Growing organizations need intelligent decision making on scaling. Hereby, company leaders can learn from unique market experiences. Google for example was launched 18 years ago, and as of today, has 57,000 full-time employees. How has this been possible? The following blog post with the original title “16 lessons on scaling from Eric Schmidt, Reid Hoffman, Marissa Mayer, Brian Chesky, Diane Greene, Jeff Weiner, and more” answers this question. It was originally published by Chris McCann on LinkedIn Pulse on Dec 8, 2015. Thanks to Chris, he gave this blog permission to publish his great post here, too. It is worth taking the time to read this article, because it brings together all of the experiences of many great company leaders on scaling in this day and age.
I listened and took notes on every single lecture. Now that the class is over, I wanted to compile all of the top lessons from the professors and guest lecturers.
Each of the speakers offered their own perspectives, and although there aren’t exact answers to challenges of scale, I noticed a few key themes / challenges from the leaders who have scaled companies. I outlined the key points below.
1. What “blitzscaling” means
Prior to blitzkrieg, all of the wars were done through supply chains. You would extend your front to only what the supply chain could handle — the max speed.
The innovation in blitzkrieg was — screw the supply chain — whatever you could carry, you carried with yourself in order to go fast, without the slow supply chain behind you. Once you got to the battle, you either won big or lost big. If you lost, you collapsed because you had no supply chain (no backup, no ammo, no food). It was very much a gamble.
Similarly in a startup, when you decide to scale — you are really going to crank up the burn rate — hire a lot more people, really make a go at it. If you are wrong, it’s very painful — most likely the death of the company.
2. Startup advice can’t be applied generally across stages
From Reid Hoffman: It depends what stage you are on. A 3–4 person startup is very different from a 15 person company and both of these are very different compared to an organization with 100’s of employees.
Advice and lessons which work for one stage probably will not work for the next stage.
From Marissa Mayer: Eric Schmidt talked about this a lot at Google. One of the things he said was, at every order of magnitude (1, 10, 100, 1,000, etc) — expect every process to break. You would need to change the process each time at each level of scale.
I saw this happen all of the time with all of our processes: our hiring process, code deployment, etc. We would go one step further and everything would break.
*This was one of the main premises of the CS183C course. Below are the various stages of a company which we covered.*
3. The top consideration of scaling is when to scale
From Reid Hoffman: It doesn’t make sense at all to have an idea and jump straight into scaling. If you hit the afterburners when you aren’t ready it’s a sure way to have your company die.
One of the principal reasons why companies have to blitzscale is because of competition.
From John Lilly: During the first stages (OS1 and OS2), competition is less important because the market opportunity is not obvious. Once you get to OS3 — other companies can see more of the opportunity you can see (it becomes less contrarian) and this turns on the clock to compete.
From Brian Chesky: The first two stages are easy. The third stage is when other people can see what you are doing and now other companies try to copy and destroy you. The big existential threats to Airbnb were both competitors and the government.
The gift the Samwer brothers [one of their early large competitors] gave to Airbnb was the reason to scale fast. We went from just a U.S. company to an international organization within a year.
4. Before product-market-fit hire slowly
From Sam Altman: What we have seen is the best startups hire the least and the slowest in the very beginning. The worst startups say “look we have 10 people working for us” — the downside of this is very high burn, more organizational inertia, people thinking about career trajectories, etc. These things are important, but only necessary when you are ready to scale — you don’t need them when you aren’t ready to scale.
- AirBnb took 9 months to hire their first person
- Dropbox took “a long time” to hire their first person
- Stripe took 6 months to hire their first person
From Eric Schmidt: Keep it small, then once you hit the point where it’s working, you grow as fast as possible.
From Patrick Collison: The biggest thing for us was being ok with taking a really long time to hire great people. It took us 6 months to hire the first 2 people at Stripe. The next 6 months after that we hired 3–4 people. We did week-long trials with many people and many people didn’t want to join after that.
5. Few things are critically important, most don’t matter (changes by stage)
From Reid Hoffman: In a startup there are always fires burning. The key in this stage is to know which fires are important to fix and which ones can keep burning. You have to focus on the things which are the most critical only.
For example analytics, dashboards, and data management will not matter at all if no one cares about your product. Getting people to care about your product is much more important than metrics (at stage 1).
6. One of the keys to get to scale, is to do things that don’t scale.
One other important lesson within this lesson is — 100 customers who love you > 1,000,000 users.
From Brian Chesky: Secondly — Paul Graham gave us a series of advice that changed our trajectory. The most important of this advice was that it was better to have 100 people who loved us vs. 1M people who liked us. All movements grow this way.
The problem with Silicon Valley is when you build an app you are expected to make the app go viral and reach millions of people. This is the worst way to think about it — it’s much better to get 100 people to love you. There was no way we could get 1M people on Airbnb, but we could get 100 people to love us.
This is when we decided to do things that wouldn’t scale. Getting 100 people to love you is hard — getting people to like you is much easier than getting people to love you. During YC, we would commute from Mountain View to New York City (where most of their hosts were) and we would meet with every single host. We would live with each of the hosts and write the very first reviews. We would also help them take photos because this was pre-iPhone and it was hard to get pictures onto your computer for our hosts.
If you can get even 1 person to love you, then you can go person by person — the challenge is how to scale that. It’s much easier to scale something vs. trying to get 1M who like you to love you.
Question: How did you find the people to start neighborhoods?
From Nirav Tolia: We asked all our friends. We did things that didn’t scale. We asked people to send us photos of their driver’s licenses. We asked for the HOA roster. We went door to door. Since then, we have systematically taken these unscalable manual processes and used technology to make them automated.
In the early days, my co-founder Sarah would call people who were at neighborhoods who only had 5 users (Nextdoor calls users “neighbors”) and encourage them to invite more people.
We do the same thing today. We sit people in product groups — a designer, 5–6 engineers, and a product manager — to simulate the early days of Nextdoor, and allow them to do things that aren’t scalable. We recently launched a service to allow you to find a babysitter. Our team walked around Palo Alto looking for babysitters. Only then did we test demand.
Engagement has always been strong; 41% of our members use Nextdoor at least 3 times per week. We didn’t focus on scaling the number of neighborhoods until we had people engaged with the product. It’s what Google calls the toothbrush test — can you create a product that people use every day?
7. The reason to scale in the first place
- 150 people is Dunbar’s number — a suggested cognitive limit to the number of people with whom one can maintain stable social relationships — this is estimated to be ~150 people.
- Once your company goes beyond 150 people, this is the time when people at your company don’t know everyone else in the company and coordination becomes challenging.
- At OS3 the company has a sense of real traction, company scale, and either has a revenue stream or can see where the revenue stream will come from.
- The coordination challenges causes the company to need to scale up and support the larger organization.
8. The first level of scale is moving from one team to two teams (building and supporting)
From John Lilly: One of the biggest tactical differences between OS1 and OS2 is building out of your team. Put simply, the team can be broken up into two broad categories:
- Team One — Focuses on engineering, product, design, growth, etc.
- Team Two — Focuses on defending and supporting team one — office space, legal, PR, customer service, sales, operations, HR, recruiting, etc.
Team two starts to build out the organization of the company which is needed to support the scale of the product and users.
9. Recruiting becomes the #1 priority when scaling
From Eric Schmidt: We wrote a book called “How Google Works” and 1/3 of the book is about recruiting.
There is a way to systematically hire people better than anyone else. Hire people into your culture — The important lesson is you don’t hire generic people — you hire people who have had some sort of stress, or achievement, or something.
Larry and Sergey at Google and Brian Chesky at Airbnb all reviewed every single candidate at their respective companies up until 100’s of people.
From Diane Greene: It’s counterintuitive but it was more difficult to hire in the beginning. When we were small, the idea of VMware wasn’t well defined and convincing people to join was difficult. Each person we hired at that time was a big deal.
Once we were scaling, we were hiring 100+ people a month and it was easier to do this. It’s a good thing to remember that hiring will get easier as you scale — but you should also never drop your standards.
From Jeff Weiner: In some regards the hiring process is the same and in other regards it’s drastically different [while scaling].
- When you are 15 people, a single person on your team can do the recruiting.
- When you are trying to get to 150 people you need dedicated recruiters.
- When you are trying to get to 1,500 people you need sourcers, recruiters, schedulers, managers, and people to support this whole group.
The machinery behind recruiting gets substantially more complex at each level of scale.
What shouldn’t change is your culture and values. Where hypergrowth companies go off the rails is when they need to grow from 150 to 300 people to keep pace with the competition and even though they have set their quality and culture bar clearly, they start to compromise.
10. Have a framework for judging talent
Below isn’t the only framework but it’s just an example to showcase that you should have some framework for talent when hiring at scale.
From Shishir Mehrotra: This was a framework for judging talent which I applied at YouTube — namely in determining the levels of individuals (senior vs. junior executives — aka. What is the difference between a level 3 product manager and a level 6 product manager?
- On the X axis is scope. What scope can the person capably work on — a feature, an area of a product, a full product, or multiple product lines?
- On the Y axis is the autonomy a person can deal with.
- PSHE (Junior) — A manager needs to spell out the problem, a rough solution, send you a list of instructions, and your job is to go and execute based on those instructions.
- PSH — You are given the product and rough solution — then you figure out how to accomplish the solution.
- PS — You are given a problem and you have to go figure out the solution.
- P — You are given a space and it’s your job to figure out what the problems are.
Some people call this leadership, but Shishir likes to call this “training wheels.” The question for employees is — what is the biggest scope and responsibility you can give someone, without any “training wheels”?
A second thing Shishir noticed is, generally the path of learning was not linear.
Typically people would initially grow by adding scope — then there is this big trough in the middle. This part isn’t about scope but rather more about how they did the job. Then a person would grow at the end by adding more scope again.
A second tool they used at YouTube was called — Dream Teams.
They would take a team of people and ask — who would you hire first if you were hiring this team from scratch? They would compile all of this information across all of the teams and divide everyone by three lines:
- The first line was the “awesome bar” — these are people you would build a team around, people you invest your time into (make them feel valued, rotate them through teams, give incentives to).
- The second line was the “hire bar.”
- The third line was the “don’t hire bar” — these people you probably wouldn’t hire again.
While they were interviewing people, they would literally use a list of 4–5 people and use them as the hiring bar for future candidates. It’s easy to just hire people to do the job, it’s much harder to maintain a high bar.
11. Remember that even at scale, great products come from small teams
From Eric Schmidt: I have seen the same cycle again and again — great products are created through small teams: with great leaders, who eliminate all non-critical features, while working under extreme pressure, and who produce a product that just barely works.
The correct answer is small teams can go off and change the world. Every successful project I have worked on within Google over the past 40 years has started off with 1-2 people working on an idea together.
For example Windows was started by one person, UNIX was 2 people, Java was started by 1 person, Gmail was started by 2 people, Android was small team, Linux was started by 1 person, and I could go on and on.
12. Hiring from the outside vs. promoting from within
From Reid Hoffman: Roughly speaking it should be a combination of internal and external.
If it’s all internal you tend to drink your own Koolaid, unless you have a lot of experience in scaling. This is tough because very few people have the experience of going early to late stage.
If it’s all external you tend to lose all of the people who care deeply about the problems you are working on, the people who are emotionally committed, work 100’s of hours a week.
The art is to balance between these two. Some of it comes down to the founders recognizing what their key strengths and weaknesses are. External people (investors/board) can help with this dialog and critique with the founder.
From Mariam Naficy: One thing I have seen is if we are around for long enough, people can grow within the company, but you need years to do this. This is how you develop your strongest and most unique leaders within the company.
We combine this with bringing in outside executives in areas we don’t have unique expertise in — such as Finance and HR.
For expertise, we have unique expertise such as crowdsourcing, we have to grow people from the inside. We can’t train people from the outside to do this because they would have to unlearn everything they were taught.
Our GM of Art and GM of Stationery were both grown from the inside. Our VP of Finance and VP of People, were both brought in from the outside.
Now that we have a stronger capital base we can let people grow. One thing we did is hire advisors from the outside to help advise and grow our execs. For our GM of Art and GM of Stationery we have a very senior exec from retail advising them on their strategy. This is to help give them more of an opinion than just my own.
From Elizabeth Holmes: When you are scaling this quickly the majority of the people who are in the company, are new. [If you are 100 people now and grow to 200 people within 12 months — 50% of the employees are completely new.]
By promoting within, you have a much easier time preserving and keeping the culture you have set in place.
From Marissa Mayer: We’ve done several dozen acquisitions and classify them into three groups:
- Talent acquisitions
- Building block acquisitions
- Strategic acquisitions
Talent acquisitions — One of the interesting things that has worked well for us is we could bring in really terrific people and group-hire 4–5 people in small sets through talent acquisitions. The nice thing is these people were already working as a team and they could hit the ground running fast.
When I first joined, a big pitch to the board was to double down on mobile. I was glad to hear we had an existing mobile team but I was shocked to find out the whole mobile team at the time was 30 out of 14,000 people. The mobile team needed to be more like 500 people — not 30. We acquired a lot of teams which have helped us to reinvent our app and mobile strategy. [The founders of the teams they acquired became the leaders of the new divisions they needed to build].
13. Have a strong culture
From Marissa Mayer: There is a view of culture that I learned from Brett Taylor, one of the early APM’s who became the CTO of Facebook. I asked him what was different about working at Google vs. Facebook.
His response was — he couldn’t really articulate the differences, but both companies had a very strong culture. If you were at Google, even if you took away all of the logo’s and all of the company info — you would still know you were at Google. Same thing with Facebook.
From Brian Chesky: [When I personally lived in Airbnb homes for a year] it sent a huge message to the team that working at Airbnb wasn’t a job — it was a calling. Part of having a strong culture is when people believe in what you are doing. It’s not about a website, an app, a system, or screens — it’s about building a mission — creating a whole new world — this is only possible if you are living the product.
There isn’t a bad culture or good culture, but there are weak cultures and strong cultures. I wanted to have a strong culture — a shared mission, a way things are done, beliefs we share.
A big part of culture is hiring — who are you going to be spending a lot of time with — and how do you remove people who don’t fit within your culture. One of the strongest levers of culture is hiring.
I decided early on to interview every single person. I personally interviewed every employee up till the first ~200 employees.
Reid Hoffman: When you hit scale how do you instill culture?
Brian Chesky: I do as many culture activities as I did before — now I just have people do things on my behalf — leverage.
I used to do all of the interviews — now I hand picked all of the interviewers, I spent months with each interviewer, I built an inner circle of people who have trained interviewers, etc.
I used to meet with every single new employee one-on-one — now I do weekly orientation meetings, I have recorded many of these sessions for our international hires, etc.
I also write an email every single night to the whole company. This isn’t a tactical email but something more thought provoking. One of the things with scale is you need to continue to repeat things. Culture at scale is all about repetition — repeating over and over again the things that matter.
From Jeff Weiner: I believe it’s first important to have a shared understanding of what culture is. Culture is the collective personality of the company — namely the people inside the company. Culture is not just who you are but who you want to be — it’s aspirational. It provides the company a reason to want to reach something that is even better than where they are today.
One of the aspects of culture is, if you aren’t walking the walk and actually practicing your culture — people will think it’s all BS.
It’s easy to paint your company walls with your culture and values — but at the end of the day, if the leaders of the company are not living the values, are not recruiting people against these values, are not evaluating performance against these values — the values are not worth the paper it’s printed on.
In order to make sure people believe in your values and culture — you have to reinforce it, hire against it, reward against it and you need buy-in from everyone in the organization.
Q: How did the first Netflix culture deck come about? What led to its creation and publication?
From Reed Hastings: About 8 years ago, we were getting tired of new employees joining, and going through this 100 slide deck, and having 1/3 of the employees being shocked at its content. The big driver was that we realized every candidate should get it, and if every candidate would get it, it made sense to make it public.
Putting things in writing makes it more debatable. To some degree, it’s a Bill of Rights for employees — things we aspire to live by. We probably started putting it in writing 5 years before that — it allows everyone in the company to participate and contribute to it.
From the time we were founded in 1997 to when we went public in 2002, all we were focused on was not going bankrupt. In 2000, raising money was as easy as taking a tin can and shaking it, and $50 million would show up. Never seen anything like that until last year! The year after, when you shook your can, someone would steal the can.
We had to lay off 1/3 of the company in 2001 (from 120 people to 80), and eked our way into profitability and survived. After 2002, we realized we were going to survive and thought, it would be awful not to want to work here.
What we valued — even more than success — was working with really talented people in a productive way. After our layoff, we thought things would grind to a halt, but we actually got more done. We didn’t have to dummy-proof things. So at first we said, let’s do a 1/3 layoff every year. Instead, we decided to continually focus on talent density.
Managers had to decide if they wanted to retain each employee — if they wouldn’t fight to keep the employee, we wanted to give that employee a generous severance package.
When we went public, we had 150 people. People were worried that now that we were public, everything would go to shit — put in a lot of process, stop taking risks. What we’ve done is to promote employee freedom. If you want to operate with very few rules, you need to set context. We added a chapter to our culture deck, Context, not Control.
There is context about the problem, but there’s also context about behavior, which is culture.
14. Communication with 100’s+ of employees is tough
From Patrick Collison: Past 150 employees has been a big change for us. The biggest is a need for formal explicit communication — specifically broadcast communication.
This kind of communication feels very unnatural — no one wakes up in the morning and sets out to talk in bullet points — Here is our 3 bullet points for our Q4 strategy. When you think about it, a startup itself is not a natural environment, there are different things you do that you would not do naturally. You don’t typically grow your social circle 50–100% year over year.
All of the discussions and debates we have — many of our current team wasn’t around when we had those discussions. 50% of our entire team wasn’t there a year ago (due to scaling so far). Each new person that comes in wants to do things differently. Part of it is good in the fact that it re-opens issues and part of it is bad, given new people don’t have the full context.
From John Lilly: One of the profound realizations I had is the CEO learns really fast, but the various layers of the company can’t possibly absorb all of this change — so I moved towards speaking consistently and getting alignment the bigger we got.
The reason CEO’s say these words (alignment and communication) is they are trying to get the organization to make the same set of decisions, whether they are in the same room or not. This is very difficult, especially when the company is growing quickly and each new employee hasn’t had a lot of time to work with you directly.
Once an organization brings on more and more people, the CEO will say words and some of the staff will hear it perfectly clear and some of the staff will think you are speaking greek.
The other problem is the CEO learns new things everyday and slightly alters the old stuff, little by little over time. While the organization is getting bigger and bigger, you can’t get enough time with everyone to notice.
The rule I developed for myself at Mozilla was to say:
- Only a simple number of messages
- Repeat these messages over and over again
- If I need to make a change to the message — make sure its a big change — and make sure this change is noticeable.
- Repeat this over and over again.
From Diane Greene: When we got bigger we sent out emails to everyone. We first started with our Monday staff meetings — we would do a writeup of what was going on in our group — particularly things other groups should know about.
I had each of my staff members send it to me by Sunday at 9pm and I would put all of the pieces together, write my note on top, and highlight what was important. I would send this out to all of the other team members outside of my group.
These reports could be shared by other people and eventually all of the teams within VMware started doing a similar report once a week. This helped people know what was going on across the organization every week.
From Marissa Mayer: I really liked the way Eric ran his staff at Google:
- Staff meetings on Monday — what we did in the previous week, what we are doing this week, a way to get cross functional teams working together.
- Strategy reviews on Tuesday and Wednesday — deeper dive into specific product launches and operations.
- One-on-ones on Thursday
- Full company meeting on Friday — a way for anyone in the company to ask anything and understand our thought process.
From Jeff Weiner: When your company is 15 people, if you want to hold an all hands meeting, you say “let’s talk.” When your company is 150 people you have to call everyone into a cafeteria a set aside a time to do so. When you are 1,500 people spread across multiple locations, you can’t just go to the cafeteria anymore.
Communication is essential as you scale. One of our tools we used to great effect is an all-hands meeting every other week.
I started this when I joined — while we could all fit into the cafeteria. Now we broadcast our all hands to all of our offices in 30 cities around the world in different time zones (some tape it and watch after hours).
During these all-hands, we walk through what’s happening in the company — both the good and the bad things. These meetings are invaluable because we can:
- Repeat every other week what our top priorities are.
- We shine the light and highlight what is working and behavior we want to reinforce.
- We identify things and areas that are not working — and have honest discussions about these areas.
15. Scaling is moving away from problem solving to coaching
From Jeff Weiner: On the continuum of Problem Solving <=> Coaching
Coaching — Founders tend to be people who are good at getting things done, therefore they look to solve problems rather than coaching people to solve them. The problem with this is when you add people into the organization — when they have a problem, if the founder solves it for them — they will keep coming back to the founders to solve problems.
This won’t scale. You have to coach people to solve their own problems. Then you need to coach people to coach other people to solve problems. This is how you get to true scale.
16. The role of a CEO during blitzscaling
From Eric Schmidt: My role was to manage the chaos. There is are different kinds of CEO’s and there is more than one answer.
In any successful company, you have someone who can run very fast, has good product sense, and has emotional leadership of the key stakeholders. In that sense it’s like a faculty — the key engineers put up with the management. My job was to organize the world around them.
From Patrick Collison: Basically the CEO’s job can be reduced to three things:
- Culture (No other person besides the founder/CEO can affect culture to the same degree)
- Selecting senior management of the company (hard for anyone else to do this job) — these people will be the domain experts of their function who are better than you.
- Optional is the product — the CEO can be the head of product or lead some specific function of the product.
From Mariam Naficy: In the beginning I needed to know every single thing that was going on at all times. Now I don’t know everything that is going on, it’s tough.
In terms of prioritizing, our company is very revenue oriented so we ranked all of our initiatives by projected revenue growth. We do the ones with the highest potential first.
I am now no longer involved in consumer marketing, and I have moved to be involved in product and strategy. Growth companies are hungry and constantly looking for new sources of growth and products. Once you get past product market fit the next big hurdles are revenue scaling and looking for new growth avenues — different verticals or different geographies.
Even though I am not worried about every single little detail, scaling has made my life more complicated. The areas I don’t manage directly, I help set objectives and look at the numbers. If it looks good I don’t need to worry about it, and I can tell if something looks wrong.
From Brian Chesky: Post product market fit — I now do a few things — hiring, strategy, and culture.
From Marissa Mayer: One of the big things I learned from Eric was, he said — executives confuse themselves when they think they actually get to do things. CEO’s don’t code, they don’t build product, they don’t design things, etc. Instead, CEO’s set direction — their job is defense and to remove things in the way of their team. CEO’s listen and help clear the path to make their team and company more effective.
From Reed Hastings: That varies by stage of company. In the first couple of years, you do everything. Customers, investors, dishes. You have so many disadvantages as a little less known company, you have to make up for it with talent and hard work.
As you get to 50–100 people, you have to evolve your management style to be more strategic.
When you get to real scale, most of what I do is envision what’s important. We should be global, but I’m not picking markets. We should be spending 10% of revenues on marketing, but I’m not picking campaigns. Vision, focus, inspiration, culture. But you can’t do much of the work — if you try to, you’ll burn out and get everyone else upset.
At my first company, I was 33, and we had 50 people. I was still coding at night, and trying to be CEO by day. I wasn’t taking showers. Finally, someone said, “Take a freaking shower. And when you have bugs in your codes, it takes forever to fix things because you’re not around.” I held on too long.
I felt like investing in me was selfish. I thought, “I should be working.” I was invited to join YPO, but I thought, “I can’t take a day off.” I was too busy chopping wood to sharpen the axe. I should have spent more time with other entrepreneurs. I should have done yoga or meditation. I didn’t understand that, by making myself better, I was helping the company — even if I was away from work.
From Jeff Weiner: Reid and I both share the conviction that the most valuable companies in Silicon Valley are lead by product people. You could have been a product manager, engineer, product designer, or anything where you developed a good product sense.
At the end of the day, Silicon Valley companies create value through their products. The further removed a CEO is from the product — the more challenge it’s going to be for that company to create value over time. Steve Jobs, Mark Zuckerberg, Jeff Bezos, Elon Musk, you all know the names — these people are all product people first and foremost.
Jeff Bezos has a quote from a long time ago before Amazon became what it is today, which I liked: “Amazon isn’t a book store — it’s a customer store.”
I am grateful for the opportunity learn from all of the instructors and guest lecturers during the CS183C class, and humbled to learn from everyone’s incredible experiences.
A big thank you to Greylock Partners, Chris Yeh, John Lilly, Allen Blue, Reid Hoffman, and Stanford University for putting this class together.