How to get back to better

Takeaway

Michelle Zatlyn and Lexi Reese believe operators need to cut down to “must haves”, track metrics more frequently, and check in with customers more during this period in order to get “back to better”

Main

Operator Collective is a newly founded group for operators from diverse backgrounds to support founders both operationally and financially. Members include C suite people from Stripe, Waymo, Zendesk.

They recently held an event on “How do you shift your operations during a crisis?” where they interviewed Michelle Zatlyn, Cloudflare Co-Founder COO and Lexi Reese, Gusto COO [1]. Notes below will sometimes be paraphrased for clarity, and covered the following topics:

1. What does a COO actually do?
2. How have you changed operations internally?
3. How are you thinking about the future?

What does a COO actually do?

Michelle

• I was a founder at Cloudflare [2], but I didn’t start with the COO title. It was something we grew into.
  • 3 of us started the company, and 2 of us are still running it [3].
  • A different group of people report to me vs the CEO. A lot of the go to market (GTM) functions report to me. Legal, technology, finance to Matthew (Cloudflare CEO)
• The way I think about having a COO role is, if you can bring on people to take on more things than you ever could, you can grow further
• At Cloudflare’s stage there’s a lot of building to do, it’s very messy, and a COO can help with running things if you partner with a person you trust
• But if you look at large companies, not a lot have COOs. So there’s some concern about when a company is in its lifecycle.
  • Is it out of build mode and into maintain mode? Would you you still need a COO then?

Lexi

• Josh, Gusto CEO [4], had been given advice that you really need a COO, but need to be intentional about why you’re hiring one
  • If you’re hiring a COO, you need to be explicit about what job needs to be done, that you either have no experience for or no bandwidth
• I was hired to run customer experience. The challenge we have at Gusto is how to reliably and scalably deliver a customer experience that’s unmatched, but do so in a way that’s efficient and repeatable. Serving 10k businesses vs 100k is different.
  • I liked starting as the head of UX, since it was a known problem.
• A COO title can be too vague, with problems not articulated. If you don’t have a scoreboard for success in mind, it will be a problem

LL - I’ve usually thought of the COO role as “how do we make money” and the CEO role as “how do we spend money” [5]; the CEO’s top priority should be capital allocation. I’m unsure if the point by M on the lack of large company COOs is true, perhaps it is outside of tech? Agree with L on needing to define what success looks like in a role, and that applies at all levels, whether that’s entry level or senior leadership.

What has the impact of Covid been on strategic planning, and have you made any modifications?

Michelle

• This is not the time for “nice to haves”, only “must haves”. Have put projects on hold.
  • We also asked people to flag to their manager if they thought the project they were working on was not a priority for the business, and we saw good outcomes from that
• Right now there are more questions than answers, it’s still messy and depends on the company
• We’re doing a lot of scenario planning. People are getting a better sense of Q2, and are trying their best to figure out what’s going to happen next
• If you’re tracking metrics on monthly or quarterly basis, you’ve got to go to weekly instead, since things change so quickly
• We ask ourselves, “What have you learnt in this week that can change the business going forward”
• We’d always operated quickly, and are operating even more quickly now

Lexi

• It’s also interesting to ask what has stayed the same.
  • Our fundamental strategy and mission hasn’t changed. Gusto is a people platform, we deliver prosperity.
• Since march, one area we needed people working on first was health and safety for employees
• We have an employee workplace experience workstream, and there we ingest data from local jurisdiction and federal law, to set up risk frameworks
  • That workstream meant that most of us were already working from home, even before it was mandated, since were taking in all that information and felt that we had to be able to work from home soon
• Providing a service like Gusto is not a nice to have, it’s a must have for our customers, so we feel strong in that regard
• Based on what we’re reading in our data, we’re indeed seeing employees going off payroll and businesses going out of business
• Right now is the time to focus on organic traffic leads
  • And also on the cash we have, cash we need, and make decisions to preserve cash
  • For example, taking away perks that weren’t mission critical to delivering service
  • Need to ask people to rally for this moment

LL - Nothing too surprising here, would say the move towards tracking on a more frequent basis and the emphasis on cash both make sense and are a common trend in companies. I like Michelle’s idea of getting employees to flag non critical projects to their manager, and would think that takes a good culture and trust within the company to happen effectively.

What metrics are you looking at?

Michelle

• We try to find leading indicators.
• We sell services to internet properties, and traffic has been up 40%. We sell to businesses, from SMBs to big business developers
• We want to know how does the pipeline look, since that dictates how the business will work
• Want to emphasise again how before we looked at things quarterly and monthly, and now we do so weekly and at higher pace
  • The increased frequency of pace has been helpful in this uncertain time
• We launched Open for Business to help other businesses
  • We’ve been writing blog posts on technical issues
• On the cost side every business is looking carefully at what they’re spending,
  • And we’re also seeing customers coming and asking for extended terms, cost reductions, or service discontinuations.
  • It’s prudent to plot all of that customer activity and look and track with the team, to see if you’re on upswing or downswing of slope
• One thing that keeps coming up is that in a crisis, leadership matters, and that’s up to all of us. Whether you like it or not, some companies will come out stronger, gaining market share, and others will lose, and you’ll have to decide which of those you want to be as a leader

Lexi

• At the start of the crisis, we were meeting daily as an extended leadership team, including engineering, marketing, business tech etc
• The way we bucketed our priorities was
  • 1) current customer health, how they’re growing, whether they’re up/downgrading
  • 2) growth engine health, based on our traffic, leads, and how well we’re connecting with customers
  • 3) our cash. Even if you’re benefiting from growth, the additional volume could lead to burden on cash. e.g. site disruption due to high traffic loads etc, so need to track cash carefully as well
• This year is shot from a business as usual perspective
  • e.g. We’d normally be fretting about a $2mm miss, and now it’s not about that any more. It’s about “Are you going to come out of this pandemic and economic crisis better, and how can you set yourself up to be in fighting shape?”
• Educate yourself on legislation, prepare your product and teams, and educate customers on how to utilise the product

LL - Emphasis from both Michelle and Lexi and staying even closer to metrics and tracking changes from the norm. The blog that Michelle mentions could be an interesting scalable way for your company to do outreach, if you’re not doing so already. If you are, I’d tailor it towards problem solving top customer complaints that are coming in due to the crisis.

What have you been doing with respect to communications within the company?

Lexi

• Would be helpful to know how we’re organised at Gusto
  • We have an executive team that reports to the CEO. That’s the head of finance, people, engineering, product, and myself.
  • We also have an extended group of 15 people that form an extended leadership team
• We had to get clear on what’s the responsibility of each group.
  • We have to define what’s the picture for our customers and employees
  • We also need to figure out what we need to do, and in what order
  • Based on what we know, what’s important to do now, and what can wait till later
• We set up a data workstream, customer workstream, etc
• Our daily meetings were briefings on what we’ve learnt today from legislation, what we’ve seen from data, etc
• We had 2 priorities
  • keep the business healthy,
  • run more operationally efficiently
• Had to meet daily initially, but as we got into rhythm, we meet every 2 weeks now instead
• For the whole company we have a meeting every 2 weeks
  • Every other week there’s a town hall, and then Q&A via slido, where we commit to answering everyone’s question within 24hrs
  • So it’s alternating between telling and showing and letting people ask questions

Michelle

• We were an in person company, had an environment where people come into office, and that led to a rhythm of communicating. And then all of a sudden we had to convert all of that to virtual interaction instead.
• Couple of things we did
  • We told our people managers, they need to be checking in with their team 2x vs before. For the first few weeks the idea was like “we want to be able to reach out to everyone and they can say they’ve had a conversation with their manager”
  • Should see chat usage go way up. Our CEO created a random corner for questions, with the intent of making everyone feel connected
  • We started fireside chats with executives, where people can ask them questions, also to let people feel connected. These went well, and then people started asking, “what about external leaders?” and we’ve started doing that too
• Being remote, it’s harder to get your job done. When we’re finding people are getting stuck, we want people to get unstuck as soon as possible

LL - Slido is a common tool used at tech companies to do crowdsourced Q&A during large company meetings. I’m supportive of doing Q&A, and the company culture also matters in how effective these can be. e.g. Managers giving non-answers or Employees asking abusive questions. The checking in with teams likely depends on the individual, as some people would prefer fewer check ins.

What have been some challenges?

Michelle

• Our all hands used to be in person, now someone gave feedback that seeing larger face for zoom is better, so we might start doing that
• What we’ve said internally is that we don’t want to return back to normal, but rather back to better
• Internet traffic is way up, and it’s been a challenge thinking of how to make changes to engineering side to scale the system
• Also rethinking what do we want to use our office space for after this

Lexi

• There are so many great parts about what’s happened, even as there’s so many horrible things that are going on.
• Things that were always there are now standing out e.g. what’s your mission, do you live your values, these help you make decisions
• Your courage of conviction needs to be there, and you need to evaluate value and mission
• Have the customer at the center
  • When’s the last time you talked to a customer?
  • If your answer isn’t “in the last 48 hrs,” that isn’t enough.
  • Have your sales team record calls, on why you’re winning or losing business. Make the exec team listen to those calls every week or day
  • Also listen to customer service calls as well
  • Do these in addition to watching the numbers
• Graphs are important but texture and tone are equally important

LL - Everyone talks about being customer obsessed; few actually are. I like the idea of making execs listen to sales and customer service calls regularly and wonder how many companies do so. The theme of rethinking usage of office space has been common, and I wonder if that will finally happen

How are you thinking about new customers and new business?

Michelle

• We really want to come out of this stronger.
• We’ve shifted on the marketing side. We’ve needed to check what was working, and do those still work? What does the data say and does it make sense in this new environment?
  • You need empathy
• We changed how we started the relationship with a customer, based on looking at our data and externally for what works
  • e.g. if you’re a business that needs to create its digital first experience, “guess what, we can help with that at Cloudflare,” “these cost savings can help your company save money”
• Even in this global pandemic, cyber attacks are up
• We’ve also looked at what do the best companies in china do, and how they are building community
  • e.g. Estee took their in store sales associates, and turned them online into online influenceers. They were able to recover a lot of sales from that
• An important thing we think about is “How do we at Cloudflare encourage a bunch of experiments to help start new relationships?”
  • We want our employees to feel that if you have an idea, we’ll back you, go and do it.
  • There have been a lot of amazing innovations out of that to help relationships
  • You need to decentralise and enable ppl to do good work

LL - Empowering employees is difficult, as there’s a tradeoff between independence and control. And as much as people would say you should just let people do their thing, that leads to abuse by a few. It’s why you hear the common trope of how companies are “cleaning up” before they IPO, since they had more independent employees and less control when they were private. I personally prefer more independence, but can see why that doesn’t work in many cases.

Footnotes

1. Panel was moderated by Mallun Yen, Operator Collective Founder
2. Cloudflare is a Content Delivery Network that allows copies of a website to be distributed on servers worldwide in order to reduce loading speeds
3. The story of the third co founder is a sad one
4. Gusto does cloud based payroll and human resource services
5. I can’t find the source for this idea, lmk if you do and I’ll credit them

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