he studied distribution.

Steve Jobs had developed what we call exceptional product sense, and he used this to come up with an inspiring and compelling product vision for his company (twice), and then he was relentless in sharing the product vision with his leaders and his teams.

Steve Jobs personified Founder Mode.

As Paul noted in his article, many smart founders figure out that the delegation model might sound nice, but the negative consequences in practice are hard to miss.

But the big fear, which Paul also noted, is that leaders will swing the pendulum all the way to the other approach, and think they instead need to become micromanagers

– The Micromanager / Micromanager Mode

the micromanager engages at the task level to make decisions, direct resources and manage milestones personally

Most importantly, micromanaging professionals does not result in the innovations our companies and customers depend on. Especially in an industry where the vast majority of innovations originate from individual contributor engineers.

To come up with meaningful innovations, those engineers, and their product teams, need the interactions and inspiration that come from engaging with the Founder Mode executives. They need to understand the strategic context. They need direct access to customers. They need direct access to data. This is what Netflix means when they say to “lead with context not control.”

I find myself constantly repeating that empowered organizations don’t require less management, they require better management.

Better management means immersing in the details of the business, asking countless questions, pushing to get good answers, coaching and developing their people to pass along what they’ve learned, talking directly with employees at every level, connecting the dots between people in different areas of the company, and relentlessly evangelizing the vision and strategy.

until now I would argue we have lacked a name for the style of leadership practiced at the top, product model companies.

consider Amazon’s “Dive Deep” Leadership Principle: “Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdotes differ. No task is beneath them.”

Another key point that’s often missed, is that at the strong product companies, the senior leaders coach and develop the product leaders that report to them to be skilled in Founder Mode as well.

One of the biggest misconceptions about scale-ups and large companies running in Founder Mode is that the CEO is the only one that has this depth of knowledge

Just as with product sense, a founder that is skilled and effective at Founder Mode in her first company, is not necessarily able to jump right into another company and expect the same results.

what to do if you realize you need a founder-mode leader, but you don’t yet have one? There are two important cases here:

– The Founder CEO Has Left, So The Company Has Hired A New CEO

this will take real time to develop, but it’s very possible that the survival of the company depends on this.

If the board selected a professional manager, then hopefully that manager understands enough to realize that he or she will likely need to find an exceptionally strong CPO. The company, and likely the customers too, are probably starving for the product vision, product strategy and innovations that come from a Founder Mode leader.

– The Founder CEO Has Hired a CPO

it’s likely (and usually a good thing) for the Founder CEO to remain as the visionary head of product, and the new CPO is there mainly to help make that vision a reality. There is nothing wrong with this, and it is especially common in growth stage companies.

The problem is that the Founder has likely many years of experience that will be impossible to completely capture, but nevertheless the new CPO needs to do everything humanly possible to learn as much as possible, as fast as possible.

Ed Batista: The Antidote to "Manager Mode" is Actual Management. Management as a concept seems to have fallen into disrepute. In a recent essay Paul Graham described "manager mode" as the unpalatable alternative to "founder mode." But what is Graham really criticizing?

Graham isn't criticizing actual management. He's criticizing the absence of management

the historic critique of management practices--a decades-old phenomenon, not a recent one--has been so badly misunderstood and so poorly implemented that many leaders are now so fearful of being called a "micromanager" that they fail to provide sufficient management at all.

The concept of "micromanagement" is associated with the work of MIT professor Douglas McGregor... He noted that Theory X manifests in both a "hard" version that extracts employee compliance through coercion and threats, and a "soft" version that renders employees pliable by catering to their desires for comfort and security.

today we encounter "soft Theory X" almost everywhere in the information economy. But both hard and soft Theory X are rooted in a shared view of human nature: that people are "indolent...lack ambition, dislike responsibility [and] prefer to be led"

McGregor's alternative, Theory Y, takes as its starting point an entirely different set of assumptions about people and their capabilities: People are not by nature passive or resistant to organizational needs. They have become so as a result of experience in organizations.

This is a process primarily of creating opportunities, releasing potential, removing obstacles, encouraging growth, providing guidance. It is what Peter Drucker has called "management by objectives" (MBO) in contrast to "management by control."

And I hasten to add that it does not involve the abdication of management, the absence of leadership, the lowering of standards, or the other characteristics usually associated with the "soft" approach under Theory X.

It should be obvious that putting these Theory Y principles into practice isn't easy

There's a noteworthy and relevant parallel here with the work of Amy Edmondson, whose research has highlighted the importance of psychological safety in organizational life. Sadly, this concept has been misinterpreted to mean, "No one's feelings can get hurt," when it really means "No one should be punished for speaking up and sharing bad news."

those workers still need to be managed. They need leaders who are actively involved in the process of determining 1) who will do what by when, 2) to a certain standard of quality, 3) with regular check-ins to assess progress, 4) and the ability to intervene and change course when necessary. That's not "micromanagement"--that's just management.

Some issues will remain under the leader's close scrutiny indefinitely, while others will come and go depending on the context, and the cultivation of the ability to know the difference is an essential leadership skill.