Lenny's Podcast: Product | Career | Growth
00:50:31 · Brian Halligan, Lenny Rachitsky
[00:50:31] S0: Worked out great. [00:50:33] S1: So, it is a good lesson. Okay, a few more here. One is, it's a math formula. "EV is greater than TV is greater than MEV." What is that?
00:50:44 · Brian Halligan
[00:50:44] S0: Okay, EV is enterprise value, TV is your team's value, MEV is your value. And as HubSpot was scaling, and we had a lot of people who were VPs in different roles, and they started to get good-sized organizations, where they would fall down was they didn't solve for MEV, but they'd solve for TV over EV. They'd solve for their own team. So, let's say they ran sales, and say, I just want bookings to be as high as possible because I get paid on bookings, and the service team can handle all the downstream problems I created. Marketing to sales... Between every department that's happened. And the kind of immature managers who didn't scale, really solved for themselves, and as they solved for themselves kind of sub-optimize for their peers. And their employees would notice it and complain about it, it would be fine in the short term, but it would show up. And the place it would show up, Lenny, was, we did, and I think a lot of companies do this now, but we did a quarterly employee net promoter. We did a quarterly customer net promoter survey and a quarterly employee one. And we would have people rate it by the department they're in. And one interesting thing about that, so it's like sales and service and engineering, all the different departments, and we had an overall net promoter score, and then each department had a net promoter score. And let's just take sales. Sales net promoter score was like, 65, 62, 68, 30. Ooh, that's a big drop. And then you read the comments and it was not good, a lot of complaints about the leader of that. And a lot of the complaints were a little bit of this TV thing. And then, we give feedback to that VP, would help them, we give them all the comments, be like, you got this. And then a quarter later from 30 to -5. And they almost never actually recovered. When you lose, your team can't... It's hard to get them back. And that's why I say hire slow, fire fast. And this doesn't show up in the first 100, 150 employees, everyone's solving for EV, but as it gets bigger, and the CEO doesn't know anyone, and there's a couple layers between you and the employees, they tend to solve for TV. So, we always put on the wall, "Solve for EV over TV over MEV," and then we added CV in front of EV, solve for the customers first, then for HubSpot, then the employee, then yourself. That was be very helpful to us.
00:53:22 · Lenny Rachitsky, Brian Halligan
[00:53:22] S1: Yeah, I imagine everybody listening, working at a big company understands this. Where you have goals, you get your KPIs, and your performance reviews based on what impact you drive, if you hit your goals. And so, the incentives are focused on my goals and drive those, and I don't care about other people's goals, the company's goals- [00:53:41] S0: Steve Jobs had an interesting line, he says, "You don't work for your boss, you work for Apple." I thought that was pretty good. And I heard that after I was CEO of HubSpot, but that kind of captures the sentiment. And that's how I felt about HubSpot. You work for HubSpot first and then you work for your boss. [00:53:56] S1: This is hard because people's performance reviews are based on their goals, KPIs, it's always like, here's what I got to drive. Other than putting posters on the wall, and this is our, just HubSpot growth above all is what matters, or our customers, I guess in your case. Is there anything tactically that was useful in helping people prioritize enterprise value?
00:53:56 · Lenny Rachitsky, Brian Halligan
[00:53:56] S1: This is hard because people's performance reviews are based on their goals, KPIs, it's always like, here's what I got to drive. Other than putting posters on the wall, and this is our, just HubSpot growth above all is what matters, or our customers, I guess in your case. Is there anything tactically that was useful in helping people prioritize enterprise value? [00:54:14] S0: This was explicitly called out in the form for the employee when you got your review, this was part of it. And so, they get a score of one to, I forget, 10 on that. I would talk about it constantly. And when we first started HubSpot, I ran it a little bit like Jensen runs NVIDIA, where I didn't do one-on-ones, and I gave a lot of good and bad feedback publicly in large management team meetings, and I definitely would go out of my way to criticize people if I felt like they were solving for TV over EV. And people got a sense for that. And then, every quarter we did a really well-produced company meeting, we spent a lot of time on it, and at the end of the company meeting, we gave out, we called them the Champaigner Awards, it was a bottle of Veuve, that my co-founder and I signed. And we'd read something nice about them and give it to them, and usually there was an EV team in that. And so, we did different things to kind of beat that into people's heads. [00:55:11] S1: Amazing. So, here is just celebrate people that focus on this, and also included in their valuation performance reviews. [00:55:19] S0: Yep.
00:55:19 · Brian Halligan, Lenny Rachitsky
[00:55:19] S0: Yep. [00:55:19] S1: Okay. That's a good segue to another Halliganism where you talk about how companies are either customer-centric or investor-centric, and it's really important to know which you are. And you guys actually shifted there. What's your insight there?
00:55:35 · Brian Halligan
[00:55:35] S0: Okay. We were very employee-centric, more than customer-centric in the first several years of HubSpot. So much so that the company was number one on Glassdoor's best place to work, I was the number one CEO on Glassdoor, and as I look back at that, I'm not sure that's a good thing. Wanting to be liked I don't think is a good feature of a CEO, and wanting to be the best place to work probably isn't the right way to go. If you look at Tobi from Shopify, his scores aren't that good, but that company is doing really, really well. And so, we over-indexed on it, and part of the reason we over-indexed on it is my co-founder was really strong in this, and we had an incredibly powerful head of HR, named Katie Burke, and we just worked on it. We spent a lot of time on it. And when we'd have a management team meeting, and let's say it's four hours long, two of the four hours would be on employee stuff. And at some point I was like, why are we spending so much time on employee net promoter scores? Let's say our employee net promoter score was 60, and our customer net promoter score is 25, I was like, we need to take... I would give up 10 points of employee net promoter score to get 10 points of customer net promoter score. And so, over some time we shifted the center of gravity to customers, and we still of course, worried about employees, but the center of gravity from HubSpot moves very much to customers. And we did that in a few ways. Every time we had a management team meeting... We had our management team meetings once a month, not once a week, and we would have a customer panel come on, and that customer panel, I would run the panel, and ask very tricky questions to the customers, and pull out the bad news from that. And then, we still do this, we have a customer panel at our board meetings. Our whole board can ask questions. And my favorite question is, what do you love about HubSpot? And then... And then, what do you hate about HubSpot? And they kind of look at their shoes. And you're like, come on. And it's a great way... So, the employee's voice is here, those company meetings, we have the customers at the company meetings. We changed the comp plan, so the management team got paid not on revenue but on retention and net promoter score. And so we worked very hard and swung the pendulum to customer-centric.