Pave helps companies plan, communicate, and benchmark employee compensation. Today, the company has 160 employees, more than 3,500 customers, and is valued at $1.6B. Founder and CEO <a href=https://www.ycombinator.com/"https://twitter.com/matthewschulman?lang=en\%22>Matt Schulman</a> has created one of the most comprehensive and thorough recruiting processes, which has made him one of the most successful recruiters in the YC community. We sat down with Matt to hear his insight on <a href=https://www.ycombinator.com/"https://www.workatastartup.com/companies/pave-2/">building a team</a> in the early stages of his company and today as a CEO of a growth-stage company. </p><p><strong>Many of the first Pave employees were hired as a contractor before converting to a full-time employee. Would you recommend this strategy to founders? </strong></p><p>I strongly recommend the contract-to-hire setup in the early days of a startup, as it led me to have a 100% close rate with the candidates we wanted to convert to full-time. This strategy worked for two reasons: </p><p>1) By the end of the contract, the contractors had poured weeks of energy into the work – learning the code base and investing their time – and getting to know potential coworkers. This escalated their sense of commitment.</p><p>2) I was flexible on working hours – open to them working nights or weekends. This made it easier for the candidates who were busy with full-time employment to say yes to working with Pave and earn extra income on the side. </p><p>To convince people who were employed to work for Pave as a contractor on top of their current job, I framed the process as a mutual evaluation. This is an opportunity to evaluate the company and come to a mutual decision at the end of 2, 4, or 6 weeks together – no pressure. We paid them a fair market rate, and as mentioned, we were flexible on working hours. One contractor worked their day job until 5:00pm and then on Pave from 6:00pm-2:00am, for example. They were excited to be able to build something from the ground up and work closely with me at the earliest stage of the company – which is another strategy I used to encourage people to work with us. </p><p>Before Pave, I was an engineer at Facebook and regularly worked on side projects. These projects were my fun, guilty pleasures because when I built something from the ground up, I felt an emotional attachment to the work. Usually engineers at large companies feel part of a machine, but when they build something full-stack from the ground up, there’s a magical allure to that work. I gave those contractors ownership over the work and often jammed out with them – working side by side at all hours. (One note: I did not have the contractors touch customer PII.) Within weeks, we’d both know whether Pave would be a good fit, and if so, we were already committed to each other.</p><p><strong>What were you looking for in early employees? </strong></p><p>When starting to build out the team, I was given a tip that the first 10 hires would set the tone for the next 100. Because of this, I personally recruited 100% of the early Pave employees. I sourced people, took phone screens, went to dinner, coffee, and on walks with candidates, and spoke with them for hours on Zoom and Facetime. It was an all-encompassing process. But I found that early advice to be accurate: The first 10 employees are the most important aspect in the company’s life cycle – other than finding product-market fit – and recruiting has to be the founder’s priority.</p><p>When recruiting for the first ten employees, I wasn’t looking for experts in specific areas but generalists with rapid career growth, passion for our mission, and a hunger to work. Those early employees readily tackled whatever fire we were facing that day from engineering work and sales to back office and HR. I also had a deep level of trust with those first ten hires, as they were all in my network. </p><p>Today, I still look for mission alignment and hunger but there are times I need to hire a specialist. I identify the tightest set of criteria for the role and only talk to people who fit that criteria. This is very different from the early days when I was solely looking for generalists who could fill multiple roles.</p><p><strong>How did you convince those early employees to join Pave? </strong></p><p>I always found ways to continue our conversation even when I could sense the candidate wanted to turn down the offer. I would do this by scheduling future conversations – saying that I needed to share something new with them – and then I would get to work writing a Google Doc that showed how I planned to invest in their career. We still use this strategy at Pave today, but it has evolved and is now affectionately called the collaborative Google Doc.</p><p>The collaborative Google Doc is shared with the candidate and used throughout the entire interview process. The document outlines expectations for the role and frames the interview process in stages, communicating which stage the candidate is in at any given time to ensure we are working within their ideal timeline. We encourage the candidate to comment and add their thoughts to the document, including feedback for me and their thoughts on the interview process.</p><p>As we get further into the interview process, I get more specific about what I’m looking for in a candidate. And when we get even deeper, I write multiple pages on what I’ve learned about their career aspirations through our conversations and backchanneling, and how I’m going to support them. </p><p>When it comes to backchanneling for potential executive hires, I try to talk with at least 10 people and ask, “If I have the privilege to be this person's manager, I want to set them up for the utmost success. What are your specific recommendations about the best ways to set this person up for success and unleash their full potential?” This 360 review is shared with the candidate right before I deliver the compensation package. I outline what I learned about their strengths and weaknesses, and specific ways that I’ll push them and support them.</p><p>When I communicate compensation, I lay out all the facts, including cash amount, equity (shares and dollar amount), and the benefits package. In addition, we also share:</p><ul><li>The salary band for the role (and implicitly their position in it).</li><li>The level that the employee will be in the organization, along with more information on our leveling framework and what each level means.</li><li>The methodology for determining the compensation, like the market data we use (75th percentile for similar stage companies).</li><li>Broader information on compensation philosophy, including how someone moves through the band, gets promoted, etc.</li><li>Additional info on equity: current preferred price, current post money valuation, details on vesting, PTE window, 409A price, and more – essentially everything they need to determine the actual value of the grant.</li></ul><p>We’re ultra transparent about compensation because compensation should not be a guessing game; people deserve to understand every aspect of their compensation package and how it was derived. I then offer to meet live to answer any questions or discuss feedback – or ask them to leave their comments in the Google Doc. Most candidates will ask questions in the document, as it can be more approachable.</p><p><strong>For every open role at Pave, a Slack channel is created to drive urgency and ensure no detail goes missed. Tell me about this process. </strong></p><p>As a seed-stage company, I was creating Slack channels for every role. Today, Slack channels are created for roles that I’m involved with – like hiring a head of finance or VP of engineering. The process still looks the same, however. </p><p>I create a Slack channel for that role and add relevant stakeholders. Every morning I ask for an update. What’s the movement? Have we sourced any more candidates? Have we talked with candidates X, Y, and Z? I do this to keep the process moving forward every day. I also post updates – sharing with the team when I spoke with a reference, for example. When we extend an offer, I use this Slack channel to encourage stakeholders to reach out to the candidate through text messages or Loom videos. </p><p>Loom videos are an interesting medium. If you’re a candidate and receive six Loom videos from different people at the company, it may feel bizarre and a bit overwhelming. But the videos show we are excited about the candidate and also gives insight into our energetic culture. </p><p><strong>You also review email copy and do drip campaigns for candidate outreach. Tell me about this. </strong></p><p>We have a pre-written email sequence that is sent from me or the hiring manager depending on the context, and then we use <a href=https://www.ycombinator.com/"https://www.ycombinator.com/companies/gem/">Gem to automate this. The response rates for these campaigns are much higher than if the emails were coming from a recruiter. Before the emails are sent out, I’ll spend 30 minutes personalizing 30 emails (one to two sentences at the onset of the email) that will be sent to target profiles. And then it’s important you do a drip. If you only send one email, most of the time the candidate won’t respond. I find sending a third email with a short message like, “Hey, any thoughts?” leads to the most responses. </p><p><strong>How do you think about where your job ends and your team begins when it comes to recruiting?</strong></p><p>Today, if I’m not the hiring manager, I delegate and come in only at the end of the process for a sell call. The process looks vastly different if I’m the hiring manager. I spend a lot of time reviewing resumes and identifying the top 25 profiles in the space. Every outreach to them is very personalized, and I have time to do this because I focus on quality over quantity of candidates. Quality over quantity was a big lesson for me, actually. At first, I would look at all inbound resumes and thousands of applicants. But I have come to realize that I have more success when I map out the market and find the top 25 candidates in the space. Then I'll find a way to get one of them in the door.</p><p><strong>Describe the ideal candidate for senior-level positions when Pave was a smaller company. </strong></p><p>As a company of 35 people, we didn’t need managers who delegated – which has merit at a later-stage company. We needed people who would personally take on the hard work. Often, first-time founders hire someone senior for optics reasons. Instead, you should look for someone earlier in their career who has grown at a crazy high slope – often referred to in the tech industry as a high-slope candidate versus a Y-intercept candidate. There is a time and place for both types of hires, but as a 35-person startup, almost always go for the slope, not the high Y-intercept. And in some cases, you may meet exceptional candidates with both high slope and high Y-intercept. This is the dream case!</p><p>Another mistake first-time founders can make is rushing hires by trying to squeeze them in before a term sheet. Don’t try to meet some arbitrary deadline or cliff date. If it takes six months or a year to hire an executive, that’s ok – wait for the right person.*<br><br><em>*This answer has been updated to clarify the founder’s intention behind the statement.</em></p>","comment_id":"6348578e2184dc0001eebf80","feature_image":"/blog/content/images/2022/10/BlogTwitter-Image-Template--8-.jpg","featured":true,"visibility":"public","email_recipient_filter":"none","created_at":"2022-10-13T11:23:10.000-07:00","updated_at":"2022-10-26T08:44:29.000-07:00","published_at":"2022-10-17T09:00:11.000-07:00","custom_excerpt":"Pave Founder and CEO Matt Schulman has created one of the most comprehensive and thorough recruiting processes, which has made him one of the most successful recruiters in the YC community.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"/blog/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"}],"tags":[{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"61fe29efc7139e0001a71152","name":"Founder Stories","slug":"founder-stories","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/founder-stories/"},{"id":"61fe29efc7139e0001a71158","name":"Leadership","slug":"leadership","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/leadership/"},{"id":"61fe29efc7139e0001a71170","name":"Startups","slug":"startups","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/startups/"},{"id":"634d76fe3f2ab90001338eb9","name":"#21831","slug":"hash-21831","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"},{"id":"61fe29efc7139e0001a71155","name":"Growth","slug":"growth","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth/"}],"primary_author":{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"},"primary_tag":{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},"url":"https://ghost.prod.ycinside.com/learnings-of-a-ceo-matt-schulman-pave/","excerpt":"Pave Founder and CEO Matt Schulman has created one of the most comprehensive and thorough recruiting processes, which has made him one of the most successful recruiters in the YC community.","reading_time":7,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"62fa7b87ab52db0001d3b656","uuid":"c432a242-4288-4980-a6e9-d9c82359c9ad","title":"YC Founder Firesides: Gusto on building for new verticals","slug":"yc-founder-firesides-gusto-on-building-for-new-verticals","html":"<p><a href=https://www.ycombinator.com/"https://gusto.com//">Gusto (<a href=https://www.ycombinator.com/"https://www.ycombinator.com/companies/gusto/">YC W12</a>) provides growing businesses with everything to take care of their team. Today, more than 200,000 businesses use Gusto for payroll, employee benefits, talent management, and more. And with the recent addition of <a href=https://www.ycombinator.com/"https://embedded.gusto.com//">Gusto Embedded</a>, developers now use Gusto’s APIs and pre-build UI flows to embed payroll, tax filing, and payments infrastructure into products. </p><p>Last week, Gusto <a href=https://www.ycombinator.com/"https://gusto.com/company-news/gusto-embedded-one-year-in-fueling-smb-tech-success-at-scale-with-critical-compliance-/">announced they have dozens of new partners across verticals like laundromats, health & beauty, and construction building with Gusto Embedded. The company also announced they are making it easier for software providers to keep their payroll customers in compliance.</p><p>YC’s <a href=https://www.ycombinator.com/"https://twitter.com/anuhariharan/status/1557784730543632384/">Anu Hariharan</a> sat down with Gusto co-founder and CPO <a href=https://www.ycombinator.com/"https://twitter.com/tomerlondon/">Tomer London</a> to talk about building for new customer segments and the future of embedded finance — sharing advice for startup founders and CEOs along the way. </p><div class=\"kg-card kg-audio-card\"><img src=https://www.ycombinator.com/"https://ghost.prod.ycinside.com/content/media/2022/08/Founder-Fireside---Tomer-London--Gusto-_thumb.jpg?v=1660587475243\" alt=\"audio-thumbnail\" class=\"kg-audio-thumbnail\"><div class=\"kg-audio-thumbnail placeholder kg-audio-hide\"><svg width=\"24\" height=\"24\" fill=\"none\" xmlns=\"http://www.w3.org/2000/svg\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M7.5 15.33a.75.75 0 1 0 0 1.5.75.75 0 0 0 0-1.5Zm-2.25.75a2.25 2.25 0 1 1 4.5 0 2.25 2.25 0 0 1-4.5 0ZM15 13.83a.75.75 0 1 0 0 1.5.75.75 0 0 0 0-1.5Zm-2.25.75a2.25 2.25 0 1 1 4.5 0 2.25 2.25 0 0 1-4.5 0Z\"/><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M14.486 6.81A2.25 2.25 0 0 1 17.25 9v5.579a.75.75 0 0 1-1.5 0v-5.58a.75.75 0 0 0-.932-.727.755.755 0 0 1-.059.013l-4.465.744a.75.75 0 0 0-.544.72v6.33a.75.75 0 0 1-1.5 0v-6.33a2.25 2.25 0 0 1 1.763-2.194l4.473-.746Z\"/><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M3 1.5a.75.75 0 0 0-.75.75v19.5a.75.75 0 0 0 .75.75h18a.75.75 0 0 0 .75-.75V5.133a.75.75 0 0 0-.225-.535l-.002-.002-3-2.883A.75.75 0 0 0 18 1.5H3ZM1.409.659A2.25 2.25 0 0 1 3 0h15a2.25 2.25 0 0 1 1.568.637l.003.002 3 2.883a2.25 2.25 0 0 1 .679 1.61V21.75A2.25 2.25 0 0 1 21 24H3a2.25 2.25 0 0 1-2.25-2.25V2.25c0-.597.237-1.169.659-1.591Z\"/></svg></div><div class=\"kg-audio-player-container\"><audio src=https://www.ycombinator.com/"https://ghost.prod.ycinside.com/content/media/2022/08/Founder-Fireside---Tomer-London--Gusto-.mp3/" preload=\"metadata\"></audio><div class=\"kg-audio-title\">Founder Firesides: Gusto's Tomer London on building for new verticals</div><div class=\"kg-audio-player\"><button class=\"kg-audio-play-icon\"><svg xmlns=\"http://www.w3.org/2000/svg\" viewBox=\"0 0 24 24\"><path d=\"M23.14 10.608 2.253.164A1.559 1.559 0 0 0 0 1.557v20.887a1.558 1.558 0 0 0 2.253 1.392L23.14 13.393a1.557 1.557 0 0 0 0-2.785Z\"/></svg></button><button class=\"kg-audio-pause-icon kg-audio-hide\"><svg xmlns=\"http://www.w3.org/2000/svg\" viewBox=\"0 0 24 24\"><rect x=\"3\" y=\"1\" width=\"7\" height=\"22\" rx=\"1.5\" ry=\"1.5\"/><rect x=\"14\" y=\"1\" width=\"7\" height=\"22\" rx=\"1.5\" ry=\"1.5\"/></svg></button><span class=\"kg-audio-current-time\">0:00</span><div class=\"kg-audio-time\">/<span class=\"kg-audio-duration\">118:07</span></div><input type=\"range\" class=\"kg-audio-seek-slider\" max=\"100\" value=\"0\"><button class=\"kg-audio-playback-rate\">1×</button><button class=\"kg-audio-unmute-icon\"><svg xmlns=\"http://www.w3.org/2000/svg\" viewBox=\"0 0 24 24\"><path d=\"M15.189 2.021a9.728 9.728 0 0 0-7.924 4.85.249.249 0 0 1-.221.133H5.25a3 3 0 0 0-3 3v2a3 3 0 0 0 3 3h1.794a.249.249 0 0 1 .221.133 9.73 9.73 0 0 0 7.924 4.85h.06a1 1 0 0 0 1-1V3.02a1 1 0 0 0-1.06-.998Z\"/></svg></button><button class=\"kg-audio-mute-icon kg-audio-hide\"><svg xmlns=\"http://www.w3.org/2000/svg\" viewBox=\"0 0 24 24\"><path d=\"M16.177 4.3a.248.248 0 0 0 .073-.176v-1.1a1 1 0 0 0-1.061-1 9.728 9.728 0 0 0-7.924 4.85.249.249 0 0 1-.221.133H5.25a3 3 0 0 0-3 3v2a3 3 0 0 0 3 3h.114a.251.251 0 0 0 .177-.073ZM23.707 1.706A1 1 0 0 0 22.293.292l-22 22a1 1 0 0 0 0 1.414l.009.009a1 1 0 0 0 1.405-.009l6.63-6.631A.251.251 0 0 1 8.515 17a.245.245 0 0 1 .177.075 10.081 10.081 0 0 0 6.5 2.92 1 1 0 0 0 1.061-1V9.266a.247.247 0 0 1 .073-.176Z\"/></svg></button><input type=\"range\" class=\"kg-audio-volume-slider\" max=\"100\" value=\"100\"></div></div></div><p>You can also listen on <a href=https://www.ycombinator.com/"https://open.spotify.com/episode/0FTnE08QzuCg6I21S4PB8e?si=ShDfsjwnRWKYH0LjwzI-rg\%22>Spotify, <a href=https://www.ycombinator.com/"https://podcasts.apple.com/us/podcast/159-yc-founder-firesides-gusto-on-building-for-new/id1236907421?i=1000576161014\%22>Apple Podcasts</a>, and <a href=https://www.ycombinator.com/"https://twitter.com/i/spaces/1dRKZldrvOzJB?s=20\%22>Twitter.
1:28 - Tomer describes Gusto Embedded and the complexities behind compliance.</p><ul><li>Gusto Embedded takes ten years of Gusto’s experience building payroll software and compliance and makes it available to any software company wanting to ship their own payroll product to the market. </li></ul><p><strong>5:00 </strong>- Why did you decide to pursue startups as the company’s first target audience? How did you think about customer segments in that first year? </p><p><em>Over the last ten years, Gusto has scaled to build for multiple customer segments – starting with startups, then SMBs, accountants, and now with Gusto Embedded Payroll, developers who are embedding payroll directly into their software. </em></p><ul><li>When you have a grand vision, where do you start as a founder? Choose a customer segment. Make sure you choose a segment where 1) they have an important customer problem, 2) the product you are building solves that problem, and 3) you can reach your customer. </li></ul><p><strong>9:30 </strong>- Who were your competitors in the early days? </p><ul><li>The old, traditional payroll solutions, which were complex. With Gusto, <em>anyone</em> can run payroll at <em>any time</em>. Gusto also focuses on employees, a critical part of the system, by building a great payroll experience for them. </li></ul><p><strong>11:30 </strong>- Why did you decide to build for SMBs after startups? </p><ul><li>Look at your current customer base and learn from customers adjacent to the market you want to expand into. When you do expand into another vertical, make sure you maintain that early customer love. </li></ul><p><strong>14:45</strong> - How did you maintain the customer love of the existing customer segment? </p><ul><li>Think about your long-term vision and don’t put yourself in a corner when you want to move to the next segment. </li></ul><p><strong>17:00</strong> - Most startups find it hard to tackle the SMB market. Why do you think this is the case? </p><ul><li>Traditionally SMBs are hard to reach and use incomplete or manual solutions. Since 2000 an entire generation of business owners had to learn to trust online financial services. Today, SMBs are online and looking for solutions.</li></ul><p><strong>22:25 </strong>- What is different about serving SMBs as a customer versus startups? </p><ul><li>Startups come and go, and the real economics come from the big winners. Focusing on startups is a good place to start your journey, but think about how to scale with them.</li><li>There are more small businesses than startups, and they are around for a long time – but most don’t grow to thousands of employees. You need to build a business model that works with that dynamic. </li></ul><p><strong>27:00 - </strong>Why did you pursue developers and how did you decide to service them? </p><ul><li>For many verticals, it is much better to have an all-in-one platform to run your small businesses. But payroll is really hard to build yourself. Gusto Embedded helps partners deliver a more integrated solution for customers without investing the several years and tens of millions of dollars.</li></ul><p><strong>29:00 </strong>- Gusto went from directly acquiring small businesses as customers to creating an embedded solution – essentially “giving up” the relationship with the customer. How did you think about that? </p><ul><li>Evaluate the future of the industry and don’t ignore reality. Be the one to create that future. In this case, many payroll customers want all-in-one solutions. We can either try to meet those needs directly, or empower hundreds of partners to customize unique solutions.</li></ul><p><strong>33:00 - </strong>How should founders think about who to partner with? When should founders build directly for the industry and when should they go the embedded route? </p><ul><li>Think about the unique insight you have in the business you’re creating and make sure you own your destiny around that insight.</li><li>For your customer, what does a successful product look like, and could you partner with a company to fulfill those needs.</li><li>Your product must be high-quality. You have to put enough resources behind whatever you own. For everything else, you must ensure you bring in the right partner. It’s all about the end-to-end experience. </li></ul><p><strong>39:30</strong> - Gusto now makes it easier for software providers to bake compliance into embedded payroll. Tomer, I think developers looking at a payroll API would assume that compliance is baked in. But there are often steps companies have to take beyond just calling APIs. Tell us if that assumption holds.</p><ul><li>Regulation can change every quarter and every year. This is built into the product. We protect the customer and make it easy for developers to ship something quickly that is compliant for the long term.</li><li>One third of the companies in the U.S. get fined for mistakes on payroll. </li></ul><p><strong>43:00 - </strong>Compliance is the hardest part of payroll to build and ultimately has to be right. It took ten years of experience in compliance to launch this into Gusto Embedded Payroll. What advice do you have for founders who are building complicated, yet essential, components for an industry?</p><ul><li>Determine the parts of your product that are highly regulated and which areas are not. Build a culture that ensures quality-first in those highly-regulated areas, as well as a culture where people can iterate quickly in other areas. You can’t build a monolithic culture.</li><li>Embrace cross functional work. </li></ul><p><strong>46:00 </strong>- In the early days of Gusto, what guidance did you provide to your engineers about building payroll? What areas could break and which areas could not break? </p><p><strong>48:40</strong> - Looking back, would you have done anything different? </p><ul><li>Start charging what you feel is the value you provide; fix downwards versus upwards. If you’re truly adding value, customers won’t hesitate moving forward at that price.</li><li>Have the humility to learn from the customer and how the market changes around you. </li></ul><p><strong>51:45 </strong>- How should founders be thinking about embedded finance and how does this market evolve over the next 5-10 years? </p><ul><li>When you build a new software system for your customer, the more connected the system is for your customer, the better it is. Embedded products enable you to do that quickly and in high quality.</li><li>Bring more solutions into your product that are driven by what your customer needs. Understand your customer’s day-to-day, and figure out how to build something that solves their entire flow instead of one segment.</li><li>If you are not making money on your product, you don’t know if there's a product market fit. If you can charge and retain a customer, then there is product market fit. </li></ul><p><strong>56:30</strong> - Outside of payroll, what are you seeing product wise offered by APIs? </p><ul><li>This space is brand new and there’s a ton of opportunity to create a product that helps customers go through the end-to-end journey successfully and solves multiple pain points – instead of the customer needing ten years of background to create a high-quality solution.</li></ul>","comment_id":"62fa7b87ab52db0001d3b656","feature_image":"/blog/content/images/2022/08/BlogTwitter-Image-Template--5-.jpg","featured":true,"visibility":"public","email_recipient_filter":"none","created_at":"2022-08-15T09:59:51.000-07:00","updated_at":"2022-08-15T11:48:12.000-07:00","published_at":"2022-08-15T11:32:19.000-07:00","custom_excerpt":"Today, more than 200,000 businesses use Gusto for payroll, employee benefits, talent management, and more. 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You can read the first edition <a href=https://www.ycombinator.com/"https://www.ycombinator.com/blog/learnings-of-a-ceo-max-rhodes-faire/">here. </p><p><a href=https://www.ycombinator.com/"https://zapier.com//">Zapier was founded in 2012 by <a href=https://www.ycombinator.com/"https://twitter.com/wadefoster/">Wade Foster</a>, <a href=https://www.ycombinator.com/"https://twitter.com/bryanhelmig?lang=en\%22>Bryan Helmig</a>, and <a href=https://www.ycombinator.com/"https://twitter.com/mikeknoop/">Mike Knoop</a>. The founders went through YC’s <a href=https://www.ycombinator.com/"https://www.ycombinator.com/companies/zapier/">Summer 2012 batch</a> and <a href=https://www.ycombinator.com/"https://www.ycombinator.com/growth-program/">S18 Growth Program</a>, and today, Zapier automates work by connecting with over 5,000 apps. The company has been profitable since 2014 and is valued at $5B – with 700 employees working remotely. Wade, Zapier CEO, shared his learnings growing into the role of a growth-stage CEO. </p><p><strong>How has your job as a CEO changed from leading a 3-person company in 2012 to a 700-person organization today? </strong></p><p>In the early days, you’re in the trenches with your co-founders and early employees splitting up tasks and touching nearly every part of the business. Often you’re writing code, selling products, recruiting, and helping with HR and finance functions. Today, Zapier is almost a team of 700 – and as we’ve grown, people have taken more and more duties from me to help the company grow and scale.</p><p>Now, one place I feel I am most needed is the vague concept of setting the vision and communicating that vision — and then ensuring everyone understands what we are doing, why it’s important, and their role in getting that done. This came naturally to me when we were small and I was in the trenches with everyone and communicating constantly. But as we hired more folks, I realized leaders were interpreting the vision to their team somewhat differently. I learned that if you are not communicating the vision well, you'll have teams that seem to be working on random projects. In isolation this isn’t bad, but as a collective set of tasks, you discover their work doesn’t fit into the vision. </p><p>We now repeat the vision over and over again in many formats. We put the vision in writing and it's constantly referenced; it's communicated at our all-hands; we bring in customers to talk about Zapier’s impact; we show data, so charts and figures can help tell the story; we have a company podcast. </p><p>When people inside the company start to turn the vision into a meme or Slack emoji, I know they really get the vision. Diagnostic tools, like employee engagement surveys, also help me understand how well employees understand why their role is important. It’s also evident when reviewing roadmaps. If a team’s tasks are tight and cohesive, I can tell they’ve been making tough decisions to align to the vision; if there are a bunch of random tasks, I can tell the vision hasn’t been communicated clearly. As a CEO, you have to ask, “Tell me how this is aligned,” and force those conversations to occur. Over time, people will get more comfortable with these types of assertive exercises. </p><p><strong>As you've grown, what changes have you had to make to keep everyone at your company aligned?</strong></p><p>We host weekly all hands, bring customers in to talk at those all hands, are transparent with metrics, and make sure those metrics are reflective of the good and the bad. Ultra transparency with metrics has served us well, as they are motivating and help people get aligned. People start to ask, \"How do we get these bad metrics to the good category?\" and then work towards change.</p><p>Being candid has also served us well. Whether at all hands, on a podcast, or solely talking with one of our leaders, we have candid conversations about why we didn’t hit a goal, why we were off schedule, why a deal didn’t close – and then immediately dive into what we think needs to happen next. The goal is to give awareness to the organization, so that in various meetings and forums people can try to figure out how to improve those areas.</p><p><strong>What's your advice to other founders on how to hire executives?</strong></p><p>Hiring executives is one of the hardest things you’ll do as a CEO. It's hard to determine when to start hiring executives, exactly what you’re looking for in an executive, and then find that person. </p><p>The best way to figure out when to start hiring executives is to meet with people who are unquestionably good executives at companies a stage or two further along. With no intention to hire them, meet with the VP of Engineering, VP of Marketing, and VP of People and ask, \"What are the things you do? What makes you great at this job? What do people in your job disagree on?”. Get as smart as you can on this topic and then compare and contrast what that set of leaders is telling you with how your company operates. If these executives wouldn’t bring anything new to the table, you may not be ready for that type of leader. This starts to help you answer the when part of the equation – and also the what, because you start to see what these folks are capable of and what they are not. </p><p>Part of determining what you should look for in an executive is understanding your own strengths and weaknesses. This requires honesty with yourself and internalizing feedback you have received. (I encourage folks to work with executive coaches and get 360 performance reviews.) Figuring this out helps you start to realize, \"Okay, within my executive team, I need people who will compliment me in these ways.\" Otherwise, you risk hiring a team that is quite capable and competent at their function, but actually may not work well with each other or with you.</p><p><strong>What is Zapier’s culture? What do you do to cultivate it as a remote company?</strong></p><p>We have a strong set of values that we align around. One is default to action. We hire folks who are action-oriented – and we have to as a distributed company; folks aren’t in situations where they notice someone next to them is stuck on something. So, they need to be curious, self-starters, and (figuratively) scratch and itch when they see something that doesn’t satisfy their innate drive. </p><p>Next, we value defaulting to transparency because folks who are action-oriented should be equipped with a ton of context. The mission, strategy, metrics, goals, systems and processes – all of it – is well documented and organized so people can find them and take action.</p><p>We also have a feedback-oriented culture. I teach a course on feedback to all the new folks to ensure they understand how to ensure they understand how to give and receive feedback effectively because it helps us grow. </p><p>The rest of our values are outlined <a href=https://www.ycombinator.com/"https://zapier.com/jobs/culture-and-values-at-zapier/">here, but these are some of the things that drive Zapier’s culture – and as you scale, it’s crucial to create different forums to communicate these values. We have an internal tool we named Async, which is email meets Reddit. The platform is public by default, anyone can post, and information can be targeted at different groups or people. We find this is great for long-form substantive topics that have a longer shelf life (1-2 weeks) versus Slack channels (1-2 days). We also hold all hands and have a company podcast, where we capture evergreen content. For example, when we have key moments in the company history, we’ll break it down: Why we did this thing, what led to that decision, the outcomes, why it is an important moment, etc. We have found podcasts to be helpful when onboarding new folks. </p><p><strong>Why did you decide to not raise any additional funding since your seed round?</strong></p><p>The only funding we took in the history of the company was a $1.3M seed round in 2012. This was partially philosophical and partially about the business. </p><p>The three of us co-founders had worked at a fast-growing, bootstrapped company owned 50/50 by two brothers. When we came out to the Valley (we were from Missouri), we started to hear this line of thinking, “No great company has ever done X.\" Some of these statements would center around the impact of venture funding, and I was dismissive in part because I had this counterexample from my time in Missouri. So, when we raised the seed round, we decided to treat it like the last round we’d ever raise.</p><p>Our second reason for not raising multiple rounds: Across the founding team, we had all the skill sets to do every job inside the company. That meant we didn't have to hire to make progress in the early days. We even had rules in place around hiring like, “Don’t hire until it hurts.” </p><p>Then there was the third, rational component: We were able to grow quickly without external funding because of Zapier’s network effect on our developer platform side. We're able to have low customer acquisition costs (mostly through organic channels), and this is intrinsic to how Zapier works. </p><p>Along the way, some of the philosophical thinking fell by the wayside by observing other companies and realizing fundraising is a tool like anything else. There are moments when it can help you, and there are moments when it can hinder you. You should strive to understand when external funding is a good tool to use versus when it is not – and then apply it if it makes sense for you.</p>","comment_id":"62f15573ab52db0001d3b642","feature_image":"/blog/content/images/2022/08/BlogTwitter-Image-Template.jpg","featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2022-08-08T11:26:59.000-07:00","updated_at":"2022-08-15T12:08:14.000-07:00","published_at":"2022-08-09T08:55:00.000-07:00","custom_excerpt":"Today, Zapier automates work by connecting with over 5,000 apps. 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In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"},"primary_tag":null,"url":"https://ghost.prod.ycinside.com/learnings-of-a-ceo-wade-foster-zapier/","excerpt":"Today, Zapier automates work by connecting with over 5,000 apps. The company has been profitable since 2014 and is valued at $5B – with 700 employees working remotely. Wade, Zapier CEO, shared his learnings growing into the role of a growth-stage CEO.","reading_time":6,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"62d8038a3644180001d72a0d","uuid":"1d8947c7-4bd1-4f7c-8175-e3750393a8d1","title":"Learnings of a CEO: Max Rhodes, Faire","slug":"learnings-of-a-ceo-max-rhodes-faire","html":"<p>Every year, 200 YC companies go through our <a href=https://www.ycombinator.com/"https://www.ycombinator.com/about#continuity-1\">post-accelerator programs</a>. These programs provide founders with the resources they need to build a company all the way through IPO. One area covered extensively is how to scale as a CEO of a growth-stage company. </p><p>Outside of the YC community, little has been documented on best practices to be an effective CEO. We want to help founders everywhere scale and build enduring companies — and today, we’re launching a new series to do just that: Learnings of a CEO. </p><p>We’re kicking off this series with Max Rhodes, the co-founder and CEO of <a href=https://www.ycombinator.com/"https://www.faire.com//">Faire, a one-stop shop for wholesale. Before Faire, Max was an early product lead at Square, where he worked on the Cash App and was a founding member of Square Capital. Max and his co-founders were part of the <a href=https://www.ycombinator.com/"https://www.ycombinator.com/companies/faire/">W17 batch</a> and <a href=https://www.ycombinator.com/"https://www.ycombinator.com/growth-program/">F18 Growth Program</a>, and YC led Faire’s Series B and doubled down in their C-G rounds. Today, Faire has over 1,000 employees. </p><p><strong>How has your job as a CEO changed from seed stage to Series G?</strong></p><p>Much of my time is spent setting the vision and strategy for Faire and driving the execution of that strategy. This often feels like driving an aircraft carrier versus a speedboat, which is how I often describe leading a seed-stage company. In the early days, we were on a six-week product cycle, decisions were centralized (often with me making those decisions), and the entire company met daily for standups to stay aligned on our goals. Today, we are on a six-month product cycle, decisions are decentralized, and we have built systems that hold people accountable without needing consistent touchpoints. </p><p>As a thousand-person company, the number of products and features we can build has greatly increased, and we have to map out our strategy for the next 6-12 months to keep teams aligned. Communicating the strategy to the entire company requires multiple channels and repetition. We have a strategy doc that I collaborate on with the leadership team and share with the company; updates are provided at the half-year mark. We hold all-hands, where I share what is top of mind. We also have biweekly business review meetings, which are open to anyone; we also make the notes accessible. </p><p>Being able to decentralize decision making starts with hiring the best people and then arming them with the right information. Outside of meetings, we use OKR templates, track the history of our milestones, and create a collective body of work (in Notion and Google Slides) to provide everyone with direction. </p><p>We’ve organized the company in a way that lets us hold people accountable without needing constant touchpoints. The product development strategy is broken down into focus areas that each get assigned to a team. Each team is self-sufficient and has all of the technical and go-to-market people it needs. The team works autonomously to reach a metric. Every metric ties back to a top-level company goal, ensuring that teams are solving real customer problems.</p><p><strong>As you've grown, what changes have you had to make to keep everyone at your company aligned?</strong></p><p>We’ve experimented a lot: strategy docs, all-hands, documenting our 5Ss (the five most important initiatives across the company), and OKRs. There are pros and cons with OKRs. We use them as a guidepost rather than a measuring stick, to make sure we’re consistent in our planning and getting realigned on goals. </p><p>As we grow, some systems break. For example, I used to hold a biweekly business review meeting with each team. This was great when the company was broken up into three teams. With more than 15 teams, it became inefficient and borderline impossible. Eventually, these teams were organized into pillars, and each pillar was held accountable with a biweekly business review. My goal is to always find a balance between how much time it takes to coordinate versus execute, while designing information flows that don’t turn into silos. </p><p><strong>What's your advice to other founders on how to hire executives?</strong></p><p>First, clearly outline the outcomes you need the person to drive. Then, design a rigorous hiring process that evaluates whether they’ll be able to drive those outcomes and whether they share the same values as your company. We use a combination of behavioral interviews and work studies, where we see how they’ll perform at the job. We also extensively check references. </p><p><strong>What is Faire’s culture? What do you do to cultivate it?</strong></p><p>Our culture can be described by our five values. These underpin both why we are here and how we operate as a team. We’re still in the early days of building what this company will someday become and these operating principles help everyone at Faire maintain the spirit of entrepreneurship:</p><ol><li>We serve the community.</li><li>We seek the truth.</li><li>We are owners.</li><li>We embrace the adventure.</li><li>We are kind.</li></ol><p>To create this culture, it’s all about mechanisms. It starts with hiring. If we’re able to hire people who hold the same values and bring a new lens to the work, cultivating this culture is easy. We also embed the values into our feedback cycle and reward people for living them out. We give weekly shoutouts and recognize people, as well as hold quarterly value awards.</p><p><strong>Advice you would give to future leaders? </strong></p><p>Starting a company is hard, but it’s a lot easier if it’s something you care about, something that will impact the world. If you have a vision for how to make society better, don’t take that for granted.</p>","comment_id":"62d8038a3644180001d72a0d","feature_image":"/blog/content/images/2022/07/BlogTwitter-Image-Template--3-.jpg","featured":true,"visibility":"public","email_recipient_filter":"none","created_at":"2022-07-20T06:30:50.000-07:00","updated_at":"2022-07-20T08:33:04.000-07:00","published_at":"2022-07-20T08:30:00.000-07:00","custom_excerpt":"Outside of the YC community, little has been documented on best practices to be an effective CEO. We want to help founders everywhere scale and build enduring companies — and today, we’re launching a new series to do just that: Learnings of a CEO.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"/blog/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"}],"tags":[{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71158","name":"Leadership","slug":"leadership","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/leadership/"},{"id":"61fe29efc7139e0001a71152","name":"Founder Stories","slug":"founder-stories","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/founder-stories/"},{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"62d804e33644180001d72a1f","name":"#1543","slug":"hash-1543","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"},"primary_tag":{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},"url":"https://ghost.prod.ycinside.com/learnings-of-a-ceo-max-rhodes-faire/","excerpt":"Outside of the YC community, little has been documented on best practices to be an effective CEO. We want to help founders everywhere scale and build enduring companies — and today, we’re launching a new series to do just that: Learnings of a CEO.","reading_time":4,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":"https://ghost.prod.ycinside.com/content/images/2022/07/BlogTwitter-Image-Template--3--1.jpg","twitter_title":null,"twitter_description":"Today, we're launching a new series to help founders everywhere scale and build enduring companies: Learnings of a CEO.\n\nWe're kicking it off with @MaxRhodesOK, co-founder and CEO of @faire_wholesale, a one-stop shop for wholesale.","meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71931","uuid":"f8771430-ae61-498b-9d57-84a44d351bb3","title":"How Do You Measure Leadership?","slug":"how-do-you-measure-leadership","html":"<!--kg-card-begin: html--><p>Are you a good leader? How do you know?</p>\n<p>In a startup culture that is obsessed with management by metrics, many founders struggle to answer this critical question about themselves. It’s tempting to measure leaders simply by the success of their businesses. But even the most successful founders know how much timing and luck can be confounding factors in this approach. Measuring leadership through bottom-line company performance also fails to provide any clues as to how someone can improve as a leader. So is there a better way?</p>\n<p>This essay describes a way to measure leadership that I hope will be helpful to those who seek to improve as leaders. It is based on observations I made when working closely with four leaders that I consider extraordinary: Ed Catmull (Pixar’s founder), Steve Jobs (Pixar’s CEO), John Lasseter (Pixar’s Chief Creative Officer), and Bob Iger (Disney’s CEO). To my surprise, these men could not have been more different in style, temperament, and approach. They did not conform to a single model of leadership. One was an introverted scientist while another was an extroverted artist. One was a college dropout who had founded a company and was infamous for brash behavior while another was a career executive who was exceptionally genteel and diplomatic.</p>\n<p>Despite their differences, these men were able to create an extraordinary amount of trust in the people around them. They built trust by doing the same three things exceptionally well, though each in his own way. I believe that these three traits are the foundational traits of great leaders You cannot be a great leader without them because you cannot build trust without them. And the trick to measuring leadership is to measure a leader’s effectiveness along these three dimensions, as detailed in the notes section <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/how-do-you-measure-leadership/#survey-questions\">at the end of this post</a>.</p>\n<h3>Three Foundational Characteristics of Great Leaders</h3>\n<p>I believe that people of all temperaments, personality types, and personal/professional backgrounds can be great leaders, and that they can lead quite differently and still be successful. But to be trusted and followed as a leader, you must excel in three key areas:</p>\n<p><strong>1. Clarity of Thought and Communication</strong></p>\n<p>Great leaders think and communicate clearly. They describe a vision of the future that people find compelling to work hard to achieve. If your employees are confused about your mission and strategy, or do not find it motivating or credible, they will not follow you with the focus and determination necessary to succeed.<sup id=\"footnoteid1\"><a href=https://www.ycombinator.com/"#footnote1\">1</a></sup></p>\n<p>Clarity of thought always precedes clarity of language. To improve your communication, the best thing you can do is to spend more time thinking about what you believe is truly important for your business. Once you’ve crystallized what’s important for everyone to understand, practice expressing it in simple terms. Simplicity is vital. A great example is the retail strategy that Amazon’s Jeff Bezos <a href=https://www.ycombinator.com/"http://www.businessinsider.com/jeff-bezos-brilliant-advice-for-anyone-running-a-business-2015-1/">communicated to his team years ago. He based it on three simple but enduring customer preferences: lower prices, bigger selection, and faster delivery. To this day, anything Amazon employees do to lower prices, expand selection, and accelerate delivery creates value for the customer and advances the company’s strategy. As Bezos said, “You can build a business strategy around the things that are stable in time….when you have something that you know is true, even over the long-term, you can afford to put a lot of energy into it.”</p>\n<p>Taking time to prepare internal communications becomes increasingly important as your company grows. As you scale, your employee base grows more diverse, and fewer of your employees have a personal relationship with you. Hence, they are much less likely to just “know what you mean” and more likely to be confused and critical if you don’t communicate well.</p>\n<p>Great leaders spend hours preparing their internal communications. They don’t just wing it, no matter how naturally talented they are as communicators. As an example, Shopify CEO Tobi Lütke and his senior team spend hundreds of hours preparing for their annual employee Summit. As Tobi says, “We want to be a loosely coupled, highly aligned company. The Summit is the main enabler of this because it is a grand sync. We spend countless hours preparing because if we communicate well at the Summit, we achieve great alignment by the end. We can then use our weekly townhalls to keep us from drifting too far apart until the next Summit.”</p>\n<p><strong>2. Judgment about People</strong></p>\n<p>Great leaders have great intuition about people, particularly when it comes to selecting people to whom they give power and responsibility. They are able to see hidden potential in people and detect cases where ambition exceeds ability. And when they make hiring or promotion mistakes, which are inevitable, they have the courage to rectify the situation if the employee cannot be coached to improve. Nothing does more damage to an organization or to the standing of a leader than picking the wrong leaders or failing to correct these mistakes when they happen. The judgment around the initial hiring or promotion decision is the most important, as leaders who fire too many of their own also lose a lot of credibility and trust.</p>\n<p>Not everyone is naturally gifted when it comes to intuition about people, but everyone can improve. Gathering more data will help you make better people decisions. When looking to hire leaders, try to meet as many of the best people in the field as possible as a way to sharpen your recognition skills. Spend as much time as you can getting to know executives that you are considering hiring. In a <a href=https://www.ycombinator.com/"http://www.geekwire.com/2016/qa-uber-cto//">2016 interview</a>, Uber CTO Thuan Pham describes being interviewed by CEO Travis Kalanick for “30 hours straight, one-on-one, over two weeks,” including over Skype when Travis was traveling. “Throughout those 30 hours,” Pham continued, “I actually forgot it was an interview. It was just like a discussion between two colleagues.”</p>\n<p>It also helps to do extensive reference checks on hires and ask for examples of behavior that shows good judgment and high integrity because these traits are hard to test in an interview. And try to learn from cases when you hire or promote the wrong person and are not able to coach them to improve.</p>\n<p><strong>3. Personal Integrity and Commitment</strong></p>\n<p>Great leaders have exceptional personal integrity and commitment to their mission. Integrity means standing for something meaningful beyond oneself rather than being motivated by narrow personal interests. It means being able to admit when you have made a mistake rather than acting like you are always right and having the humility to receive critical feedback openly and work to improve. It means avoiding behavior like favoritism, conflicts of interest, inappropriate language, inappropriate work relationships, etc., that erode trust. A useful test is to ask yourself: if your team had full transparency into your private communications and behavior towards employees, would you be embarrassed by anything you have done or said? This is a high bar, but one that great leaders strive to meet.</p>\n<p>Beyond putting in the time, great leaders make their work into their core life mission in ways that inspire others. They derive deep personal meaning and fulfillment from leading people to achieve a mission. Their personal commitment translates into high levels of personal productivity and execution, which in turn becomes the foundation for pushing their organizations to do the same.</p>\n<h3>It All Adds Up To Trust</h3>\n<p>So how do you know you are good leader? You are a good leader if you excel in the three areas described above and thereby earn the trust of the people around you.</p>\n<p>Building trust in this way is both a science and an art; it requires both competence and character. Trust is built when leaders think clearly about the future and move their organizations to the right place, in terms of product, sales, and people. Do the predictions you make about the future – about the products you should build, the investments you should make, and the changes in competitive or technological landscape – prove to be accurate? And do the people you have chosen to lead in your organization prove to be the right ones? Over time, the answers to these questions become known, and if you answer a lot of these questions correctly, you earn trust. I consider this the “science” of building trust. It’s built on clarity of thought, good communication, and good judgment about people.</p>\n<p>The art of building trust is more complicated. It is closely tied with a leader’s ability to communicate with integrity. It is built when you say the right thing at the right time, and show empathy and good judgment. It grows when you stand for ideals bigger than yourself rather than caring primarily about your personal success, wealth, fame, or position. It also grows when you are honest with others, admitting what you don’t know, and not trying to be someone else. This is why you can’t try to copy Steve Jobs or Ed Catmull in your quest to be a great leader. You can only be yourself.</p>\n<p>Most leaders understand the science of building trust. They understand that they need to think and communicate clearly about product and strategy and make good choices when they are hiring and promoting people into leadership positions. They understand that they have to show deep commitment and get things done. But in my experience, the truly great leaders also understand the art of building trust. Leaders have to make many hard decisions – firing people, taking responsibility for mistakes, disappointing people by saying no, etc. Great leaders treat these challenges as opportunities to build trust. They ask themselves which course of action and which style of communication will increase the trust that employees have in them. When faced with a difficult challenge, they optimize for trust.</p>\n<p>This, perhaps, is the lesson that great leaders teach everyone else. In difficult times, as you evaluate one course of action versus another, ask yourself which path will generate more trust in you as a person and as a leader. Always try to choose that path.</p>\n<p><em>Thanks to Tobi Lütke, Tyler Bosmeny, Daniel Yanisse, David Rusenko, Sam Altman, Michael Seibel, and the YC Continuity team for reading drafts of this essay.</em></p>\n<p></b> </b></p>\n<hr />\n<hr />\n<p></b> </b></p>\n<div id=\"survey-questions\">\n</div>\n<p><strong>NOTES:</strong></p>\n<p><span style=\"color: #888888;\"><strong>Survey Questions for Evaluating Leaders</strong></span></p>\n<p><span style=\"color: #888888;\">The best approach to measuring leadership is to evaluate a leader’s performance in the three areas in which all great leaders must excel: clarity of thought / communication, judgment about people, and personal integrity / commitment. Measuring leadership in this way requires gathering data from employees, but most startups have never done this in a systematic way.</p>\n<p></span></p>\n<p><span style=\"color: #888888;\">Eventually, all companies need to develop methods to gather employee sentiment and turn it into structured data. In fact one of the core responsibilities of a good HR team is to gather and document employee sentiment and use it to assess leadership.<sup id=\"footnoteid2\"><a href=https://www.ycombinator.com/"#footnote2\">2</a></sup> I suggest that startups begin to gather this data systematically once they reach about 50 people in size.</span></p>\n<p><span style=\"color: #888888;\">Whatever set of data gathering techniques is used, it’s critical to ask the right questions to assess leadership performance. These sample questions are meant to serve as a starting point for a more thorough employee survey. These questions are written to evaluate a CEO, but can easily be adapted to any leader in the company. Part of the goal is to see the level of alignment between a CEO’s responses and that of the employees.</span></p>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>1. Clarity of Thought and Communication</strong></span>\n</p>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>Questions for the CEO</strong></span>\n</p>\n<ul>\n<li><span style=\"color: #808080;\">Write down your company’s mission, strategy, and key metrics (“mission-to-metrics”) in less than 2 minutes.</span></li>\n<li><span style=\"color: #808080;\">Write down 2-3 themes that you have consistently emphasized in your communications to employees.</span></li>\n</ul>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>Questions for Employees (current and departing)</strong></span>\n</p>\n<ul>\n<li><span style=\"color: #808080;\">What is the company’s mission and strategy? </span></li>\n<li><span style=\"color: #808080;\">What are the most important operating metrics that measure the company’s success?</span></li>\n<li><span style=\"color: #808080;\">How does your work contribute to these key success metrics?</span></li>\n<li><span style=\"color: #808080;\">How often has the company’s definition of mission, strategy and metrics changed in the past 24 months? Or has it been the same over this time?</span></li>\n<li><span style=\"color: #808080;\">What do you think is really important to the CEO? What does he or she consistently emphasize in communications?</span></li>\n<li><span style=\"color: #808080;\">How effective and clear is the CEO in the following communication methods: written, speaking to a large group, speaking with a small group? </span></li>\n</ul>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>2. Judgment About People</strong></span>\n</p>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>Questions for the CEO</strong></span>\n</p>\n<ul>\n<li><span style=\"color: #808080;\">Rate the effectiveness of each leader you have promoted or hired at the company.</span></li>\n<li><span style=\"color: #808080;\">Write down the name of any leader that you have promoted or hired that you don’t think is actually the right person to lead his/her area.</span></li>\n<li><span style=\"color: #808080;\">Have you exited the right employees? Or have you made mistakes?</span></li>\n</ul>\n<p><span style=\"color: #808080;\"><strong>Questions for Employees (current and departing)</strong></span></p>\n<ul>\n<li><span style=\"color: #808080;\">Has the CEO chosen good leaders at the company?</span></li>\n<li><span style=\"color: #808080;\">Which leaders do you respect and why?</span></li>\n<li><span style=\"color: #808080;\">Are there leaders that you think are weak and why?</span></li>\n<li><span style=\"color: #808080;\">Has the CEO replaced any leaders in the past year? Were these good decisions, from your perspective?</span></li>\n<li><span style=\"color: #808080;\">What are the strengths and weaknesses of the senior leader (i.e., CEO direct report) who oversees your area?</span></li>\n<li><span style=\"color: #808080;\">Have any high performing members of your team chosen to leave the company in the past year? Why did they choose to leave?</span></li>\n<li><span style=\"color: #808080;\">Ask departing employees: are they leaving because of concerns about senior leadership?</span></li>\n</ul>\n<p><span style=\"color: #808080;\"><strong>3. Personal Integrity and Commitment</strong></span></p>\n<p dir=\"ltr\">\n <span style=\"color: #808080;\"><strong>Questions for the CEO</strong></span>\n</p>\n<ul>\n<li><span style=\"color: #808080;\">Are there actions you have taken which you feel have diminished the confidence that employees have in your integrity? What are they?</span></li>\n<li><span style=\"color: #808080;\">Do you ask for feedback about your performance? Are there examples when you have responded to employee feedback and changed your behavior?</span></li>\n<li><span style=\"color: #808080;\">How do you rate your level of commitment to your job?</span></li>\n<li><span style=\"color: #808080;\">How do you rate the level of commitment of your direct reports?</span></li>\n</ul>\n<p><span style=\"color: #808080;\"><strong>Questions for Employees (current and departing)</strong></span></p>\n<ul>\n<li><span style=\"color: #808080;\">How would you rate your CEO’s integrity / moral compass?</span></li>\n<li><span style=\"color: #808080;\">Do you think the CEO listens well and is open to feedback? Are there examples where feedback has changed the CEO’s behavior in a positive way?</span></li>\n<li><span style=\"color: #808080;\">Have you seen examples of favoritism, inappropriate relationships, inappropriate language, conflicts of interest, or any other unethical behavior in the CEO?</span></li>\n<li><span style=\"color: #808080;\">When asked anonymously, what do employees / direct reports feel motivates the CEO?</span></li>\n<li><span style=\"color: #808080;\">How would you describe the level of personal commitment that the CEO shows to the mission of the company?</span></li>\n<li><span style=\"color: #808080;\">Have you seen examples of lack of commitment from the CEO?</span></li>\n<li><span style=\"color: #808080;\">Have you seen examples of lack of commitment from other leaders or from employees?</span></li>\n</ul>\n<p><b id=\"footnote1\">1</b> Please see “<a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/the-second-job-of-a-startup-ceo/#creating-purpose-and-alignment\">What’s the Second Job of a Startup CEO</a>” for a more thorough discussion of creating purpose & alignment.<a href=https://www.ycombinator.com/"#footnoteid1\">↩</a><br />\n<b id=\"footnote2\">2</b> Data gathering methods include employee roundtables mediated by the CEO or HR, structured questions asked as part of employee exit interviews, all-hands or team meetings to gather employee feedback, hiring of external consultants to survey or interview employees, and on-line or email surveys of employees.<a href=https://www.ycombinator.com/"#footnoteid2\">↩</a></p>\n<!--kg-card-end: html-->","comment_id":"1098199","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2017-01-19T02:02:07.000-08:00","updated_at":"2021-10-20T13:16:13.000-07:00","published_at":"2017-01-19T02:02:07.000-08:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a71078","name":"Ali Rowghani","slug":"ali-rowghani","profile_image":"/blog/content/images/2022/02/Ali.jpg","cover_image":null,"bio":"Ali is Managing Director of YC Continuity, where he invests in & advises growth-stage startups. Ali directly contributed to the growth of 2 great companies — as CFO / COO at Twitter and COO at Pixar.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/ali-rowghani/"}],"tags":[{"id":"61fe29efc7139e0001a71155","name":"Growth","slug":"growth","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth/"},{"id":"61fe29efc7139e0001a71156","name":"Growth-Stage","slug":"growth-stage","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth-stage/"},{"id":"61fe29efc7139e0001a71158","name":"Leadership","slug":"leadership","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/leadership/"},{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71182","name":"#ycc","slug":"hash-ycc","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a71078","name":"Ali Rowghani","slug":"ali-rowghani","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Ali.jpg","cover_image":null,"bio":"Ali is Managing Director of YC Continuity, where he invests in & advises growth-stage startups. 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Learnings of a CEO: Matt Schulman, Pave, on Hiring
by Lindsay Amos10/17/2022
Pave Founder and CEO Matt Schulman has created one of the most comprehensive and thorough recruiting processes, which has made him one of the most successful recruiters in the YC community.
YC Founder Firesides: Gusto on building for new verticals
by Y Combinator8/15/2022
Today, more than 200,000 businesses use Gusto for payroll, employee benefits, talent management, and more. And with the recent addition of Gusto Embedded, developers now use Gusto’s APIs and pre-build UI flows to embed payroll, tax filing, and payments infrastructure into products.
Learnings of a CEO: Wade Foster, Zapier
by Lindsay Amos8/9/2022
Today, Zapier automates work by connecting with over 5,000 apps. The company has been profitable since 2014 and is valued at $5B – with 700 employees working remotely. Wade, Zapier CEO, shared his learnings growing into the role of a growth-stage CEO.
Learnings of a CEO: Max Rhodes, Faire
by Lindsay Amos7/20/2022
Outside of the YC community, little has been documented on best practices to be an effective CEO. We want to help founders everywhere scale and build enduring companies — and today, we’re launching a new series to do just that: Learnings of a CEO.
How Do You Measure Leadership?
by Ali Rowghani1/19/2017
Are you a good leader? How do you know?In a startup culture that is obsessed with management by metrics, many foundersstruggle to answer this critical question about themselves. It’s tempting tomeasure leaders simply by the success of their businesses. But even the mostsuccessful founders know how much timing and luck can be confounding factors inthis approach.