Box is the quintessential startup success story. What began in a proverbial garage now enables over 150,000 businesses to share files and collaborate anywhere in the world. In this First Round Town Hall talk, Aaron Levie shares what he’s learned about scaling a company as a first time Founder and CEO.
Once Box launched and got to product/market fit, one of the biggest challenges became maintaining talent standards. When going through hyper-growth, there is a temptation to hire quickly. This tends to conflict with the goal of only hiring the best people — and is exacerbated once a founder stops being involved in every hiring decision.
It’s true that the fastest way to solve a problem when building a hyper-growth business is to hire someone who’s already solved that problem. For example, if a startup faces infrastructure-scaling issues, the quickest solution is to hire someone who has scaled infrastructure somewhere else.
The challenge is if your only hiring criterion is someone who can solve the problem (which maybe the case for the manager who is dealing with broken infrastructure), you will fix the current problem but might not have someone who will fit into the organization and allow it to grow long-term. One way to counteract this is to centralize hiring and make sure everyone, regardless of role, is evaluated along the same core criteria. That limits the ability of someone in the organization to just hire someone to plug the hole they’re trying to fill and limits the possibility of the classic “desperation hire.”
Another mental trick Levie has found helpful is the 10-person test. He says, “[For anyone that] you hire, would you also want them to be in the first 10 people of your company? So if you’re hiring the 400th employee, you would still want that person to be in your original 10. There's no reason you ever have to relax your standards. People do because of the need for speed and the need for growth but there's no reason you actually have to if you put the right processes in place.”
Another challenge of managing a startup that is succeeding is maintaining culture as the company rises to new stages of growth. Even when Box was only 30 people, Levie noticed how deliberate you need to be about preserving your culture as new people join the team. It doesn’t just replicate itself, it needs to be intentional.
Levie illustrated this point by sharing a story, “We had a brand new employee that noticed something wrong on a marketing program we were doing. He and I were talking about it and I said, 'Well, why don't you just go tell the person who's running the marketing campaign that you don't think it's a good idea' and he responded, 'I didn't know that would be appropriate.' People have all these expectations of how an organization looks and all of the sorts of channels to communicate in organizations. We're trying to blow that up in our organization and so you constantly have to push that through to people to make it very clear that you are a much more open, much more organic and collaborative kind of environment.”
You want data and information flow up. Decisions should flow down.
If employees expect to be punished for sharing information up the hierarchy, the decisions that flow down will be less informed. Your culture, the way in which people operate and how decisions are actually made, need to be constantly reinforced by everyone at the company. Politics and bad culture are an accumulation of these small actions that people take on a daily basis, so you need to be mindful and correct them early and often.
According to Levie, the 100th person hired at the company needs to understand the culture as well as the fifth person did. To do this, leaders give frequent speeches. Managers often have conversations with new hires about their role at the company. New employees get documents about the company’s mission and how their department fits into it. Everything needs to constantly communicate the company’s culture and actions need to mirror those words on a daily basis, up and down the organization.
Founder-CEOs tend to come from the experience of being totally involved in every significant decision at the company. Levie recounts how he wanted to own everything: to be consulted whenever a button moved, whenever text changed, or whenever a new color was picked. This methodology can work up to about 35 people before the Founder becomes a massive bottleneck for the organization. Levie notes, “It was very, very obvious that shit was about to cascade like a tidal wave into me because everything that could possibly happen in the organization had to flow through me. If somebody wanted a performance review or somebody wanted a raise or somebody had this HR thing that they were dealing with or somebody wanted to approve something, everything had to flow through.”
In 2010, Levie’s solution to this crushing reliance was to hire a COO — someone who had managed organizations of thousands — and according to Levie, “From that day forward, I was leveraged by 10x because of the scale that he had operated in.” Dan Levin, Levie's COO hire, was able to find the areas where he was the decision-making bottleneck, replace him with better processes, and allow the company to resume growth at fast clip.
In addition to building a leadership team, Levie is always in search of as much knowledge about being a CEO as possible. He voraciously reads books about competitors, strategic problems he’s having, corporate history, as well as speaks with CEOs who have dealt with relevant problems to the ones his company faces in the moment. Levie uses this information to form a mental model for the world playing out in front of him and often pulls from these lessons learned.
I spend a lot of time just watching videos on YouTube of CEOs. It's nerdy and probably creepy.
Levie realizes not all of it is going to be helpful all the time and not everything is relevant. Someone who hires 1,000 people in a day may not be that helpful if you’re trying to hire one person — but a grounding in past problems can provide better background for decision-making. He says, “Models can help you make decisions faster in the absence of data. You can start to pick them out, like 'This looks a lot like the situation that happened to Oracle in '93. What did they do?' You use that as an extra data point so that you can synthesize and come to a better answer. That’s way more useful than going in blind.”
Part of Box’s strengths as a product and a company come from its willingness to look for competitive advantages in unorthodox areas for an enterprise company. Levie recently tweeted:
Future enterprise software leaders will build like Facebook, design like Square, measure like Zynga, and support like Zappos.
Levie argues that these four characteristics actually aren’t in conflict. Normally when you look at traditional enterprise software companies, they’re good at sales, really good. But at a fault, they don’t focus on much else. He goes on to say, “There's no reason why we can't have a world class support, world class design and world class kind of engineering velocity. None of those are in conflict with one another… You can't be the low cost leader and the premium service provider, that's an impossible conflict; but to have premium and high-end design as well as amazing customer support, those things are totally additive and complementary.”
Levie has tried to make the company world class in these four areas through very intentional hiring. He explains, “To be world class in each of those areas, you want actual leaders in that come with that kind of background and domain expertise and experience. We wouldn't get our engineering leader from some on-premise software five-year build cycle organization because that's not the engineering organization we’re going to build. We wouldn't get our customer support leader from Oracle because they’re not known for their customer support. There are ways that you can be best in class in a lot of these areas.”