What Scott Cook Wished He Knew About Being a CEO When He Founded Intuit
Scott Cook founded Intuit in 1983 — before many current Silicon Valley founders were even born — and grew it from an idea into a multi-billion dollar company that currently employs over 8,500 people and serves 60 million customers every year. In this interview, Cook cuts through management speak and shares tactical advice on how to evaluate talent, think about competition, and build a company to last, as well as sharing the one thing every first-time CEO needs to know.
Turning Reference Checks into Something Valuable
Everyone says, “Hire ‘A’ players” but founders know the reality is that’s easier said than done. Not only is it hard to convince the best people to join your unproven company — it’s just hard figuring out if someone is outstanding. Interviews are a fundamentally broken and imperfect process. In hiring thousands, Cook has found the most reliable way to evaluate talent is through reference checks on the founders. Most use reference calls to just check the box and make sure the candidate is generally telling the truth — but Cook uses it to dig and evaluate the potential hire. There is no better place to learn about a candidate than talking with lots of people who actually worked with that person.
Cook begins the entire process by being very specific about what he’s hiring for — and those common attributes for him generally break out into four key areas.
- Learning ability
- Cares about quality work and satisfying customers
- Gets things done
Cook emphasizes the last characteristic, “There’s a real difference between how much literal work and progress and effectiveness there is between people. Two people might be equally smart and equally driven — but some people just get a lot more. People will agree with them, people will follow them, they can process work. These doers can figure out what’s most important and work on that where other people just spend a lot, the same amount of time, but they get half as much, a third as much, a fifth as much done. You don’t have time for that. You want people who get things done.”
Keeping these four key attributes in mind, Cook gets on the phone with the reference and begins by letting them talk about working with the candidate. However, the reality is people generally want to be nice and don’t have much to gain by being fully transparent and honest, so they generally start by saying how great the potential hire was and how valuable they were to the team. Cook has found that it’s most effective to completely ignore this opening feedback and throw it out. Once they’re done rambling on, Cook asks, “Among all of the people you’ve seen in this position, on a zero to ten scale, where would this person rank?” They go, “Seven.” Cook says, “Why isn’t this person a nine or a ten?” And then you’ll finally start learning about what this person really thinks.
Cook concludes the call by asking this person for other people who can give a reference on the candidate and then begins the process again. Getting as far away as possible from the candidate’s suggested references often leads to the most valuable data.
Running a Counter-Cultural Business
Intuit has always been a counter-culture. If there’s a dominant trend in software, like producing hyper-featured suites of clanging bells and tooting whistles, Intuit will be making programs that solve a small set of problems well. If the other big players are rushing to service enterprise customers, Intuit will rush to service small businesses and consumers.
Cook noted, “When people were adding tons of features to software, we were putting very few features in. We produced the first accounting software with no accounting in it. That was QuickBooks. We entered the payroll business by not doing key chunks of the payroll process. We didn’t do payroll taxes, didn’t file the taxes or anything like that, but we could sell our product at 1/20th the price.”
Unlike most companies, Intuit doesn’t shy away from going after crowded markets, so long as they bring some kind of disruptive advantage to them. Cook refers to the article “Disruptive Technologies: Catching the Wave” by Clay Christensen in Harvard Business Review as encapsulating Intuit’s approach of searching for opportunities to create an entirely new value network that supplants an existing one over a course of years and decades. "We want to go after problems that aren’t solved…we want to go after the things nobody’s figured out, either because they haven’t understood that problem or because they understood the problem but didn’t solve it. That means we go at things countercultural from the rest of the industry."
If you want a big business, solve a big problem.
However, Cook qualifies his statement by noting the importance of not only the difficulty but the scale of the problem you’re trying to solve. One of Intuit's leaders, Roy Rosin, famously said, “If you want a big business, solve a big problem."
Cook on Operating Intuit as ‘A Network of Startups’
Cook suggests that managers need to be deposed from their traditional role of ‘Caesar’ at the Colosseum, passing judgment on whether or not ideas are worthy of being implemented, for innovation to be sustained within a company as it scales. Cook learned this the hard way, “We had dozens and dozens of internal start-up projects. Many of those didn’t work — which really bothered me. Some had issues inside where the bureaucracy got in the way. Others got out and didn’t work. Things I believed in, things our people believed in. The greatest waste is when you have great people with great talent who work on something that customers just don’t want.”
Managers were attempting to predict how customers would behave and their track record for fortune-telling wasn’t good, despite experience of how those customers had behaved in the past with other products. “In fact, our odds were no worse than that of VC’s. VC odds of one or two out of ten for a traditional VC are actually ones they’re proud of. Then they got a few they can slough off to some company to buy and then a bunch of zeroes.”
In 2007, Intuit changed its approach by changing the role of its managers. Instead of deciding what products to build by fiat, managers facilitate teams so that they can operate many inexpensive experiments with real customers to figure out which product lines to build upon and which to leave behind at the early stage. “It’s not an experiment if it’s not real customers. Real customers making real decisions that they think are for real to do real stuff.”
These ‘live-fire’ exercises have higher stakes than conventional user testing, but the information that they provide is more useful information about how customers actually behave. This naturally puts a check on managerial hubris. If everyone at the organization knows that the business shapes itself based on customer behavior and not on the edicts of people with pointy hairstyles, a more empirical culture flows from that.
The outcome of the experiment makes the decision, not the manager.
"You need to be selective on who you allow on your board because even more than your spouse, you can’t get rid of them. Divorce is a formal procedure, unfortunately, and you can’t really do that with your board”. Cook’s method for figuring out if you should have someone on your board is really simple, “Pick somebody whose advice you want, whose advice you just can’t get enough of."
The problem is board members hate people who try to act like there’s no problem, but most importantly, board members want to help.
It’s also important to direct the attention of the board members to areas where you actually need their help. Using this basic assertiveness is something that Cook realized most CEOs miss.
“In your board meetings and individually, tell the board members where you want help. Tell them where the problem is, where the challenge is, and where you’re uncertain. So many CEOs act like ‘I’m in charge, I know what I’m doing, don’t show any weakness.’ The problem is board members hate people who try to act like there’s no problem, but most importantly, board members want to help. If they’re on a board, they want to help. They’re going to help and they’re going to find areas to help and if you haven’t given them any guidance in where you need it, they’re going to be helping in places where you don’t want it, you don’t need it, and they’re in the way. Tell them where to focus.”
When the CEO doesn’t manage the attention of the board properly, the board members will wander off on their own, meddling in areas that aren’t useful to the company, rather like a pack of rude goats munching an herb garden. Herd your board to the areas where you need their help, where their individual strengths can be of some use.
Get a Coach
When you look at the best athletes in the world, people like Tiger Woods or Kobe Bryant, you’ll quickly notice that they’re often able to play at the highest possible levels because of the ongoing coaching they receive. No matter how brilliant their talent level, if they didn’t have a coach working with them on technique, rethinking their tactics and form, they couldn’t improve. Cook believes this same philosophy around coaching should be applied to CEOs. He noted in his early years, “I was leaving a trail of destruction on various teams that I wasn’t seeing. My guts were telling me it was there, but I didn’t want to admit it.”
Cook is also an advocate of regular, anonymous 360-degree feedback in particular, as it’s the best way to find out what your subordinates really think of you.
It’s one thing for the CEO to proclaim that they’re a great CEO, beloved by all — it’s another to verify that by surveying the rest of the company.
"I’ve learned if you’re a boss you’re not hearing the true story from your people. They’re polishing the apple and giving you this happy pat about how great you are and they’re not telling you the truth about where you’re not. You’re flying blind, you’re not going to see it."
This is where a great CEO coach can come in and ask the right questions of employees, make sure that the feedback gets past the psychological defenses that prop up your CEO-sized ego, and then schedule follow-up sessions once you’ve implemented the changes.
That’s the sort of improvement that also sets the right example for employees, who will in turn be more likely to look within themselves to see how they can improve. This also dovetails with the broader approach to favoring experimental results over managerial diktat. It’s one thing for the CEO to proclaim that they’re a great CEO, beloved by all — it’s another to verify that by surveying the rest of the company.