In startup culture there is a classic metaphor, “no surprises.” It’s often used in referring to how a CEO and Board are supposed to function.
“No surprises”.
The first time you hear it you go, huh. The second time, you start to wonder. By the umpteenth time you finally get over the fear to just ask…WTF are they talking about with “no surprises”?
A startup, by its nature, is one giant science experiment. You start with a thesis and then you test the shit out of it, day after day, week after week, year after year. This process is constant and anything but predictable.
So if you have no idea what is going to work, how can you have no surprises?!
You can’t.
Instead consider everything will be a surprise. The question then how do you manage it?
The Background
I have three little kids. When they decide to throw peanut butter covered apple slices across the room…that is a surprise. Even if you carefully place them on their plate, put a 6 foot tarp around the table, and sit with them…they still decide to throw their apples across the room.
Why?
Because they are experimenting. They are trying to learn and test where the line is.
So as a parent what do you do? Before you make the food you communicate about what you’re going to do. Before you put it on the plate you let them know the expectations. And before they take it from you they look you in the eyes and agree to what you’ve told them.
You do the same thing with a Board. You tell them where the company is going, what you are testing next, and what is expected from those tests. What’s important is that you share the downsides of what you are testing and not just the upside. Otherwise all they hear is the upside so when your effort doesn’t work they will go…oh that’s a surprise.
This holds true whether you are super early testing basic assumptions or further along and testing annual plans.
Another Way To Think About It
I don’t like the term, no surprises. It’s reminds you of being told by your parents not to let them down. It’s kind of like no shit, why would I want to let myself down, let alone you?!
What they really mean by no surprises is they want predictability. Boards LOVE predictability. They may say they love supporting founders figure out their path, but deep down the want you to crush what ever plan you put down. Anything to the contrary is a “surprise” in their mind.
Another way to think about no surprises is be transparent. Tell us when shit breaks. And if you steer away from the plan we talked about last meeting please let us know.
Managing To No Surprises
Assuming this nomenclature isn’t going to changed anytime soon here are a few ways to manage that expectation.
1. Build Your Plan In Phases
Early on in a startup you have zero predictability and even less validation that your founding thesis is correct. Instead of building financial models, work on defining the major phases of the business and what you want to prove to yourself with each phase. If you are your harshest critic then meeting everyone else’s “no surprise” expectations will be easier. And if you need help in making these phases, they all include “not running out of cash.”
2. Build Into Annual Plans
It takes years to build into business predictability. It took four years at Moment until we had an annual plan. Instead we moved from predicting a month to a trimester to a year. It allowed us to experiment and learn faster without having to guess at what would happen 12 months from now. Building into predictability trains your board on what types of surprises they can expect. Together you want to learn as the startup scales from smaller to larger bets.
3. Don’t Hype
Shit is going to go wrong. It always does. And if you are known for hyping, you immediately look out of control when you hit a rough patch. There are times that you want your team and board excited about the potential, but that potential doesn’t last long. Building a successful startup is at least a 10 year journey, which means you need to manage this consistently.
4. Don’t Get Emotional
Business is matter of fact, especially with a Board. If you take people’s money then you have a job to do…provide them with a return. If you don’t like this expectation then don’t take their money. Otherwise recognize that your job is to test and re-test until you find the successful path you promised. That path may be a different direction than what you pitched, but none the less it will be a path towards the return you promised.
5. Prioritize What’s Broken
Always start with the bad news. Hit it first thing in your emails, updates, Board prep materials, and meetings. Most importantly make it concise. The more words you use the more out of control you appear. Instead make the problem succinct, provide alternative directions, and your recommendation. And at the end you want to have a clear ask from your Board.
6. Escalate Major Changes
Put yourself in a Board member’s shoes…from the last meeting we talked about “blah.” If in operating the company something changes that impacts your ability to deliver blah then you should escalate that. One path is an email that outlines what happened, why, and what you are going to do going forward. A more serious path is that same email with a phone call on the end of it.
Board’s have a fiduciary responsibility, which means they too can get sued if you screw up. So use your best judgement…if I was on the board would I want to know this new information? If yes then escalate.
Just remember you can only escalate so many times until it looks like you don’t know what you’re doing.