20VC How To Upscale Management Teams Effectively, When Should The CEO Play The Role of Lifeguard & What Role Does The Board Play In The Team Upscaling with Matt Straz, Founder & CEO @ Namely

In this episode of 20 Minutes VC, host Harry Stebbings interviews Matt Straz, founder and CEO of Namely, the leading HR platform for midsize companies. Straz discusses his journey from founding two companies acquired by larger entities to addressing the gap in HR software for small to midsize businesses. He emphasizes the challenges of scaling a company, particularly the necessity of evolving leadership teams and making tough decisions about personnel changes. Straz shares insights on the importance of PeopleOps in supporting company growth, the balance between innovation and current operations, and the significance of maintaining a strong company culture. He credits his board and mentors, like David Skok, for valuable advice and highlights the role internal communication plays in reinforcing the company's mission, vision, and values. The conversation also touches on strategic hiring, the delicate process of parting with team members, and the vision for Namely's continued global expansion.

• Harry Stebbings introduces the episode of "20 Minutes VC and Founders Friday."
• Harry mentions his Snapchat account for behind-the-scenes content.
• He invites listeners to provide feedback on the 20vc app available in the App Store.

"This is the 20 Minutes VC and founders Friday with me, Harry Stebings. You can find me and see all things behind the scenes from the show on Snapchat at htebbings with two B's."

Harry Stebbings introduces the podcast and his Snapchat account to engage with the audience.

"And I'd love to hear your thoughts on our app, which can be found on the App Store by searching for 20 vc."

Harry encourages listeners to download and provide feedback on the 20vc app.

• Matt Straz is the founder and CEO of Namely.
• Namely is an HR platform for midsize companies with over 1000 clients and 150,000 users.
• The company has raised significant funding from prominent venture capital firms.
• Matt Straz sold his previous company, Pictela, to AOL and has been recognized as a top entrepreneur by Goldman Sachs.
• Paul Martino at Bullpen facilitated the introduction for the podcast episode.

"But I'm thrilled to welcome Matt Straz, founder and CEO at namely to the hot seat today. Now, for those that don't know, namely is the leading HR platform for midsize companies."

Harry introduces Matt Straz and gives a brief overview of his company, Namely.

"Due to this incredible success, Matt's been named one of the hundred most intriguing entrepreneurs by Goldman Sachs."

Matt Straz's accomplishments are highlighted, including recognition from Goldman Sachs.

• Namely aims to improve HR processes for midsize companies.
• The platform offers comprehensive HR, payroll, and benefits management.
• Namely is designed to be user-friendly and adaptable to today's workforce needs.

"That's why, namely brings employees together on the HR platform that everyone loves to use."

The mission of Namely and the user experience of their platform are emphasized.

• Eero provides a Wi-Fi system with mesh technology for consistent coverage.
• The service is designed to handle the increased number of devices during periods like Christmas.
• Eero is available in the US and Canada.

"Eero is the world's best reviewed Wi-Fi. A system of ero and aero beacons wirelessly connects to blanket your home in fast, reliable Wi-Fi."

The features and benefits of the Eero Wi-Fi system are described.

• Matt Straz has founded multiple companies and worked with many small to midsize businesses.
• He was frustrated with the poor HR software solutions available in the market.
• This frustration led him to found Namely to address the problem.

"So I had worked in small to mid sized businesses basically my whole life. I had founded two other companies and they had both been acquired by somewhat larger companies."

Matt Straz shares his background and the motivation behind starting Namely.

• Matt credits his board, including Pat Grady at Sequoia, for guiding the scaling process.
• Founders often face the challenge of changing their team as the company grows.
• On average, a software company may go through 4.1 leadership teams before going public.

"So I think most founders love their team. And so to change that team is a pretty hard thing to do."

Matt discusses the emotional difficulty founders face when needing to change their teams during growth.

• People often specialize in different stages of a business's development.
• Titles should be assigned thoughtfully to allow for long-term progression within the company.
• Title inflation can be problematic and may lead to the need to replace team members later.

"I found that to be absolutely the case that people are good at different stages of the business."

Matt affirms that individuals often excel at specific stages of a company's growth.

• Assigning multiple roles to a single person can lead to failure due to the rapid growth of the company.
• Founders must recognize the need to upgrade their skills and leadership style as the company matures.

"I found time and time again, when I give people multiple things to do, it's a recipe for failure."

Matt explains the dangers of overloading team members with multiple responsibilities.

• Founders are expected to evolve their skills to match the company's growth stages.
• Successful leadership involves recruiting a great team and constant self-improvement.

"One big realization for me was that if I wanted to stick around and be relevant, that I was going to have to change the way that I led the company and the things that were required of me."

Matt shares his insight on the necessity for founders to adapt their leadership approach as the company grows.

• Scaling a business involves continuous personal upscaling and managing numerous challenges.
• The process can be particularly daunting for founders as it requires constant adaptation and growth.

"Was that a daunting thought for you personally, having to realize about that continuous upscaling of yourself when, as you mentioned, apparently it's so difficult for so many others."

The quote highlights the speaker's interest in the personal impact of scaling on a founder, acknowledging the difficulty of the task.

• Up-leveling a team often means parting ways with current members, adding responsibility to the founder.
• A founder can end up with an overwhelming number of direct reports during transitional periods.
• The speaker emphasizes a transparent approach to recruitment and dismissals.

"There was a point not so long ago where I had more than two dozen direct reports because I was managing people out at the same time that I was trying to recruit to replace those positions."

This quote illustrates the challenging situation of handling many direct reports while also recruiting new team members, emphasizing the workload on the founder during scaling.

• The hiring strategy should focus on individuals who can drive significant growth.
• It's important to consider the company's growth stages and hire individuals who can scale the business accordingly.
• A four to five-year timeline is considered appropriate for achieving substantial growth.

"I think what I look for are people that can get us to ten x more growth."

The quote reflects the speaker's strategy of hiring individuals capable of scaling the company's revenue by significant multiples.

• Balancing internal promotions and external hires is crucial for maintaining morale and fostering growth.
• Intermediate titles can create career paths within the company.
• The speaker suggests promoting internal staff while also bringing in external talent, similar to Google's approach.

"So there's a path for people to move up within the company."

This quote explains the introduction of intermediate titles to facilitate internal career progression.

• Transparency and involvement are key when integrating external candidates into the team.
• It's essential to align both the board and the team with senior hires, which can be a complex and lengthy process.

"I make it an absolute point to be very transparent. Even if we're going to add somebody or top somebody and we're going to bring in their boss, I'm very, very transparent and I'm very upfront with the person that's going to have a new boss and a new leader that they participate in the process."

The quote emphasizes the importance of transparency and inclusion of current team members in the hiring process for their new supervisors.

• Securing board approval for senior leadership hires is essential.
• The process involves strategic communication and sometimes requires aligning differing board opinions.

"It is absolutely essential for senior leadership hires that the board is involved and that I include every board member, speaks with and interviews our finalist candidates."

The quote underscores the necessity of involving the board in the final stages of hiring for senior leadership positions.

• The dismissal process should be handled with care, especially for senior positions.
• The founder must strategically plan for future changes and communicate delicately with those who may not have a long-term role.
• Performance reviews and regular check-ins can aid in transparency and early identification of performance issues.

"So I think it needs to be handled extremely carefully and with a lot of finesse."

The quote conveys the need for tact and careful consideration when handling dismissals, particularly at higher levels within the company.

• Predicting company needs and individual performance scaling is challenging.
• Regular communication and formal performance reviews can help manage expectations and identify issues.
• Major events or feedback may trigger the need to replace individuals.

"The more forthright you are, the better. Earlier the better."

This quote stresses the importance of honest and timely communication in managing performance and potential replacements within the company.

• Turnover is necessary for growth, especially in fast-growing companies.
• High turnover rates are common when there's a lot of growth and change, particularly when new leaders are brought in.
• Turnover can unsettle the employee base, but it's a natural process, especially when leadership changes occur frequently.
• Retention should be approached carefully, with intention and selectiveness.
• CEOs cannot save every employee; some people need to move on, and excessive efforts to retain someone can be wasteful.
• It's important to focus retention efforts on those who are fundamentally happy and can scale with the company.

"So I think turnover and retention, some amount of turnover is absolutely necessary for a company to grow and is endemic to a company who's growing fast."

This quote emphasizes the inevitability of turnover in a fast-growing company and suggests it's a necessary part of growth.

"There's nothing worse than going through tremendous effort to save someone and get somebody to stay when they're either just fundamentally not happy or not going to scale."

Matt Straz highlights the futility of trying to retain employees who are not content or unable to grow with the company, suggesting that retention efforts should be strategic and selective.

• Early on in a startup, departures can feel personal to both the founder and the employee.
• Emotional ties to the company make turnover and retention feel more intense in the early stages.
• As the company grows and revenue increases, turnover becomes less personal and more strategic.
• Founders and CEOs learn to accept a certain level of turnover as they gain experience.
• Efforts to retain employees should be reserved for those whose departure doesn't make sense, such as key contributors who have built significant parts of the business.

"You can't save everybody, right? Some people actually do need to move on."

Matt Straz compares a CEO to a lifeguard, acknowledging that not every employee can or should be saved from leaving the company.

"I will go to them and say, what are you doing? You've done all this work. I'm just going to hire somebody who's going to take credit for all the work that you've done over the last four years."

Matt Straz describes his approach to retaining key employees who have made significant contributions, arguing it's worth the effort to keep them.

• As a company scales, the founder and CEO can no longer interact with the entire team daily.
• PeopleOps helps scale the founder's and CEO's influence across the organization.
• Strong PeopleOps is critical for handling internal communications, leadership development, and risk mitigation.
• A diverse and broad employee base requires experienced PeopleOps to manage various issues.
• PeopleOps becomes increasingly important during phases of high turnover and organizational change.

"You need to find ways as a founder and CEO to scale yourself."

Matt Straz stresses the importance of scaling the influence of founders and CEOs as the company grows, with PeopleOps playing a key role.

"There are very important legal and just human things that you need to be aware of during those transitional periods."

Matt Straz indicates that PeopleOps is essential for navigating both legal and personal challenges during times of significant company change.

• Revisiting mission, vision, and values is crucial, especially when the company grows and the workforce changes.
• Even though it may seem unnecessary, reiterating the company's mission and adapting the vision and values is important for new employees.
• Involving a diverse team in developing the company's values ensures broad representation and buy-in.
• Effective internal communications must be thoughtful and align with the company's mission, vision, and values.

"It's actually really important to reiterate your mission."

Matt Straz acknowledges the importance of regularly reinforcing the company's mission to ensure all employees, especially new hires, understand and connect with it.

"Every few years the vision of the company is going to change somewhat."

Matt Straz accepts that a company's vision evolves over time and must be recalibrated to stay relevant and meaningful.

• There is a risk of becoming less innovative while focusing on up-leveling leadership, processes, and customer-driven roadmaps.
• To maintain innovation at scale, companies must define and articulate its importance, dedicating resources to innovative efforts.
• Innovation doesn't happen organically at scale as it might in the early days; it must be intentionally structured and supported.

"You can actually become not innovative."

Matt Straz warns against the danger of losing the innovative spirit that initially drives a startup's success when the company becomes too process-driven.

"If we want to be innovative, we've got to be really thoughtful."

Matt Straz emphasizes the need for deliberate actions and resources to foster innovation within a growing company.

• Hackathons have been used effectively to foster innovation.
• Involving clients in hackathons can be beneficial.
• Creating small growth teams to work on non-core features that may intersect with other areas like marketing.
• These teams can be public-facing and contribute to a company's innovative efforts.

Yeah, we've used hackathons to pretty good effect. We've done them once or twice a year over the last couple of years. We've actually included our clients in one of them.

This quote highlights the use of hackathons as a strategy to drive innovation within a company, noting the inclusion of clients in such events to enhance creativity and collaboration.

I think the other way is that you can create these small growth teams that work on features that are not necessarily core and may even bleed into other areas like marketing, and maybe they're even public facing.

The quote suggests that aside from hackathons, forming small, focused teams to develop features outside the core product can also spur innovation, potentially impacting marketing and public engagement.

• Matt Straz prefers survival stories over business books for insights on being a CEO and founder.
• "438 Days" by Jonathan Franklin is a favorite book for its survival narrative.
• Survival stories are seen as instructive for leadership and resilience.

So obviously, there's lots of books out there, lots of business books out there, and I've got a bunch that I love. But I've recently read a book called 438 days by Jonathan Franklin...

Matt Straz expresses his preference for survival stories, such as "438 Days," finding them more instructive for his role than traditional business literature.

• The board of directors provides honest feedback, both positive and negative.
• Engaging with mentors and advisors has become more prevalent in Matt Straz's approach.
• Notable advisors include Mike Derrison from LinkedIn and Karen Peacock on product development.
• Opening up to external advice has been a significant change in recent years.

No. So I do leverage the board like crazy. Sometimes they tell me things I want to hear. Sometimes they tell me things I don't want to hear. But they're always honest.

This quote emphasizes the value of honest feedback from the board of directors, indicating that it plays a crucial role in guiding the company's direction.

I've really opened up a lot more over the last couple of years and been much more open to seeking out advice from great people like that.

Matt Straz acknowledges the shift in his leadership style, becoming more receptive to advice from mentors and advisors, which has been beneficial for the company.

• Leadership must evolve with company growth.
• Feedback from the board can be instrumental in recognizing the need for leadership development.
• Being open to and acting upon feedback is pivotal for scaling.

I think just being open to that kind of feedback and then acting upon it is really, really important.

The quote underscores the importance of being receptive to feedback, particularly regarding the evolution of leadership, as a key factor in successfully scaling a company.

• The common advice to focus on one thing and do it well is not always applicable.
• In SaaS, differentiation often comes from additional products and services, not just the core product.
• Matt Straz believes in building a complete product with necessary services for success.

Just focus on your product and just do one thing well. And while I understand that single mindedness, often it leads to a dead end, especially in SaaS...

This quote reveals Matt Straz's disagreement with the common advice of focusing solely on the product, arguing that in SaaS, a broader approach that includes additional services is more effective.

• Hiring a CTO was particularly challenging due to geographical and experience factors.
• Finding the right leadership is critical for an enterprise software company.
• The successful candidate was able to build an impressive team quickly.

Our hardest role to hire for was the CTO position, without a doubt.

Matt Straz identifies the CTO role as the most challenging to fill, highlighting the importance of leadership in tech and the difficulty of finding suitable candidates in certain locations.

• Focus on creating a great company culture at scale.
• Aims to achieve high levels of internal employee satisfaction leading to customer satisfaction.
• Building a great culture with a larger workforce is a primary goal for the next five years.

So I think building a great company culture with what will by then surely be thousands of employees, that's the number one goal that I have over the next five years...

The quote outlines Matt Straz's vision for the future of Namely, with a strong emphasis on cultivating a positive company culture and employee satisfaction as the foundation for long-term success.

• Thanks to Pat Grady at Sequoia and Paul Martino at bullpen for introductions.
• Namely is highlighted as an intuitive HR platform.
• Eero is promoted as a top-rated Wi-Fi system in the US and Canada.

I want to say huge thank you to Pat Grady at Sequoia and Paul Martino at bullpen for the intro to Matt today...

Harry Stebbings expresses gratitude for the introductions that made the interview possible, emphasizing the importance of networking and connections in the industry.

Namely, is the all in one platform that helps companies manage HR, payroll, benefits and more.

This quote serves as a promotional message for Namely, positioning it as a comprehensive solution for HR management, which is relevant to the overall discussion of company culture and scaling.