The formula behind Harvard Business School is simple:

1. Admit people who are already on a supercharged career trajectory.

2. Break down their egos so you can then fix the mental/character flaws that come with having early career success in corporate America, but hold you back later.

3. Round out their skill set so they know enough to ask good questions no matter what business context they walk into.

4. Create room for them to explore high-risk / high-reward career moves with the safety net of the HBS brand to fall back on.

5. Reap the benefits as these career moves pay off.

The linchpin of this formula is the so-called required curriculum behind step three above. A core set of approximately 300 cases that cover everything from how not to go to prison to how to run a factory floor efficiently.

It does not matter what you did before your MBA — you cannot test out of the ten courses that everyone must take in their first year. Half the class ends up being bored and suffering through half the cases. But that is the whole point: make no assumptions about what folks already know, make sure everyone has the same set of foundational knowledge, and close the gaps that inevitably arise when you skip career steps as a 20-something.

Here’s the thing: across this set of 300 foundational cases only one is focused on sales.

And it is almost comically awkward:

In this case, we talked about the challenges of door-to-door vacuum sales in a developing country 20 years ago. Complete with play-acting the roles of a housewife who has never owned a vacuum and a door-to-door salesman.

It was a fun exercise but nowhere near enough to understand sales to the same depth as marketing (which gets its own semester-long class).

Because CFOs and Investors either don’t know how to ask or don’t know how to add value the real ‘aha’ 💡 moments of your go-to-market motions often do not make it into board decks.

Below are 3 common fallacies that explain why leaders fail to treat Sales as a Strategic discipline and a partner to shape (vs. just execute on) the company’s direction.

Fallacy #1. Sales is not a “leadership“ discipline

Why this view is misguided:

• Sales teams are bigger and have more layers. Looking at people across the company, you’ll find that front-line sales managers consistently lead more people than other folks at their seniority.

• Sales as a career attracts a very diverse set of backgrounds. This calls for:

  • A lot more leadership: help everyone figure out their strengths, lean on their motivations, bring them along on the journey;

  • A lot less management: hire a “mini-me” and teach your team to do everything the way you did when you were in their shoes.

In reality, as startups scale, sales leadership becomes intertwined with the changes in the company’s culture. Three things drive that:

• Sales start approaching 50% of headcount. This changes the culture.

• Finance gets more involved in key decisions. Processes slow things down. This too changes the culture. Sales is the one team that intuitively understands the value of process (ability to scale) and its downsides (time kills deals).

• Product focuses on more customer-driven incremental innovation vs. a big bets approach. Revenue impact becomes a more important prioritization driver. You need to hire a fundamentally different profile of product managers for this stage.

Fallacy #2. Sales is just persuasion + some cold calling

Why this view is misguided:

• The problem with this view is that it equates all of sales with high-velocity transactional sales i.e. the door-to-door vacuum salesperson from the example earlier.

The reality is that to sell well you need to:

• Be a project manager: aligning stakeholders externally;

• Hold space for other people: walk everyone towards the future state your product will help solve for;

• Excel as a cross-functional partner: bringing the voice of the customer back into the company, so that you can sell a better product next time.

(This 👆 is particularly true if you’re selling Enterprise Software.)

Fallacy #3. Leading sales is easy: just set up quotas and analyze your pipeline report

Why this view is misguided:

• This is a classic finance-led view that, unfortunately, is also common among investors that equates Sales with RevOps and the reports that get pushed out.

• Because CFOs/Investors either don’t know how to ask or don’t know how to add value the real ‘aha’ 💡 moments of your go-to-market motion often do not make it into board decks.

Just some of the insights this view is going to miss:

• Where are the causality + incremental growth levers in your pipeline and funnel?
  Many startups I talk to say “We know the metrics and benchmarks, but we don’t know how to change them other than by cascading higher goals to see what happens.”

• Are you even measuring the right metrics to influence behavior?
  Even a “good” model usually scores B+ at reporting, C- at predicting, and F at explaining.

• Are you creating sustained customer value? Or is this a niche product that is hitting saturation? What does it take to hit an inflection point?
  Every startup that hit raised their Series B and then stalled out is going through a version of this. Their board decks are full of numbers but lack a customer-centric view.

Sales is a must-have skill for startup CFOs. Just a few places where having empathy for sales leaders and asking informed questions helped me when I was a finance leader, chief of staff, and advisor to founders:

• Product-market fit signals: understanding what’s real and scalable before we even know how to measure it quarter-over-quarter.

• Pricing and packaging: probably the single most cross-functional set of decisions companies need to make every 18-36 months.

• Fundraising narrative: past your Series B every single slide of your investor pitch deck must have a verifiable go-to-market proof point.

Where to go next:

• If you are bored: read the HBS case about selling vacuums.

• If you are looking to align your Financial Planning and Go-to-Market: download my (free) Strategic Planning Playbook.

• If you need a little bit of extra support getting there: set up time to chat about my advisory or fractional offerings.

Thank you for reading!

I was excited about the opportunity to work with him: it is rare to learn from someone who has a perspective on leadership that has been, quite literally, battled-tested.

For those who don’t know my style, I learn through debate, disagreement, and post-mortems (and my wife’s patience as I go through these 3 stages).

The entire time we were working together we kept debating the importance of strategy.

We kept disagreeing on three questions:

• Where does Strategy (with a capital S) fit in the decision-making process?

  • I said: at the start

  • He said: at the end

• When we change course, do we acknowledge it as a change in strategic direction or do we help the company process it as a continued evolution of the mission?

  • I said: acknowledge the change

  • He said: reinforce the continuity

• How important is it to rely on (or avoid) precedents when we make decisions?

  • I said: be consistent

  • He said: acknowledge nuance

Looking back it is crystal clear to me now why his answers to these questions were right, and the “MBA” answers were wrong.

These are the three counterintuitive truths I’ve learned by scaling startups for the last 10 years.

1/ You can delegate strategy, but you can’t delegate execution

Joining a startup is an exercise in cognitive dissonance (more on this here).

• You know that most startups fail. Even at later stages, only a third will raise a subsequent round. Yet you believe what you’re building will beat the odds.

• You compromise your vision, often in ways that aren’t immediately obvious, every day: whether it’s signing a large customer that’s outside of your target market or hiring an employee you know you’ll need to layer in 12 months.

The thing that keeps startups going through all this is passion. Passion is what brings them back on course when they are forced to take a detour from the vision.

Passion is contagious. And it emanates from the founders.

For it to be visible founders must be involved in execution.

If, as a founder, you delegate strategy:

• You may need a bit of extra time and outside help to get the story retroactively buttoned up when it comes to the next fundraise.

• You will need more VPs/Directors to coordinate team activities and priorities in real-time because there isn’t a strong framework to keep them aligned top-down.

➡️ These are problems you can throw money at (incidentally, these are common consulting engagements for me.)

But if, as a founder, you delegate execution:

• Very quickly you’ll find that team activities don’t ladder up to the vision anymore.

• Accountability starts to break down with teams focusing on achieving their goals instead of shared goals.

• Last but not least, you risk losing touch with the one thing that helps you recharge your passion and clarify your vision: customers.

➡️ These are problems you cannot throw money at.

2/ If you have a clear vision and milestones along the way, you want the strategy to change

The common hierarchy of decision-making is vision — strategy — execution.

The CEO sets the vision and raises money behind it.

The C-Suite develops the strategy, with the CFO helping set guardrails and prioritize resource constraints.

VPs execute against that strategy.

Now, consider this alternative hierarchy:

Vision — Milestones — Resourcing — Strategy.

The vision is unchanged.

Milestones are set based on their ability to give you a tactical advantage and bring you closer to the vision. They can be customer case studies, finance KPIs, organizational capabilities, or product launches.

Resourcing is still the job of the CFO. But the decision is no longer abstract e.g. “Does my resourcing support the breadth of my vision? Can I afford to pursue a two/three-pronged strategy? ”

💡 Instead, it is concrete and measurable: “Do I have enough resources to hit this milestone? What are the relevant benchmarks? Which milestones have the highest upside with the least resources required?”

Last but not least, Strategy and the associated decision authority get pushed out to middle management, or, even better, ICs.

In doing that, the job of strategy is clarified: incrementally bring the vision to reality by finding the best way to use the resources available to maximize the chances of accomplishing the milestone assigned to each team.

As a result:

💡 Middle managers learn to act as mini-CEOs: reconciling resources and goals (milestones) within their domain in real time.

💡 There’s more room for experimentation and innovation that’s sitting precisely where it can have the most impact: with the people on the front lines who are closest to your customers.

3/ The job of a good strategic plan is to surface the right tactics

The core problem with frameworks, plans, and pretty much anything you can put on a PowerPoint slide is that you lose nuance.

But nuance is where startup success happens:

• Early adopter customers switch away from incumbents because your solution addresses their nuanced needs better.

• Investors buy into your vision of the market because you’re picking up on an emerging trend that isn’t obvious to everyone else.

• Star product managers or account executives understand the nuance of a customer’s pain points and use cases long before you have the scale to run A/B tests, hire a UX researcher, or slice/dice your product analytics.

So a good strategic planning process needs to:

1. Surface this kind of nuance from the front lines to the executive team

2. Equip the teams that best understand it to support the milestones

When running a planning process I like to include a leadership offsite that’s specifically designed not to make decisions.

Instead, it should help teams educate each other on the opportunities they see and plan to pursue from their vantage point and, in the process, surface the connection points or tensions between team-level lists of tactics.

In other words, the output of a strategic plan is not a strategic framework or set of strategic priorities.

Instead, it should be a list of tactics that have been vetted for consistency across go-to-market, operations, product, and finance.

To convert your vision into reality — and find the tactics that will help you get there, dig into two further resources 👇

1/ HBR article on the importance of strategic plans vs. planning

🔗 Link

2/ Abacus & Pencil strategic planning playbook

🔗 Link

➡️ When you’re ready to go into 2025 with a high-impact growth plan, surface the right tactics, and align the team to key milestones — get in touch and I’ll help you map out the path to get there (Video Call | LinkedIn | Email)

Thank you for reading!

When someone says “We need a budget” you’re probably visualizing a big spreadsheet that includes:

• An ARR Goal that might or might not map to the roll-up sales quota,

• Some assumptions about how that ARR converts into GAAP Revenue and Cash,

• Detailed list of headcount, by team and by month with roles and new hires listed and greenlit one by one,

• A list of all your vendors, how much you spent on them last year, and how much you can afford to spend next year,

• A three-statement model with your balance sheet and cash flow (which most non-finance people don’t know how to read anyway).

The challenge is that most annual budgets suffer from 1 of 3 fatal flaws.

The budget is performative (typical in Series A/B)

Despite the title of this post, every startup is contractually required to have a budget. After all, it’s part of your investor rights agreement and/or any bank debt agreement.

No budget = no VC investment.

Where this becomes a problem is when this investor/lender requirement is the primary reason you’re building a budget every year.

What this looks like in practice:

1. CEO sets top-down targets, tells finance to come up with some numbers.

2. Board gives feedback, CEO tells finance to “make it work” in the budget.

3. Finance goes around and asks for inputs, nobody expects to be held to those inputs later.

4. You build the budget and ship it just in time for your reporting deadline of January 30th.

5. Nobody looks at the budget to see how you’re doing against it, except for the week before the board meeting; finance comes up with some “explanation” for why you’re above/below budget.

6. By the time summer rolls around you’re so far off on the budget that it becomes meaningless; you continue to report on it but bury it in the appendix of your board deck

TL;DR: the budget is a waste of precious resources and a distraction for management.

The budget is restrictive (common for Series B/C)

At this stage, you’ve probably already hired an experienced Head of  / VP Finance; maybe you even hired a CFO. They have taken the time to educate the company on why budgets are important:

• Accountability: set clear goals and hold ourselves accountable to hitting them; measure and track our ability to forecast and course-correct the business.

• Execution: invest time up front to align on what we’re funding, so that as we get into the year teams can focus on execution.

• Risk: create checks and balances to manage burn; make sure budget owners have clear guardrails that they can stay within.

• Fundraising: anticipate the next fundraise by forecasting the company’s cash needs and setting goals around KPIs that investors are looking for.

Notably absent from this 👆 list is Growth. And that’s how many budgets go from being value-additive in theory to being value-destructive in practice.

Here’s a common way this shows up: a burn / growth downward spiral with repeat layoff cycles. An example that I’ve seen first-hand:

1. The burn number in the draft budget was adding up higher than what the board wanted to see.

2. In response, the company raised its growth target above what was supported based on the bottom-up forecast and sales and marketing headcount investment.

3. Unsurprisingly, the company started missing its growth goals. A quarter later the CFO mandated cost cuts so that the company could at least hit its burn target.

4. But with sales and marketing being spread so thin, this was now further undermining the growth trajectory and risking starting a downward spiral.

TL;DR: the budget forces the company to make bad decisions and limits the ability to respond to evolving market needs.

The budget is manipulative (often in Series C/D)

Even with the best intentions, good budgets can be used to justify bad decisions.

The example below was frankly my fault 🙂:

1. The company was focused on annual growth and burn targets.

2. The finance team wanted to:

   1. Come across as being growth-oriented and not restrictive (mindful of the example above).

   2. Create some incentive for the Eng. team to invest time into the oh-so-not-sexy project of optimizing cloud spend (which Engineer would be excited to be tasked with deleting old files?) by ‘rewarding’ them with headcount based on those savings.

3. As a result, executives were given the ability to reallocate OpEx within their teams as long as they hit the growth and burn targets.

4. Where all of this ran into trouble was when budget owners started:

   1. Using savings from their well-padded vendor budgets to fund headcount: shifting one-time costs into semi-permanent expense commitments.

   2. Using savings in their Q1 budget to fund headcount in Q4: without controls that accounted for the fact that hiring one less person in Q1 saves you $200K for the year, which in turn funds four (!) people in Q4 (you only incur 3 months of salary in the current fiscal year).

5. As a result, the company went into the subsequent year with virtually all of its headcount capacity pre-committed. Leaders had to scramble to move people around and weren’t able to get the right roles funded to support the subsequent year’s strategic initiatives.

A situation I often run into is when teams are just “dumping” assumptions into Q3/Q4 to make the year as a whole look good. Some examples I’ve seen:

• Going into the year with a revenue goal that’s lower than your bottom-up forecast; then using that surplus to fund a pet project that wouldn’t have been funded if it had to go through the scrutiny of the annual planning process.

• Sandbagging the revenue goal early in the year to gain some credibility and goodwill. Knowing that this credibility can be “cashed in” when we inevitably blame “market conditions” for missing the back half of the year.

• Assuming an operationally unreasonable improvement in marketing efficiency for Q4 because “it is the holidays and everyone will be shopping” and hoping that everyone will forget about it by the time Q4 rolls around.

TL;DR: the budget isn’t there to enable better decisions but to make pre-existing decisions look good.

When I think about the most successful budgets annual financial plans I have built there are 6 shared traits.

1. Aligned up-front on guardrails for topline and bottom line, then picked one more KPI that we prioritized for the year (e.g. NDR, GM %, ACV, etc.)

2. Built a detailed bottom-up view (e.g. list of greenlit headcount) of what it took to get us a fast start in Q1, had a hypothesis for Q2, and had some triangulated assumptions that we sanity-checked for Q3/Q4.

3. Obsessed about getting an accurate bottoms-up revenue forecast, set the first half of the year ARR goals in line with that forecast and second half goals slightly above that forecast: this created pressure in the system but bought us time to figure out what was working.

4. Reinvested the time savings from not having to build a detailed bottoms-up budget into identifying and fleshing out strategic initiatives that would help close the gap between the bottom-up ARR forecast and the goals in Q3/Q4.

5. Publicly committed (and had a track record) to doing a lightweight re-budgeting midway through the year. We’d approve or pull back headcount at that point based on (a) revised ARR forecast (b) initiatives that were going better vs. worse than expected (c) strategic hires that needed to be in place for the subsequent year’s fast start.

6. Did not spend a lot of time doing budget/variance with individual teams every month. Instead, we discussed holistic performance against budget as a leadership team. Check-ins with individual teams were less focused on figuring out where they were over/under and more focused on reviewing, capturing, and validating their forecasted needs for the subsequent quarter.

As you start thinking about 2025, instead of building a detailed budget consider developing this instead:

• A list of strategic initiatives with clear operational milestones

• A light-weight financial model that maps to those milestones

• An investment narrative that helps align the two items above

You can see examples of these in my Strategic Planning Playbook, where I bring together the frameworks I’ve developed and battled-tested at companies like Upwork, Pantheon, Masterclass, and many of my recent clients.

There are a dozen annual planning cycles that went into refining it.

Click the link below or drop me a note to get your copy, schedule time, or share with your leadership team.

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Abacus & Pencil Strategic Planning Playbook

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Thank you for reading!

Almost thirty percent of Fortune 500 companies do not have a CMO. That includes consumer-focused companies with incredibly strong brands like Uber, Johnson & Johnson, AB InBev, and Starbucks. And the list is growing. Needless to say, the work of “marketing” is still being done — just elsewhere in the organization.

Why did these companies decide that CMO isn’t a C-Suite role anymore? What can startups learn from that?

In today’s post, I will cover:

1. Why the CMO role is uniquely hard to master, yet so easy to fake:

   1. It’s not a single discipline but a grab-bag of very diverse skills

   2. Requires constant right-brain / left-brain balancing

2. What you can do to setup your SaaS marketing team for success:

   1. CEOs / Founders: resist the temptation to divide and delegate — instead focus on creating tight feedback and accountability loops between the teams.

   2. CROs: engage with marketing metrics the same way you approach a roll-up of your AEs’ quota and forecasts — and not the way you would think about your pipeline reporting coming out of your RevOps team.

   3. CFOs: create room in the budget for the team to take risks, resisting the urge to center every decision on an LTV/CAC ratio.

   4. Ops/Analytics: counterintuitively, you may need to leave room for ambiguity and, as a result, marketing creativity in your data frameworks.

   5. Product: establish a high-bandwidth two-way conversation across all parts of the marketing org. While Product Marketing may feel like it should be your one-stop shop, it is equally important to align with Brand & DemandGen.

Previous posts in the cross-functional leadership series:

• “Growth Pains” — Universal Truths of Scaling Up Your GTM Engine (link)

• The top fundraising mistake Founder & CFOs consistently make together (link)

• Why Go-to-Market and Finance Teams Struggle To Work Together (link)

• Your CFO is failing and might not even know it (link)

• Most CFOs think they own annual planning & budgets — do they, really? (link)

• Be your own culture demolition expert (link)

Why the CMO role is unique(ly hard)

Think about the roles and skills that roll up to a CRO: Customer Success, Account Management, Account Executives (New Business), Sales Development, Revenue Operations, and Sales Engineering. There’s a generally accepted “pecking order” within these in the sense that some are objectively “harder” than others. AMs consistently get paid more than CSMs, SDRs get promoted to AEs, SEs move into AE roles and crush them etc.

More importantly, senior leaders that are good at leading one team, can typically successfully take on another team that is “lower on the totem pole.”

Similarly, think about the roles that roll up to CFOs (accounting, FP&A, CorpDev), CHROs (generalists, recruiters, business partners), or even a GC (compliance, commercial, corporate). These too have a clear pecking order: most FP&A leaders know enough to manage an accounting specialist, i-bankers successfully take on Head of Finance roles etc.

Across virtually all functions senior leaders have a significant base of shared foundational skills and a clear hierarchy of transferable experiences.

But not in marketing — Demand Gen, Brand, and Product Marketing disciplines are as different from each other as Finance, HR, and Legal.

This 👆 makes the CMO ​role incredibly hard to master.

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To their credit, CMOs are usually more self-aware about their strengths/gaps than other senior leaders. Most CMOs I know are good at one of these three things even if they’d rather not admit it publicly. As a result, they usually rely on one of two strategies, each of which comes with its risks:

1. Hire very senior lieutenants to head up disciplines where they (the CMO) have skill gaps. One startup that I observed closely hired fantastic VPs (each of which could easily be a CMO elsewhere), but ended up with them operating out of sync with each other.

2. Lean on their strengths and let non-marketing teams lead the charge elsewhere (with marketing playing a support role). Another team that I worked with relied heavily on demand gen to punch about its weight but had to rely on sales engineering to close product marketing gaps.

When recruiting for a CMO, the most important debate Founders, Exec Teams, & Board Members need to have is this: which disciplines within marketing to prioritize?

Unlike in Finance, Sales, HR, or even Product, the two standard “skill closing” strategies are harder to execute when it comes to marketing leadership roles. Here’s why:

• In other functions, each sub-discipline is a direct stakeholder and “consumer” of their peers’ output: AMs can only be successful if AEs close high-upside customers, FP&A relies on Accounting for accuracy and timely reporting, recruiting gets a lot harder when your HRBPs aren’t coaching first-time managers. This creates an accountability & alignment forcing function within the discipline. Except in marketing: the primary stakeholder for the VP of Brand is the CEO, for DemandGen it is the CRO, for Product Marketing it is the CPO — crucially, these primary stakeholders sit outside of marketing.

• In a SaaS startup context, the skills behind DemandGen (mostly aligned with SalesOps), Product Marketing (much more technical), and Brand (with strong creative elements) are vastly different. This makes it a lot harder for even the best CMOs to add value for their lieutenants. As a result, they end up simply passing down high-level company strategic goals and letting each VP interpret them differently.

• Often, you may decide that it’s better to have a VP of DemandGen or Brand that rolls up to the CRO and/or a VP of Product Marketing that aligns with Product, instead of 3 VPs that report to the CMO. You may convince yourself that you will achieve a better result by splitting the CMO’s team because you won’t have to worry about aligning their operating priorities with their respective internal stakeholders.

If all of this hasn’t convinced you that CMO is the hardest C-Suite job to master, consider this:

Disciplines like DemandGen or Product Marketing concurrently require you to exercise high-caliber “right brain” and “left brain” skills — they are data-driven, yet a tiny design improvement or storytelling misstep can make or break the whole campaign.

I’ve seen this firsthand:

• A marketing team that I was working with bombed a major offline advertising campaign because the shade of yellow they picked looked beautiful on a screen but was hard to print — the text became illegible when printed on a billboard.

• Another team was so addicted to being data-driven that they had A/B tested their website into a dead-end. Optimizing every word in the navigation bar, but failing to re-think whether the product line-up that was being offered was targeting the right audience in the first place. This resulted in a web experience (a) was tailored for volume, not quality (b) drove clicks, but did not contribute to the brand narrative (c) nor did it scale up to support pipeline goals.

• Finally, a third struggled to make their product marketing repeatable because 100% of it hinged on the ability of a single technical leader to spin an engaging story for the audience they were familiar with. The company struggled to land a message that resonated with non-technical personas.

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While the CMO role is objectively hard, it is easy to fake

Most non-marketing leaders I talk to are not big fans of their marketing counterparts. A productive and respectful partnership between marketing and sales/finance/product is an exception, not the norm. Executives often know in their gut when the marketing role isn’t living up to its potential, but struggle to pinpoint where and how.

Here are the 4 ingredients that make the role easy to fake for ~2 years:

Each of these can be a powerful tool driving performance in the hands of a great CMO, however, often ends up acting as the smoke/mirrors covering up for a bad CMO:

1. Lots of “squishy” numbers to throw around. They can help create the illusion of being results-oriented, even though there are layers of ambiguity, logical fallacies, and subjective judgment calls in how they’re calculated. E.g.: do YOU know the definition of an MQL at your company?

2. Heavy reliance on 3rd party agencies. You can easily spend 30% of your time in the role just blaming the agency, ripping them out, ramping a new one…

3. Good marketing should feel like magic. But magic requires suspension of disbelief for the duration of the show. You end up letting things play out until it’s too late.

4. No external accountability signal. You know your sales team is failing when ARR isn’t growing, you know your finance team is failing when you’re missing Cash Burn goals, you know your product/engineering teams are failing when they’re not shipping new features — but what is that objective metric that marketing has sole and final responsibility for?

As a startup Founder or Executive, what can you do to setup your CMO counterpart for success?

CEOs / Founders

Resist the temptation to divide and delegate — instead focus on creating tight feedback and accountability loops between the teams. For example, this may mean not having a separate goal for the DemandGen. Instead, measure their performance based on their joint success together with the SDR team. It can also mean requiring your Product and Product Marketing leaders to have a joint perspective on where the market is going, instead of treating Marketing as being the downstream commercialization arm of whatever product chooses to build.

CROs

CROs: engage with marketing metrics the same way you approach a roll-up of your AEs’ quota and forecasts — and not the way you would think about your pipeline reporting coming out of your RevOps team. In practice, this means that you can’t just limit the sales/marketing alignment conversation to setting shared KPIs once a quarter. It is vitally important to have a weekly forum to dig into the story behind the numbers and help the marketing team learn how to maintain a “sales forecast.”

CFOs

Create room in the budget for the team to take risks, resisting the urge to center every decision on an LTV/CAC ratio. This can take the form of formally carving out an “experimentation” budget that isn’t included in LTV/CAC target calculations. It also implies giving the team broad leeway to reallocate funds between channels and initiatives based on real-time results. Finally, this needs to come through in how you talk through and learn from failed campaigns, not just the successful ones.

Ops/Analytics

Counterintuitively, you may need to leave room for ambiguity and, as a result, marketing creativity in your data frameworks. For example, if there’s debate and ambiguity about which attribution framework to use, treat this as a feature, not a bug. Instead of debating which one is more accurate, ask yourself (and help the team learn) how the difference in attribution frameworks tells us a story about what we’re doing.

Product

Establish a high-bandwidth two-way conversation across all parts of the marketing org. While Product Marketing may feel like it should be your one-stop shop, it is equally important to align with Brand & DemandGen. Marketing input should surround your product roadmap, not just help commercialize features that have already been launched.

It is already August. Deals are moving slowly. You, your team, and your customers may all be taking PTO and charging up for the end-of-year push. We may still be in Q3, but 2025 will be here sooner than you think.

The best (i.e. successful) annual plans I’ve seen start with a strategic alignment conversation in August and an executive offsite in September. Whether you’re a revenue leader, a finance executive, or a CEO — early alignment is crucial to setting up the entire company for success.

Drop me a note to get a head start 👇 on next year’s growth.

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Upcoming posts in the cross-functional leadership series:

• Why you should never goal CROs on sales efficiency

• They don’t teach you Sales at Harvard Business School

• Using pricing to align sales, marketing, product, finance, and operations!

• …and more

Thank you for reading!

If you’re subscribing to a blog, attending a networking event, picking up a business management book, or hiring a consultant — chances are the offering is targeted towards you based on your function + your company’s stage and business model.

More often than not, this kind of narrow focus makes sense.

If you have identified a specific problem and are looking for a way to solve it, you want to know that you are going to get the right solution for your context.

But, as a result, there are very few places where start up operators can look across functions, company maturity stages, and business models.

If you are not sure whether you have prioritized the right problems in the first place, or wonder if the off-the-shelf frameworks actually fit your needs — there is no good way to figure that out.

Furthermore, if you’re looking to grow as an individual not get put into a box (e.g. “He is third-time Series B finance leader”, “She is good first head of sales, but company outgrows him eventually”) you must look beyond your stage and function. 

This is why I particularly enjoyed leading the Operators Guild Master Class on the CRO — CFO partnership. We were able to create a forum that cut across startup stages, functional disciplines, and business models.

Below are my own 3 key takeaways from leading this master class for 40 startup operators. (For a quick recap of the class content, check out my previous post.)

[1] Both sales and finance often think they own result. But they rarely collaborate effectively to achieve it.

🤯 What surprised me?

Even experienced leaders often view ownership as not just a zero-sum and binary outcome: either sales or finance owns the result. In my view, this is a limiting belief and, despite the best intentions, often leads to an antagonistic culture with no cross-team collaboration.

📈 What can go-to-market leaders do to change this?

As uncomfortable as it may seem, invite your finance leaders to join forecast calls with your AEs. Help educate on them on what really happens behind that X% close rate number. Encourage your RevOps/SalesOps leaders to work iteratively with the FP&A team to figure out headcount needs, set quotas, and refine drivers. Last but not least, do not be afraid to let your front-line sales managers have a direct line of communication with the finance team. Front-line sales managers are often the single point that carries the downstream consequences of everyone else’s decisions — enlist their help in educating the rest of the company.

💰 What can finance leaders do to change this?

Don’t ask for inputs into a financial model and simply ask your peers to sign up for KPIs. Being able to say “We missed ARR goals because ACV was 10% lower than expected and MQLs came in at 83% to plan” is not a good explanation because it doesn’t tell how to forecast better next time. Instead, develop strategic scenarios around discrete hypothesis rooted in customer value, then quantify them using KPIs that are customer-centric vs. based on your org. chart.

⚙️ Is there a framework to help with this?

Absolutely! I encourage all leaders that I work with to run a 3-legged forecasting (and goal setting) process. GTM leadership brings in a deal-by-deal view and line-of-sight; Operational leadership focuses on sales metrics and conversion rates; Finance leadership focuses on multi-quarter trends and identifying momentum behind them.

Your focus here should be on unlocking iterative learnings. Every time you update the forecast, as yourself these four questions:

• To what extent do we believe the future will not be like the past?

• Regardless of this Q’s final result, do we believe our underlying business health is improving or deteriorating?

• How can we become less dependent on a single large deal / top rep etc.?

• Are the metrics we track all moving together or independently? Does this represent risk or upside to the plan?

✏️ For more on this problem read:

• Most CFOs think they own annual planning — but behave as if they don’t (link)

• Your CFO is failing and might not even know it (link)

[2] It is not the CEO’s/Founder’s job to align GTM, Product, and Finance priorities.

🤯 What surprised me?

The traditional view (think: 100-year Fortune 500 company) of a leadership team is something like this: the CEO sells the vision, CFO sets the target, CRO hits the number. Unsurprisingly, 100% of startup operators agree that this isn’t their reality. And, furthermore, most also agreed that this traditional setup of roles & responsibilities is not just unhelpful but actually harmful for a fast-growing startup. Yet, surprisingly, the bad habits and mental shortcuts that have been drilled into generations of sales, marketing, and finance leaders (less so for product leaders) are still driving how decisions get made at most startups.

👑 What can founders do to change this?

From Pre-Seed all the way until you raise your Series B the company’s ability to achieve product-market fit and execute on the initial growth opportunities is 90% dependent on the founder’s ability to drive prioritization for their teams. At these early stages founder can, through sheer force of will, get the company onto the other side of a critical fundraise, product launch, or sales cycle.

When the company crosses 100 employees this ability to drive prioritization and alignment often breaks down. It is very difficult, if not impossible, to know and actively manage what 100 people are all doing every week. A key vestige of the early days that often continues well past the Series B is a leadership team that is only accountable to the Founder/CEO.

This does not scale. In my experience, startups that succeed have leadership teams who feel accountable to their peers (not just at the C & VP-level) without having to escalate up the org chart to align the teams.

🤝 What can functional leaders do to change this?

The culture of collaboration between the teams needs to go down all the way to the IC level. A great way to kick-start this is by thinking through everyone’s job description and ability to operate outside of traditional responsibilities.

For example:

• RevOps needs to take the lead on “translating” between departments.

• Deal Desk needs to help get the best outcome for the customer, not just enforce back office rules.

• Product managers should understand how AEs run discovery.

⚙️ Is there a framework to help with this?

Yes, but it’s a little trickier to implement. To do it well and effectively, you need to make a handful of judgement calls and have strong cross-industry pattern recognition (it may even makes sense to bring someone outside-in for a “diagnostic”).

The key is to analyze your company's Growth Motions while moving away from the default view of the world that’s based on your org chart (e.g. Field vs Inside Sales, Marketing vs. Sales generated). Instead, you need to identify a set of growth motions that balances a bottoms up view that can be mapped to your cost drivers, yet still speaks to your customers’ experience of buying your product.

It is a 5-step process:

• Identify all the possible permutations of your growth motions: inbound vs. outbound, partner vs. direct, new vs. expansion, PLG vs. SLG etc. — and customer segments based on geo, industry, company size, persona etc.

• Figure out if certain permutations correlate with others e.g. is field sales usually closing outbound deals? are most of your SMB clients self-serve?

• Decide which “cuts” of data are material and which ones can be downstream decisions (e.g. because they’re easy to adjust mid-quarter and don’t require a different type of headcount.) ← this is the key “simplification” step to keep this analysis action-oriented and rooted in customer stories.

• Map these growth motions to costs, keeping in mind this may require you to split the cost of a single FTE across multiple motions. Don’t forget to include all the costs you’re trying to align — not just sales or marketing.

• Set revenue targets for each growth motion/theme, not for individual teams. To do this effectively think backwards from the vision and the story you need to be telling in your next fundraise.

✏️ For more on this problem read:

• The Magic of Middle Management (link)

• 18 Months Before $50M in ARR (link)

[3] Last but not least: Pricing is an incredibly powerful forcing function to surface and resolve misalignments at all stages of growth.

More on this in a few weeks — when I’ll be kicking off a series on pricing.

If you’re curious to go deeper on one of the three key GTM + Finance collaboration areas — feel free to setup time to chat 1:1 about:

• Aligning your Financial Planning & Go-to-market Execution

• Harnessing the full power of you Pricing & Packaging

• Debating and deciding on your Growth vs. Profitability trade offs

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Too often, the relationship between the GTM and Finance teams feels like the graffiti in today’s cover image:

Zero-sum, antagonistic, distrustful…

This serves nobody:

• #1 reason CFOs get fired is for “not getting the business.” Root cause behind that: their peers do not believe the CFO is setting them up for success.

• #1 reason CROs get fired is for “missing the target.” Root cause behind that: the target wasn’t achievable relative to the resources they were given.

My core belief is that this is fixable — but needs to start early and at the top. It comes down to three things:

1. Cross-team alignment up/down the org chart

The CRO/CFO relationship – and their ability to consider themselves a cross-functional leader needs to be supported by teams that integrate “across the aisle” – outside of their JDs. For example, accounting needs to ensure that GTM is not constrained by GAAP reporting quirks (e.g. GM % goals limiting CSM hiring), while sales managers need to be in a position to provide feedback to finance because they often disproportionately bear the cost of decisions made by others.

2. Shared ownership of a high-visibility output

When Finance and GTM orgs partner on the bookings forecast – the highest visibility result at a startup – everyone succeeds, learns, and grows together – faster. The focus of this partnership needs to be iterative learning. Answering questions that neither team individually is setup to answer e.g. regardless of this Q’s final result, do we believe our underlying business health is improving or deteriorating?

3. A culture of collaboration

The traditional view of “CFO sets the target, CRO hits it” is not just unhelpful – it’s value destructive. You need to challenge the biases and help teams build good habits of working together. You do that by identifying shared points of pride and working towards the mantra that “Nobody succeeds unless the company succeeds.” Ultimately your goal should be not just to help the company hit the quarter, but to setup everyone around you for sequential success.

Building this foundation, leading teams while scaling rapidly, creating trust while figuring out the right answer, sticking your neck out when you venture outside of your functional domain — is incredibly hard to do all at the same time.

But the rewards and benefits are, in my view, well worth it.

When the CRO/CFO partnership is working well it lifts the entire company up:

• Financial decisions and processes are aligned to Go-to-Market execution.

• Resources are allocated based on ROI and not based on an adversarial negotiation.

• The company has better forward-visibility across revenue predictability, capability gaps, and execution risks...and is setup for sequential success.

Furthermore, only by working together can Go-to-Market and Finance teams answer three key questions:

1. Is our go-to-market investment aligned to fundamental growth drivers vs. an artefact of our org chart? Does our product investment directly support growth? 

2. Is our pricing simply a way for us to monetize and capture value, or is is it acting as a powerful value-creation framework that aligns customer outcomes, the sales process, and product investment decisions at the individual deal level?

3. What are the trade-offs that are within our control as we think about growth narrative and investment? How much burn risk can we reasonably take on?

One of the biggest joys of having the opportunity to lead a master class for the Operator’s Guild community is the incredibly energizing feedback I received in the process. Next week, I will be sharing my own personal learnings from this workshop with almost fifty Finance, Sales, Product, and Operations start up leaders who attended.

In the meantime, I want to thank everyone who joined and participated.

If you’re curious about learning more or going deeper on one of the three key GTM + Finance collaboration areas — feel free to setup time to chat 1:1 about:

• Aligning your Financial Planning & Go-to-market Execution

• Harnessing the full power of you Pricing & Packaging

• Debating and deciding on your Growth vs. Profitability trade offs

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Previous posts in the cross-functional leadership series:

• Be your own culture demolition expert (link)

• Your CFO is failing and might not even know it (link)

• Most CFOs think they own annual planning & budgets — do they, really? (link)

• The top fundraising mistake Founder & CFOs consistently make together (link)

Upcoming posts:

• Being a great CMO is the hardest job in the C-Suite

• Why you should never goal CROs on sales efficiency

• How to use pricing to align sales, marketing, product, finance, and operations!

• …and more

To recap how we got here:

1. Startups get funded based on the strength of the forward-looking narrative.

2. Current financials don’t accurately represent the future of the company.

3. The detailed metrics, models, and cohorts aren’t there to convince someone to invest, they’re there to make sure they don’t decide not to invest.

4. Great CFOs identify the “wart” metrics that will show up in your fundraise ahead of time and manage around them (read the previous post to learn how).

So if a fundraise doesn't hinge on the numbers, surely it's all about laying out the company's vision?

Wrong.

Your fundraise pitch is actually about your customers. The problem that you solve. The value it provides. And your ability to monetize it.

What makes crafting your pitch deck uniquely hard:

• You have to play devil’s advocate and poke holes in your own story that you’ve so carefully crafted over the years. The startup is your baby. How could anyone ever think that they aren’t the cutest baby in the world?! (As a father to a 6-month old, I ask myself this question all the time.)

• The story you tell changes quite dramatically between Series A/B vs. Series C/D — with not just heightened expectations for metrics, but a requirement that every single forward-looking claim you make is supported by current evidence from your customers.

• While the pitch is all about your customers, relative to a sales or marketing deck, the pitch deck is much more forward looking and needs to bring in elements from the rest of the business. At the same time, you need to resist the urge to simply brag about what you’ve accomplished — instead, emphasizing how much more you will achieve.

Below I’m going to share the top 7 mistakes I see in pitch decks — that often come down to the challenge of having to reframe your perspective on the company.

Finally, scroll to the bottom for the 1 trick that I keep going back to when iterating on investor decks.

Mistake #1

Opening with the team slide

• Why it’s an easy mistake to make: you’ve been told over and over again that VCs invest in the founder and the team as much (if not more so) as the product itself.

• What it tells me when I see this: the culture and operating framework (how decisions are made) hasn’t quite matured to the point where it is ready to scale (read this and this to learn more).

• My preferred approach: put the team slide at the end but start every investor pitch with a quick 60-second voiceover of what motivated you, as the founder, to start the company. It’s a great way to break the ice and establish an emotional connection.

Mistake #2

Giving a history of the market

• Why it’s an easy mistake to make: it probably feels like a great way to answer the ‘why now?’ question and show that the market is primed for disruption.

• What it tells me when I see this: the company is a follower, not a leader — they’re trying to catch the wave, not create it.

• My preferred approach: instead of framing a history of the specific market you operate in, talk about broad secular then/now trends — ideally something that speaks to what’s driving your customers’ customers.

Mistake #3

Assuming that the disruption opportunity is obvious

• Why it’s an easy mistake to make: you are pitching investors who already know the space and the company, so you don’t feel the need to “waste” a slide on this.

• What it tells me when I see this: your product-market fit may not be as broad as you think — the risk that hasn’t been pressure-tested is that you’re skimming the top of the market but can’t expand beyond the early adopters.

• My preferred approach: put a stake in the ground and make it clear why you believe that, eventually, everyone will have to see the market the way you see it; and how people/companies who don’t see it your way will fail or fall behind.

Mistake #4

Talking about the product instead of the problem

• Why it’s an easy mistake to make: you’re a tech company… shouldn’t you talk about your product to explain what VCs are investing in?

• What it tells me when I see this: the GTM motion is likely to hit a wall as the company approaches $100M in ARR. Specifically: the company is “selling its org chart” instead of selling a solution to a customer problem. This means that GTM will suffer as the company experiences all the usual growth pains.

• My preferred approach: you still need a product overview slide but it should be framed in terms of what it means for the customer and tied to a GTM metric. E.g., if your platform is modular then bridge it NDR; if your product has multiple use-cases quantify the relative value of each.

Mistake #5

Framing things in phases

• Why it’s an easy mistake to make: it’s a great way to explain why the future will not be like the past. In other words it is code for “Don’t pay attention to my current sub-par financials…it’s all just a loss-leader for phase three.”

• What it tells me when I see this: cash burn, cash burn, cash burn…with some rare exceptions where a multi-phase approach is justified (20-year horizon investments).

• My preferred approach: frame things in terms of beachheads and quick follows instead of phases; show an example where a quick follow came through with a specific customer or a handful of customers.

Mistake #6

Putting up a slide with a bunch of KPIs listed on it

• Why it’s an easy mistake to make: investors always ask for these and act impressed when they hear about them; you have reasons to be proud.

• What it tells me when I see this: someone forgot about the customer, or has spent too much time with i-bankers, or is pitching to PE shops only.

• My preferred approach: open your deck with a “why should you care” type slide that tells you what the company is/does. Weave the KPIs into the summary bullets on that slide, then make sure you have customer case studies to support them later in the deck.

Mistake #7

Telling me your vision for the company

• Why it’s an easy mistake to make: as a founder you probably think and talk about the vision all the time: with employees, peers, and customers. What better way to establish the forward-looking narrative?

• What it tells me when I see this: The company may not be ready to listen to market feedback should that vision need tweaking or require an adjustment to the product roadmap that the founder doesn’t agree with.

• My preferred approach: re-frame the vision in terms of the kind of active impact you want to drive for your customers. For example, instead of “Build the best place for mom-and-pop stores to sell online” you can say “Bringing the next 100,000 businesses online to 10x their growth.”

The One Trick

The hardest thing about developing a pitch deck is knowing when to listen to feedback, when to reframe it, and when to stop changing the deck before finally taking it to market.

You’re surrounded by advisors. Everyone you talk to will point out things that didn’t land for them or that they think are missing from the deck.

I keep coming back to this principle: treat each slide as if it’s the only one.

What I mean by that: if all you did was grab a screenshot of that one slide and sent it to an investor, would it tell them a story (vs. just share a fact) that would pique their interest.

Your deck is done when each slide passes the stand-alone story gut check and 1+1 = 3 for the story arc of the deck as a whole.

For example:

• Instead of showing a slide with a bunch of F500 logos across industries, tell a story about how/why you’re able to solve the same problem in multiple industries.

• When presenting a slide with your projected ARR growth, highlight the product “big rocks” you’re investing in to accelerate it.

• If you are laying out the key drivers of your customer value prop, present it as a case study that weaves in the $ amount customers are willing to pay for that value.

Thank you for reading and being a premium subscriber!

By the way:

I partnered with Operator’s Guild to launch a master class and diagnostic focused on leveraging the CRO/CFO Partnership to drive the entire company forward.

Our inaugural class was 280% over-subscribed.

If you’re not an Operator’s Guild member the course is still available to you and can be adapted for your specific team needs. Grab time below to learn more.

Schedule Time to Chat 1-on-1

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Today, I want to layout one of the reasons why the best founders understand the strategic value that hiring a great CFO can bring.

No, this is not an article about how to define ARR vs. GAAP Revenue.

I want to talk about the key difference between good CFOs and great startup CFOs: the ability to present the financials in a clear, succinct, (and compliant) way that not only supports, but enhances the forward-looking narrative of the company in the context of a fundraise.

In an ideal world, finance is an objective function accurately representing reality through a set of standardized reports that can be easily compared across time and companies. That’s why we have GAAP financials — 90% of the time accounting is there to serve your investors, not to support the decision making of the company.

But the path from $10M to $100M in ARR is messy. Along the way, startups get funded based on the strength of the forward-looking narrative, not their previous three years of profitability.

GAAP financials often fail to capture the growth potential and future efficiencies of scale. And most CFOs know this — after all, they would be the first to admit that accounting and financial planning are two very different capabilities with different goals.

But Accounting vs. FP&A mindset isn’t the real division here. I’ve seen not just accounting-focused CFOs but even the best VPs of FP&A make the mistake below. In fact, most CEOs — even those who’ve raised multiple successful rounds — miss this.

Here’s the fundraising mistake:

For 95% of finance leaders and 90% of startups CEOs that I’ve met, when they believe that the current financials don’t accurately represent the future of the company the response is two-fold:

(1) Prep a giant data room with a detailed view of every metric they can think of: customer cohorts, renewal rates, product usage data, detailed cost breakdown by vendor, performance by AE etc.

(2) Build a very detailed bottoms-up model with 1000s of rows and hundreds of untraceable assumptions — and then devote a third of the fundraising deck to laying out the forecast drivers.

The problem is that by the point anyone is looking at this data the emotional part of the investment decision has already been made.

The detailed metrics, models, and cohorts aren’t there to convince someone to invest, they’re there to make sure they don’t decide not to invest.

What this means is that, before anyone looks at the detailed metrics, you need to convince them emotionally to be excited about the future potential.

Specifically, by the end of the very first pitch meeting, investors must want to believe:

1. That your software is solving a valuable problem

2. That your unit economics are sustainable

3. That future growth is just a matter of executing against the plan

4. That you know how to manage all this responsibly

But startups are messy, growth comes with mistakes and trade-offs, efficiencies of scale take years to ramp into. By design (and rightfully so) all these warts show up in your GAAP financials.

A great CFO needs to understand the business (to the point of knowing what each individual team does day-to-day) and determine how to best represent that using both GAAP, non-GAAP, and SaaS metrics.

So what do you do in the initial fundraise meeting, when you need to look your best? Here’s how to solve for the most common “warts” in your P&L that I tend to see.

For some of these, it is key to start managing for the “wart” metric up to 12 months before the next raise.

Showing that your software is solving a valuable problem

Potential Wart #1. A significant chunk of your revenue is services. Most of your customers think of your startup as a service provider, not a platform. Your software isn’t usable without the services attached.

Possible solution: can you position your services as recurring or, at minimum, as re occurring? Take credit for the services revenue as part of your ARR. Then make the case that you have a viable path and a plan to productize them over time and shift those $ to software revenues.

Potential Wart #2. your churn is high with many customers dropping off during the implementation phase or shortly thereafter.

Possible solution: consider treating customers as trials or pilots when they first sign; do not include them in your customer count until after they launch (you may still be able to include it in cARR if you walk a fine line in your story). Measure churn only off of the customer base that has launched and/or graduated from the trial/pilot period.

Showing that your unit economics are sustainable

Potential Wart #3. You’re losing money on services / implementation and it’s dragging down your GM.

Possible solution: consider breaking out software vs. services gross margin; if the picture is particularly unattractive consider not taking credit for any services revenue (this trades-off with wart #1) or even showing your services cost on a net basis in the management (non-GAAP) view of the financials.

Potential Wart #4. You are selling a highly technical product where customers needs a lot of support. These costs are dragging down your overall gross margin.

Possible solution: you need to start allocating your CS/CSM costs across your GAAP P&L line items. Carve out a portion that corresponds to supporting renewals and move it to Sales & Marketing. Make the case that some of the work is reusable (e.g. automating standard tasks) and move it to R&D. Of course, continue to make the case how over time you’re going to productize this more, help the customers to be more self-sufficient, and get more efficient.

Potential Wart #5. Your cloud costs are high and are dragging down your gross margin.

Possible solution: negotiate an EDP agreement with AWS/GCP if you don’t already have on i.e. commit to a certain amount of $ spend over X years in return for discounts and credit. Pay particular attention to how those discounts and credits are structured — in my experience the teams at GCP/AWS are more than happy to work with you to help get the desired accounting treatment.

Showing that future growth is just a matter of executing against the plan

Potential Wart #6. You are spending more than you should on sales or marketing — as a result, your sales efficiency is way off benchmark and has never even come close.

Possible solution: this is one area where using GAAP may actually help you instead of hurt. Most rapidly-growing startups’ P&Ls benefit from ASC 606 when sales commission is capitalized. In other words, your GAAP Sales Costs are often going to be lower than actual cash outlay in a given year (it catches up as growth slows down).

Potential Wart #7. Your growth is slowing down right as you need to go raise another round.

Possible solution: it might be time for you to start thinking about a price increase. If a significant chunk of your revenue is month-to-month (MRR) and/or self-serve you may be able to execute on this within months. A well-timed price increase lifts a lot of metrics in the short-term: you get a rapid inflow of new bookings and NDR, your gross margin goes up because you’re booking more revenue for the same costs, your sales efficiency looks great for a quarter.

The dirty secret (one of many) of pricing is that most price increases provide a pretty immediate and tangible bump, while the risk and downside associated with them stretches out over time.

Showing that you know how to manage all this responsibly

Potential Wart #8. You are simply burning too much.

Possible solution: can you allocate more of your costs towards R&D? That’s one area where investors have more tolerance for excess burn relative to benchmarks. Many teams can often sit in either R&D or other line items on your GAAP P&L. For example, you can justify classifying your Data/BI teams as R&D vs. G&A; you can consider allocating the IT team’s costs across line items; you can even mess with how aggressively you capitalize your R&D costs.

Potential Wart #9. You have debt on the books and are burning cash on interest payments.

Possible solution: consider leading with EBITDA instead of burn metrics. EBITDA is Earnings before Interest (and Taxes, Depreciation, Amortization) and can sometimes look much better than your actual cash burn. In parallel, make sure you position the debt as either an insurance policy to extend the runway or to offset timing of customer cash collections. At all costs, avoid implying that the debt is being used to pay for the ongoing operating expenses of the business.

Some other tricks of the trade

• Lead with your new bookings instead of revenue growth
  For example, $60M → $70M → $84M in ARR look quite weak even if the YoY growth is accelerating, while $10M → $14M in new bookings clearly shows that acceleration and can help you anchor your visuals in the deck at +40%.

• Sometimes it’s better to not do the analysis at all so you can truthfully say “we don’t think about it this way” if you know ahead of time the answer won’t be attractive (this should inform how you segment the business for management reporting purposes).

Obligatory reminder:

The line between creative accounting and financial engineering is easy to cross if you're not a professional. Creative accounting represents a willful disregard of the rules, while financial engineering is the art of figuring out how to apply the right combination of rules to get the desired outcome.

Remember that just because two things sound the same in plain English, it does not mean they are on the same sides of the legal line. 

By the way: I partnered with Operator’s Guild to launch a master class and diagnostic focused on leveraging the CRO/CFO Partnership to drive the entire company forward.

Our inaugural class is 280% over-subscribed.

If you’re an OG member this class is free as part of your membership.

If you’re not an OG member, feel free to grab time below to learn more about OG in general or about the master class more specifically.

Schedule Time to Chat 1-on-1

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This post is part of the cross-functional leadership series. I’m starting with CFOs and will be tackling CMOs, CTOs, and other roles over the upcoming weeks.

Previous posts in this series:

• Be your own culture demolition expert (link)

• Your CFO is failing and might not even know it (link)

Upcoming posts:

• Ask your Founder where they stand on financial engineering. If they wince — send them this

• Why CFOs always have an opinion on go-to-market — are often right — but still can’t persuade CROs to listen

• What successful Founders know about fundraising — but most CFOs struggle to understand

• Why being a great CMO is the hardest job in the C-Suite

• …and more

In my last post I argued that accounting is the only function the CFO owns end-to-end. But what about the annual planning process? the budget? quarterly forecast updates?

Most CFOs live in an echo-chamber: everything around them reinforces the default belief that they and they alone own the annual plan and the budget.

Here’s how:

• Founders ask CFOs to run point on the planning process

• Boards hold the CFO accountable for keeping everyone on budget

• CROs need FP&A approval before they make major comp plan changes

• CTOs work with the Finance team to figure out how to prioritize impact

• When CMOs get into an argument about marketing vs. sales contribution — they go to the CFO for arbitration

• etc. etc.

But does a startup CFO really own the annual plan?

More often than not, public company CFOs truly do own the annual plan: they lead the relevant section of the earnings call, they are accountable to hitting earnings per share, they make the final call on the revenue guidance, they sit on key committees that sign off on pricing, capital investments, and hiring plans.

But startup CFOs do none of the above. Instead…

1. The CEO or CRO set growth targets — and are challenged by the board on those.

2. Finance updates are buried in the last section or appendix of the board deck.

3. Sales or product make the call on pricing — sometimes the CFO gets to veto.

4. Headcount decisions are based on “tell me what you need” or “here’s the benchmark you should hit” and not a true thought partnership with the business.

While CFOs may believe they own the plan — unfortunately, most founders expect their CFO to be a glorified project manager who happens to know GAAP and Excel.

The reality of a startup CFO’s job when it comes to annual planning is simple:

• Gather inputs

• Add it all up

• (optional) Apply a haircut and call it “Scenario B”

• Tell everyone they are below the benchmark

• Ask for updated inputs

• Rinse and repeat until the board is satisfied

• (optional) Resist the urge to say “I told you so”

What’s the CFO’s value add to this?

• Find relevant benchmarks

• Don’t make formula mistakes (harder than it sounds)

• Translate cash (what everyone thinks about) to GAAP (which nobody cares about)

If you’re a founder and treat your CFO as a fancy calculator with GAAP reporting capabilities — you’re wasting $300-400K per year and millions in equity.

It doesn’t have to be this way!

CFOs can and should add strategic value — especially at a startup.

Here’s how you can start doing that:

[1] Ownership is not a zero-sum choice

The number one reason CFOs get fired is because they “don’t understand the business.” The best way to preempt that is by taking ownership of the revenue forecast.

That doesn’t mean not holding the CRO/CMO accountable to the result. It does mean signing off on the forecast after pressure testing not just the inputs but the implicit assumptions behind them.

In prior roles, the CRO and I ran process twice per quarter where we aligned on the forecast. While the CRO was the one who presented the number and made the final call for the 3-6 month result — finance took ownership of the 9-24 month projections.

[2] Your lieutenants are your superpower

In an earlier post I outlined how middle managers have pure upside and no real career risk when they go beyond their own job scope and take the time to partner with their peers in other functions.

Use that to your advantage! The way you influence the business result isn’t through formal sign offs on decisions, but by building a team that will lift everyone else up.

It’s nearly impossible to go deep on sales comp, build a driver-based bookings model, quantify the ROI of new product features, and have a great working relationship with the recruiting team all at the same time. Decide which of these are important to tackle first, map them to your own strengths, and hire lieutenants who you trust to partner with the business on the rest.

Your job as a CFO is to promote a culture of collaboration across teams, design processes that force it where it doesn’t happen naturally, and nip in the bud the elitism that, unfortunately, appears to be innate for many finance professionals.

[3] The CEO may be your boss, but the Board is your client

The CFO is the only role in the C-Suite that virtually always has their own independent relationship with the board.

It's easy for CFOs to forget that, at the end of the day, report to the CEO. No matter how good the CFO-Board relationship gets, nothing turns board members off as quickly as seeing a CFO undermining their CEO.

But that doesn't mean the relationship you build with the board doesn't matter.

If the founder is treating their finance team as glorified project managers with GAAP & Excel skills, the path to changing that is through the board. Build trust the board members so they help the founder recognize the strategic value a finance team can bring. You want your board members to be saying this to the founder:

• “I'd like to have the CFO validate and present this plan” — for a board member to say this you need to first learn to speak in business terms and not finance terms.

• “Let me follow up with the CFO to understand what it takes to make this happen” — to win this level of trust you need your peers, from time to time, to defer to your cross-functional insights in board meetings.

• “Your FP&A team is the best way for you (the founder) to get leverage as the company scales” — this is only true if you run a strategic initiative based and not an input/output style annual planning process.

Founders will follow the board’s lead in how they treat the CFO. The board will adjust based on the CFO’s ability to demonstrate knowledge of the business.

If this article resonated you may be interested in the following:

• I’m developing a mini-course and a diagnostic to up-level the CRO — CFO partnership and drive outsize impact for the company through that. I’d love your input on the MVP.

• My one-on-one coaching for middle managers is designed for high-performers looking to remove their ceiling. Consider sponsoring it for your lieutenants.

• If you’re unhappy with your current CFO but can’t put projects on hold until you hire a new one — my fractional offering may be the right fit to close the gap.

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Thank you for reading — until next week!

In my last post I outlined the difference between single-function leaders who top out and cross-functional executives who act as catalysts for change.

Let’s dig into the role of CFO.

As a reminder, here’s what I shared last week:

Good CFOs are in full command of the company’s financials, managing against multiple scenarios and carefully balancing growth investment and risk.

Great CFOs understand that their job is not to hold others accountable with sticks and carrots but to enable everyone around them to hit goals.

I’ve had a front-row seat to more finance leadership transitions than any single startup will ever experience. Two thirds of them were “mutual.”

The story often goes something like this:

The CFO:

• Has been sounding the alarm about issue X for years

• Does not believe the company is adequately managing risk

• Focuses on creating scenarios and measuring teams against them

• Mostly talks about benchmarks and choosing which KPIs to track

Others around them:

• Do not think the CFO understands the business

• Acknowledge the risks, but are more focused on hitting the goals

• Question the importance of the financial metrics they’re being told to hit

• Have zero time to think about anything multi-year

The reality is that both sides are wrong: CFO is a thankless job with goal posts that always keep moving.

So, as a recovering finance professional myself, I often find myself defending CFOs to their bosses and peers. But, I also aim to give these CFOs direct and unvarnished feedback that they won’t hear anywhere else. The faults are mutual.

Let’s break it down across functional areas.

Accounting is like uptime: nobody cares until there’s a problem.

Accounting is the only function the CFO owns end-to-end. With due respects to all CPAs in the audience — accounting is boring.

Most companies adopt accounting processes and go through an audit because it’s a requirement as part of their fundraise — not because they see value in it. Most CEOs continue to think in terms of cash in / cash out until well past $100M in revenue. Most CFOs use “auditors will ask us about it” as the primary rationale to push more process on the company and slow business decisions.

There’s truth to that — 90% of accounting requirements are there for your investors to keep you honest and understand what’s real at a 30,000 foot level — and only 10% actually give you the insights needed to run the business better.

Accounting-focused CFOs need to take a page out of their CTO’s playbook — and manage accounting the way you manage uptime:

1. Lay a solid foundation so you can fix future issues quickly when they arise

2. Don’t overthink it: stop wasting resources on dotting i’s that nobody’s tracking

3. Prioritize bottlenecks that slow down the business e.g. accounts receivable

4. Wait for things to break before you fix them (but do so reliably and sustainably)

DISCLAIMER: advice above only applies to pre-IPO companies. As you go public accounting becomes less like uptime and more like security. For public company CEOs and CFOs, the downside of bad accounting is jail time.

The problem here is that we’re all human.

To do accounting well you need to fully believe that all that process is not only necessary but valuable and business-critical. You need to have the person closing the books every month to overthink it and spot future issues.

That’s why the best CFOs know that they need a fantastic VP/Controller or, at minimum, a Director of Accounting backing them up. The job of the Controller is to worry about accounting process and accuracy so that the CFO doesn’t have to. The job of the CFO is to help prioritize how much process and risk the company takes on.

If you think it’s too early to have two layers of leadership in your finance org: think again. The time to start building it out is 18 months before you hit $50M in ARR.

To explore more broadly why middle managers are key to allowing leaders to scale, read The Magic of Middle Management: Pure Career Upside.

Stick around through next week to unpack the role of the CFO further:

How most CFOs think they own annual planning & budgets — but behave as if they don’t.

Why CFOs always have an opinion on go-to-market — are often right — but still can’t persuade anyone to listen.

What successful founders know about fundraising — but most CFOs struggle to understand.

PLUS: How to hire your CFO & the next layer of finance leadership.

In the meantime, feel free to explore more general leadership and recruiting principles or take a step back to think about the kind of company you want to build.

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We’ve all seen this story play out at some point in our careers:

• A new CFO comes in and suddenly the company is choking in process.

• A new CTO starts pushing out your former top performers.

• A new CRO spends the next 12 months replacing everyone in their org.

• A new CHRO joins in and nobody’s job feels safe anymore.

• A new CMO builds a fiefdom yet seemingly accomplishes nothing.

It’s easy to chalk it all up to bad hires, bad intentions, or general incompetence. But the reality is more nuanced.

As startups scale up – the game changes.

There’s more at stake; there’s real equity value to lose. The payday from an IPO or M&A becomes material to not just the founders, but to many Directors and above. Your valuation accounts for the majority of a VC’s return – and they build their own reputation by promoting the company to their LPs as they raise the next fund.

In their own way, each of these leaders is preparing the company for its next phase of growth and dialing down the corresponding tolerance for risk — yet failing to recognize the amount of culture change this creates.

• The CFO choking the company in process – is actually making sure the company is set up to have predictable revenue and earnings growth when it IPOs.

• The CHRO that is creating fear – is simply raising the bar not just for hiring but for people managers, org design, and quality of leadership.

• The CPO who pushes out your top performers – is prioritizing paying back technical debt, over launching shiny features shoddily built.

• The CRO replacing their entire team – is focused on consistency and raising the average, over occasional moments of brilliance and reliance on a few outsized wins.

• The CMO seemingly accomplishing nothing – is, in reality, investing in creating a long-term enduring brand that’s attractive not just for prospects but for public company investors as well.

So here’s the hard truth: either the startup will succeed and the culture will change to support growth at scale. Or the startup will fail – and then the culture won’t matter anymore.

If you don’t want to change your culture – someone else will do it for you.

If you want to de-risk this journey, it is vitally important that an insider, not a new hire, is the catalyst and “exec sponsor” for culture change. The job requires a thorough understanding of the fault lines in the org that can only be built over 18+ months. 

Today’s cover image is an 1878 map of Paris, showing the results of the massive rebuilding program of Baron Haussmann under Napoleon III. Most of medieval Paris was demolished (which is why Le Marais feels so different from the rest of the city today), grand boulevards were opened up, graveyards were relocated (creating the catacombs), and new cultural magnets were built. Modern Paris emerged as a result.

If you want to be that exec sponsor for culture change, three things are part of your unofficial job description:

[1] Manage the pace of change.

If you move too fast, old talent with institutional knowledge will walk out the door. If you move too slowly, the new talent you bring in will start wondering if you really intend to embrace the change you sold them on. Your job is to get it just right — let old team members depart gracefully or adjust to the new norms; keep your new lieutenants from moving too fast and tripping over themselves; and avoid impacting your customers’ experience.

By default, you need to move quickly – then slow down in some areas based on expected business impact.

How do you know you’re moving too fast? Not based on how loudly the most disgruntled employees are complaining but based on the impact on the business result. This means that before you embark on culture change, your leading indicators and revenue forecast need to be robust and pressure-tested over time.

[2] Build a cross-company network of change agents.

You need to start by building out a layer of high-performers within your own team. Before you go broad, adapt and iterate on the culture you want to build among that group. Then, just as they are ready to move up in their career ladders, facilitate cross-functional moves into key roles for them. This will not only plant a new way of doing things within other teams but also create new, informal ties across teams that were otherwise siloed.

While some functions are more amenable to this than others (e.g., BizOps teams that act as talent feeders), some of the most impactful moves that I have seen were from Sales to Product Marketing, from Ops to Marketing, from Finance to RevOps, from Marketing to HR. To learn more about hiring talent that can do this, read my previous post: Recruiting for Organizational Resilience.

[3] Protect the business result above all else.

You can’t afford for the company to miss a revenue target during this critical time – especially if the company has been hitting its targets so far. The moment it does, the change you’ve so carefully facilitated will be blamed: “Well, if we’d retained X employee, we’d have closed that deal” or “We wouldn’t have f’ed Y up if Z was still looking after it.” The old guard will be tempted to assign blame, the new team will lose their shininess, and everyone’s leash (from CEO on down) and tolerance for risk will get shorter.

This means that, regardless of what your actual scope is, you need to ensure that not only are you hitting your own goals – but the entire company is hitting the board-level targets.

It is no coincidence that these three skills – managing the pace of change, elevating the next generation of leaders, and enabling the entire company to hit its goals – often make the difference between a functional leader topping out as an SVP and a cross-functional leader accelerating their trajectory as part of the C-Suite.

Naturally, this takes time. You need to build out your own team and have confidence it’ll continue to perform semi-autonomously while you focus on high-visibility change management. You also need to understand the fault lines in the organization, including identifying not only high-visibility roles critical to future growth but also the quiet leaders who keep the company humming without much fanfare. For more on managing the timing read 18 months before $50M in ARR.

Hard conversations will be necessary along the way. You may need to layer a former trusted lieutenant, replace a well-respected leader, or fire an employee who has been there for years.

The worst thing you can do is to avoid these tough conversations and decisions. The second worst thing you can do is to make them before you build up sufficient momentum behind the wave of changes.

This doesn’t mean waiting until it’s a foregone conclusion, and everyone lets out a sigh of relief when person X finally leaves. Instead, it means building momentum to the point where most (not all) people will say: I may disagree with the decision, but I understand why it was necessary.

To build momentum and be the exec sponsor for change, you need to project excellence far outside the bounds of your own function.

   
Good CMOs know how to balance investing in long-term brand creation and achieving short-term pipeline goals that keep sales, finance, and founders happy. 

Great CMOs understand that the wider employee base, not just prospects, is a key audience consuming your brand marketing.


Good CFOs are in full command of the company’s financials, managing against multiple scenarios and carefully balancing growth investment and risk.

Great CFOs understand that their job is not to hold others accountable with sticks and carrots but to enable everyone around them to hit goals.


Good CROs know their job security is dependent on their ability to consistently hit a number.

Great CROs leverage the scope and scale of their team – including Sales Engineering, RevOps, and Customer Success – to partner with the rest of the organization and channel feedback into the product roadmap and strategic planning decisions.


Good Founders know the buck stops with them and make the tough decisions.

Great Founders build teams that are accountable to each other and rarely need to escalate to the founder.
   

Over the next few weeks, I’ll be diving into individual C-Suite roles to unpack what makes that leadership job uniquely hard, why your lieutenants make all the difference, and how to avoid topping out as a single-function leader.

Do these challenges sound familiar?

If you’re looking to unlock the next phase of growth for your team and company, I offer project-based strategy & advisory work for Founders & CxOs. Together, we’ll work through your strategic options, close your go-to-market gaps, and elevate your team.

Alternatively, consider sponsoring a 1-on-1 coaching engagement with me for your high-potential middle manager. Together, the three of us will work through a structured program that’s proven to remove their ceiling and enable you, as their leader, to do your best work.

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This post is part two of the subseries on navigating culture change as you scale. Read part one here: Rigid, Robust, or Resilient.

Over the past ten years I’ve refined the recruiting principles behind building a successful team of upwardly mobile lieutenants. Today, I’m going to share the guiding principles behind how I interview and hire.

These are the principles that allowed me to identify and hire middle managers who surpass their own expectations.

For example, among the lieutenants I hired at Pantheon:

• Less than 3 years later – one of those middle managers is doing my old job.

• Another moved from sales to product and kicked ass on both teams.

• A third unlocked a partnership that single-handedly moved the company into winning more Fortune 500 customers.

• And a fourth co-founded an AI startup :-)

Today’s cover image is Leonardo Da Vinci’s Last Supper. Here’s why I picked it:

Without the twelve disciples (i.e., upwardly mobile middle managers), Christianity wouldn’t have spread outside of the Middle East. Without one of those disciples (Peter) setting the religion on a path to global dominance (i.e., graduating from start-up to scale-up), it wouldn't be where it is today.

I. Hire for trajectory, not expertise.

I like to look for a track record of fast and continued growth – erring on the side of hiring people who are slightly junior but have grown quickly over the past 3-5 years. I’d rather hire someone who will need 6 months to fully grow into the role… and then overdeliver in 12 months – instead of hiring someone who will perform “at expectations” on day 1….and still be at the same level on day 365.

Crucially, this also supports DEI goals and ensures you build a more diverse team.

When you hire for expertise (i.e., people who’ve been there and done that), you’re implicitly inheriting the hiring and promotion biases of leaders who came before you – you’re limiting yourself to a talent pool that’s been constrained by the societal biases of Gen X.

But, when you hire for trajectory and potential – you get to shape your own talent pool, free of those biases.

II. Seek out intrinsic diversity of thought.

Our experiences shape our thinking styles, biases, and operating norms. But those experiences come in two flavors: those that happen to us (e.g., growing up in a different country or landing a job after college and sticking with that career track until now) and those that we seek out (e.g., choosing to do an internship aboard, switching careers half-way through). It’s this second type – especially when it’s driven by an inherent desire to seek out challenges that matters.

I look for people who purposefully stretch themselves out of their comfort zone – and do not necessarily present a linear narrative. When you combine this with hiring for trajectory, you start honing in on candidates with highly transferable skills.

Candidates who have been successful in multiple industries, functions, and business contexts are likely to continue to grow, adapt, and go further as part of your team too.

III. Don’t be afraid to hire a “mini-me.”

I’ve often been cautioned to avoid confirmation bias. There’s a popular belief out there that hiring people who think, behave, and have similar foundational training to yourself is a sign of close-mindedness on behalf of the leader. But the context matters here.

As a leader, your middle managers are there to make you more effective. It’s critical that you understand what is required for that.

If you’re wasting cycles figuring out how to align your communication styles – you can’t be effective. If your lieutenants convey information in ways that make it harder for you to pay attention – you can’t be effective. If the people you rely on like to figure out things as they go, while you need to plan everything ahead of time to sleep well at night – you can’t be effective.

Of course, this needs to be balanced with principle II above (hiring for diversity  of thought).

IV. Don’t interview – collaborate instead.

The traditional interview (“Tell me about a time when…”) is a crutch. A crutch meant to cover for the fact that most people can’t communicate clearly in writing.

Without the aid of back-and-forth Q&A most candidates can’t put themselves in someone else’s shoes and summarize the outcome of the work they do in a few bullets.

You shouldn’t be hiring people who can’t communicate in writing to be your middle managers. One-on-ones don’t scale and group meetings are a nightmare: concise written communication is a requirement for future leaders. A good resume should answer most of your “Tell me about a time when…” questions.

Instead, focus the live interview on simulating real-life collaboration instead. There’s a reason consulting companies like to do case interviews: it is the best way to approximate the real work they do. I like to take it a step further and simulate a 1-on-1: bring a real problem, work through it together for 30 minutes, evaluate if the candidate held up their side of the conversation and pushed your thinking forward (see principle III above).

V. Hire relationship-builders, not team members.

There’s a lot of value in building out a well-rounded team where each person will lift up the others. That means being thoughtful about the skill set and experience each person brings, balancing out seniority and backgrounds, and creating overlapping mandates.

But the reality is that most startup teams go through a material transformation every 12-18 months: leaders get promoted and move into bigger roles, a single-point-of-failure person leaves, responsibilities get reallocated, former peers start reporting to each other, etc.

How do you future-proof your hiring in this context?

Look for people who are great at building one-on-one relationships independent of the hierarchy around them. People who’ve been able to come into any team and made others around them successful, then looked around and reached across the aisle to other middle managers in the rest of the org. (For more on this: read The Magic of Middle Management.)

Is this article hitting a nerve?

Consider sponsoring a 1-on-1 coaching engagement with me for your high-potential middle manager. Together, the three of us will work through a structured program that’s proven to remove their ceiling and enable you, as their leader, to do your best work.

Alternatively, if you’re looking to unlock the next phase of growth for your team and company, I offer project-based strategy & advisory work for Founders & CxOs. Together, we’ll work through your strategic options, close your go-to-market gaps, and elevate your team.

Read Testimonials

Why does all of this matter?

For an outside example, look at Upwork. As I mentioned in my last post, over the course of 5 years, Upwork went through a massive transformation – while retaining its culture, mission, and heart. Some more context:

1. The company formed through the merger of two competitors: Elance and oDesk,

2. Went through a near-concurrent CEO and CFO transition,

3. Saw growth fall off a cliff, bottom out, and re-accelerate again,

4. Built an enterprise sales team from scratch,

5. Put in public-company-grade processes and had a successful IPO.

Three ingredients made the culture – and organization as a whole – resilient through all of it.

A middle management layer with shared norms

(Hiring principles III & V)

During the crucial scale-up years, around a quarter of Upworkers had come over from eBay (myself included). At the same time, the leadership team brought in key operating norms and habits from other current and former Silicon Valley leaders: Google, Microsoft, PayPal, Yahoo.

A deep bench of cross-functional talent

(Hiring principles II & V)

Top performers constantly moved from Analytics to Operations, from Marketing to Product, etc. When revenue growth decelerated and budgets tightened, this trend accelerated further. Cost and hiring constraints forced leaders to proactively think about their organizational design in order to maximize the impact of top talent across the company.

Leaders that developed multiple lieutenants

(Hiring principles I & IV)

Most leaders had more than one deputy and a potential succession plan. They proactively reached deep into the middle management layer to coach Senior Managers and Directors into future VPs at the company.

Come back next week to learn why you should be your own culture-demolition expert.

In other words, how to bring your existing team along as you hire new lieutenants while layering or managing out old ones.

If you enjoyed reading this post, please subscribe below, or if you’re already subscribed, share it with a friend, colleague, or peer. Last but not least, you are always welcome to read my client testimonials and schedule an intro call to learn more about working together.

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If you’re joining us “mid-season” let me catch you up:

“Episode 1”: more questions than answers: Why aren’t we hiring leaders based on their ability to build teams of lieutenants?

“Episode 2”: what’s so magical about middle management?

• Without a middle-management layer, the burden of cross-functional coordination falls to the IC level and devolves to being tactical – and, as a result, upward feedback on strategic decisions gets stuck with teams too busy chasing weekly goals.

• Leaders can’t live up to their full potential without the shoulders of middle managers to stand on. As a leader, it feels like pure magic when your teams connect the dots on their own, close your blind spots without even asking, and operate autonomously across reporting lines.

“Episode 3”: When is the right time to start building your next layer of leadership?

• 18 months before $50M in ARR is the breakeven point when it comes down to talent and org design. Growing past $50M without a functioning middle management layer in place is an existential threat.

• There are real hard limits driving this – your Go-to-Market management capacity directly constrains your quota capacity. This forces you to add middle management layers if you want to keep growing at 50%+ year over year.

• At the same time, the complexity of your Marketing, Product, and Finance teams needs to mirror the complexity of your sales org.

Easier said than done.

To add a layer of middle management and nail this transition you need intentional and ruthless clarity.

Will you inevitably destroy your culture in the process?

You need to decide: is your culture worth preserving in the first place?

Ten years ago I used to think that culture didn’t matter. I was in Finance at the time. Employees, product, and customers were all just lines on a spreadsheet to me.

That is until I joined a new company with a strong culture as a middle manager myself. 

Walking the halls of Pantheon I was taken aback by how friendly everyone was and how much easier it was to get things done when advocating for change. I genuinely felt that I was having more impact because of the culture – wasting less time on politics and spending more time debating our way to the right answer.

Over the course of my career, as an employee, consultant, and advisor, I’ve had the opportunity to experience the culture, review the compensation philosophy, and see individual salaries across a dozen different companies.

One thing is clear to me: there is a direct 10-20% cost associated with having a negative culture.

In my experience, companies with a negative culture tend to pay more for the same roles. You can consider this the “Wages of Fear” (which, incidentally is a must-watch 1953 French movie). 

I want to avoid the term “bad” culture.

Your culture can be negative from an employee experience perspective but constructive from a business performance perspective (potentially justifying the payroll cost premium).

Amazon, famously, has a strong culture that’s not for everyone. The first time I interacted with an ex-Amazon leader, I felt offended and silenced. The second time I was cautious and focused narrowly on the task at hand. But by the third time, I recognized how the Amazon culture made them so effective in their job.

What makes a culture constructive? A constructive culture needs to be:

• Easily summarized into a set of operating principles that employees can adopt,

• Built into business processes and decisions – the what, not just the how or why.

Marketplace businesses are a great way to illustrate this because, compared to B2B SaaS, they have more ambiguous trade-offs to manage. For example, the perennial question is whether “by default” you choose to favor buyers vs. sellers. Or which teams are elevated to lead the growth charge when no team can single-handedly move the needle?

Take eBay, for example. Its culture stemmed from the belief, articulated by the founder Pierre Omidyar, that “people are basically good.” This showed up everywhere you looked: the trust required to transact online in the 1990s, the way employees treated each other, how the buyer-seller dispute resolution process was structured… even the way M&A was handled (which, incidentally, was part of my job.)

Compare and contrast this to other marketplaces which often have a version of this boilerplate: Trust - Team - Community - Results.

What is wrong with these values? There’s three too many; and all four of them are too generic to be built into your business processes.

The finance team measures results;

        The product team advocates for community;

                The leaders each focus on protecting their own team…

                                        …and trust is lost in the shuffle.

But if you do have a culture that drives a business result and warrants preserving — how do you add a whole new layer of management while protecting the culture and maintaining your growth in the process?

Enter the 3 Rs of culture:

• Rigid – this is where most “strong” cultures fall. They’re driven top-down, often by the founder. They have a hard time with change. When they break, these cultures are hard to rebuild. And all of them do break eventually, because so much depends on the founder’s personality and their ability to be superhuman in the face of adversity.

• Robust – next step up, are the types of cultures you’ll often find at successful public tech companies (like eBay). They’re stable over the years and a key driver of business performance. When new leaders come in, they adapt to the culture instead of shaping it in their image. 

• Resilient ← This is where you need to be as a fast-growing startup.

Let me illustrate with an example from another marketplace.

Within the span of less than 5 years, Upwork:

1. Was formed through the merger of two competitors: Elance and oDesk,

2. Went through a near-concurrent CEO and CFO transition,

3. Saw growth fall off a cliff, bottom out, and re-accelerate again,

4. Built an enterprise sales team from scratch,

5. Put in public-company-grade processes and had a successful IPO.

Almost the entire leadership team that took the company public pre-dated the merger.

Through all this, the culture changed. A lot. But it remained constructive: both from an employee experience and business result perspective.

The culture at Upwork remained constructive and resilient over 5+ years because of a strong sense of mission combined with a bench of middle management talent that propelled the daily operations forward and, in turn, freed up leaders to see around corners.

Next week I’ll continue exploring culture — and share what, in my view, made Upwork’s culture resilient (and constructive). And how you can build one within your startup.

This is the end of Part 1: Is your culture worth preserving?

  
We’ll continue with the 3 Rs of Culture next week:

Part 2: The recruiting strategy behind a resilient culture.

Part 3: Be your own culture demolition expert.

If you enjoyed reading this post, please subscribe below, or if you’re already subscribed, share it with a friend, colleague, or peer. Last but not least, you are always welcome to read my client testimonials and schedule an intro call to learn more about working together.

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PS: Today’s cover image depicts the execution of Savonarola in 1498 – a Dominican friar who captivated Renaissance Florence and led its people to burn their cultural possessions. Among those, reportedly, was Sandro Botticelli burning some of his own paintings. Needless to say, Renaissance culture turned out to be resilient.

To recap last week’s post (The magic of middle management):

• Middle management is where the balance is struck between having the context-specific expertise to go deep in one area every day vs. having the ability (and time) to step back and understand goals that you’re not directly responsible for.

• Without a middle-management layer the burden of cross-functional coordination falls to the IC level and devolves to being tactical – and, as a result, upward feedback on strategic decisions gets stuck with teams too busy chasing weekly goals.

• Leaders can’t live up to their full potential without the shoulders of middle managers to stand on. As a leader, it feels like pure magic when your teams connect the dots on their own, close your blind spots without even asking, and operate autonomously across reporting lines.

But here’s the $$$ question: at what point on the journey from $10M to $100M in revenue does the lack of middle management become an existential risk?

If you add an extra management layer too early it will:

• Slow down decision-making – instead of allowing leaders to focus on “bigger” decisions.

• Lead to an explosion of 1:1s – instead of setting up semi-autonomous teams that operate in lock-step.

• Default to decision by consensus – instead of proactively identifying opportunities and risks.

So, as a prudent steward of company resources and the cap table, you need to know: how late in my company’s journey can I wait before I add this middle management layer (without taking on an unreasonable amount of risk)?
   

If you’re in B2B SaaS, 18 months before $50M in ARR is the breakeven point when it comes down to talent and org design. Growing past $50M without a functioning middle management layer in place is an existential threat.

The impact to new business sales is easiest to quantify here. A few rules of thumb to keep in mind:

• At $50M in ARR you need to be growing at least 40% YoY in order to reach IPO “escape velocity.”

• The best performing startups get ½ of their growth from expansion i.e. 120%+ NDR (Net Dollar Retention).

• Quota achievement declines rapidly when the span of control (ratio of sales managers to individual contributors) exceeds 7.

• For fast-growing startups the de-facto span of control is 5: you need to create room for more coordination, problem-solving, coaching, and ongoing hiring.

• A high-performing enterprise seller, when setup for success, can achieve ~$1M in bookings per year.

This means that without middle management you can support:

5 AEs per manager x $1M in bookings per AE x 2 sales front-line managers

= $10M in New Business

plus expansion (120% NDR) → $20M of total growth on a base of $50M = 40% YoY

Why only 2 sales front-line managers?

Your Head of Sales also has a cap on their span of control. Without middle managers to support them, they’ll need to manage 7 people directly:

• 2 sales front-line leaders (to deliver $10M in new business)

• 2 AM/CSM front-line leaders (to deliver a similar $10M in growth from NDR)

• 1 SDR leader (based on a 2:1 ratio of SDRs to AEs)

• 1 Sales/RevOps leader

• 1 SE leader

Past this point, without middle management in place, your growth slows down rapidly: you keep capping out at $20M in new bookings per year

It looks like this: $50M → $70M (+40% YoY) → $90M (+29% YoY) → $110M (+22% YoY). All of a sudden, you’re on a path to hit ~$100M with only ~20% growth – metrics that are not good enough to raise another round on or go public.

This constrains your choices:

Run a cash flow break-even company or get bought for 3-4x ARR. Both of these are, arguably, existential risks in a venture-capital backed context.

A death spiral could look like this: you’re forced to take a down round, you slow down or even freeze hiring, morale suffers, your best talent quits, your growth slows down further as a result…

Bringing in middle management allows you to scale past +$20M in New Bookings and maintain 50% growth on the way to $100M in ARR.

An extra layer of leadership removes the constraint of having only 2 front-line managers for new business and, in turn, puts capabilities/systems in place to expand the span of control from 5 to 7.

If you’re an early stage startup, you may choose to call this layer “VPs” instead of “Directors” (I would advise against this – and will cover the trade-offs next week), but the reality is that their job description, as captured in the Abacus & Pencil career framework, is that of a middle manager – to coordinate cross-functionally on the way down and aggregate feedback into patterns on the way up.

Last but not least, the middle management layer needs to already be in place and functioning well if you want to avoid a mad rush the moment you hit $50M in ARR. To do this well you need an 18 month head start!

You’re solving for consecutive ramp periods: 6 months for middle managers to ramp + 6 months for them to start humming as an organizational layer + 6 months for all the ICs they hire to ramp under them.

In my view, the best way to do this is by hiring upwardly mobile high-potential senior managers / directors who can grow into a director / senior director / VP role in 18-36 months. (More on that in next week’s post.)

What about the rest of the company?

The complexity of your Marketing, Product, and even Finance teams needs to mirror the complexity of your sales org.

Here’s a non-exhaustive list of what you’ll need to support a multi-layer GTM org:

• Director of FP&A. The moment you start bringing in a layer of decision-makers between your executives and front-line managers you need a proper budgeting and planning processes to empower them – otherwise, these new leaders will quickly devolve into glorified supervisors. In parallel, you will also want more checks and balances on headcount approvals, discounts, sales commissions, etc.

• A product marketing team. More AEs & AMs means you need repeatable messaging and positioning. You can no longer rely on hiring the handful of sales talent out there that’s capable of figuring out their own narratives, packaging, processes etc. Ditto for a sales enablement team. 

• Middle managers in Product. While you may think your PMs don’t need much supervision and guidance you will need to have someone ready to ingest, direct, and prioritize the torrent of feedback that is likely to come from a larger sales and marketing org. Middle managers in GTM need peers in Product & Engineering to partner with. Without this, the company will tilt too quickly from being guided by multi-year product vision to quarterly sales execution. (More on that next week.)

Let’s pressure test this “18 months before $50M ARR” rule of thumb.

Here are some counterexamples that, in fact, confirm the general rule.

You may be able to get away with not hiring sales middle managers if…

1. A big chunk of your growth is self-serve (e.g. B2C, PLG) and doesn’t require sales people. But if that’s the case…that same complexity and the need for middle management is likely hiding in your product and marketing orgs (it’s just harder to measure).

2. You are selling very large deals, have amazing product market fit, and are hiring high-performing $300K+ OTE talent: then each AE could conceivably deliver $2M+ of growth instead of $1M. But if that’s the case…all you’re doing is shifting complexity and the need for middle management into your AM/CSM/SE/Eng orgs. Large customers will require more people involved in the sales process, more layers of support, technical implementation, compliance & security, etc.

3. You’re happy to hit $100M in ARR, growing at 20%, and running the company at break even. Then perhaps sell it at a 5x multiple. But if that’s the case…you’re executing a very tight balancing act in finance – and will need layers of middle management in place to keep everyone focused and cash-efficient. (Is anyone ever truly happy when an oversized finance org is telling them what to do?)

Next week I’ll talk about how to best upgrade or introduce this middle management layer if you don’t already have one. Paraphrasing a comment in response to the first post in this series:

Without intentional and ruthless clarity, you move slowly or not at all. Will you inevitably destroy your culture in the process?

Specifically: 

• Should you hire upwardly mobile high-potential senior managers / directors and let them grow into more senior roles?

• How do you upgrade your talent while ensuring continuity and keeping the existing team motivated?

• As the balance of your headcount shifts from ProdEng to GTM, how do you protect the company’s ability to prioritize a multi-year product vision – and not over-index on quarterly sales execution in its decision-making?

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PS: Today’s cover image is The Businessman from Le Petit Prince

If you missed the previous post you can read it here.

Let me summarize them below – I’ll touch on some of the underlying themes today and address others in depth in the coming weeks.

1. With the right product you can get to $100M ARR without any mid-level management. Why can't you just hire those Directors and VPs later?

2. Without intentional and ruthless clarity, you move slowly, or not at all. Will you inevitably destroy your culture in the process?

3. What should I do if finance won't let me pay the $$$s required to attract the upwardly-mobile high-performers that will form our next layer of leadership?

4. How do you match people's horse power with their career path vs. their point-in-time experience or prior job title?

First, we need to understand what middle managers do. And explain why they aren’t just paper pushers (or rather, shouldn’t be).

When I talk about middle managers I mean the two highlighted rows below in the Abacus & Pencil Career Framework. I have developed and used this framework over the last fifteen years – from structuring my own career, mentoring my teams, to guiding my clients. This view of the career ladder has held true across Fortune 500 companies, Series A/B/C startups, and pre-IPO unicorns.

The framework is self-calibrating: it helps you determine the appropriate level of talent for each role based on the expectations of how they relate to everyone else around them. Of course, an Engineering Director at Google is a totally different kind of role vs. a Customer Success Director at a $15M ARR Series B startup – but that difference is captured in the ability to influence your peers. This makes the framework portable across industries and company stages.

There’s a certain magic that happens as we move through that middle manager layer.

The difference isn’t that the more senior you are the more decisions you make – everyone, down the the newly hired SDR, makes $1M+ decisions (e.g. by choosing which leads to qualify). The difference is whether the direct consequences of the decisions you influence are borne by you and people in your direct reporting line vs. elsewhere in the organizational reporting tree.

The middle management layer is where the balance is struck between having the context-specific expertise to go deep in one area every day vs. having the ability (and time) to step back and understand goals that you’re not directly responsible for.

The key is that the second part of this balance (stepping back to dig into goals you’re not responsible for) is in many ways optional.

Directors don’t get fired because they failed to connect the dots between customer success and engineering. Afterall, they’re not responsible for org. design or setting strategic priorities.

This means that, as a middle manager, you have only career upside (no downside), if you carve out the time to help lift up your peers.

It’s precisely this career risk-free opportunity to connect the dots that encourages a middle manager to raise their hand and say: “Hey, that story we’re telling investors doesn’t match what the teams are doing every day.” or “There’s a risk nobody is talking about, and I think it is my job to surface it for the leadership team.”

AS A LEADER IT FEELS LIKE PURE MAGIC WHEN YOUR TEAMS ARE CONNECTING THE DOTS THIS WAY. When they close your blind spots without even asking and start operating autonomously across reporting lines.

What does this mean for a VP or CxO?

A strong middle management layer enables VPs and CxOs to do their best work. A CEO cannot influence teams at scale - set the culture and direction of the company without having 1:1s with every employee - without VPs to reinforce it across the teams. Similarly, a VP won’t have the time to reinforce that direction and make thoughtful muti-quarter decisions around it, if they’re busy coordinating day-to-day execution with a dozen other VPs, or, worse, holding their ICs directly accountable through constant check-ins.

This means that leaders can’t live up to their full potential without the shoulders of middle managers to stand on.

There are always exceptions to the rule (I’ve met some), but exceptions don’t scale.

Let me illustrate that using the same table.

Without a middle-management layer the burden of cross-functional coordination falls down to the IC level and devolves to being tactical – and, as a result, upward feedback on strategic decisions gets stuck with teams too busy chasing weekly goals.

Over the course of this quarter I’ll keep exploring this question: Why aren’t we hiring leaders based on their ability to build teams of lieutenants?

Next week, I’ll talk about where on the path to $100M in ARR this goes from a nice-to-have to becoming an existential risk.

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My first project was to raise the Series D. Here’s how some of it played out:

1. Investors would send over follow-up questions after the first/second meeting. I’d go to the relevant executive. They would tell me a highly contextualized story. One that was more likely to be true than not, but rarely backed by bottoms-up data.

2. Often this high-level answer had gaps. So I went to the most junior analyst I could find, asked them for access to the raw data, built my own analysis, developed my own story, and answered the question.

Asking the executive or the analyst were the only two options – there was no middle management with whom I could have a data-informed forward-looking conversation.

On paper there was a Senior Manager to Senior Director layer. In practice, at the time when I joined (well into double digit ARR), there was nobody in the company who could actually say “Here’s what we objectively know, here’s how we think about it, and here’s what we’re doing with it.”

Here I was, 30 days into the business, mapping data to our product vision for the first time in the company’s history. Validating if what the executive team believed matched what the individual contributors experienced in the field. All of this being driven by incoming investor questions.

Eventually, we fixed the issue by hiring a layer of VPs, but my open questions remained:

(1) How could the company get to $XXM in ARR and still think this is OK?

• Why did the analyst looking at the data not raise their hand and say “Hey, I actually have data to help you think through that story you’re telling”

• Why did the front-line manager not recognize that their job isn’t just to pass instructions down and supervise, but to also help leaders make better decisions?

• Why did the executive not nurture the behavior described above?

(2) Why did it take another two years for the company to acknowledge this was a talent and not a BI systems problem?

(3) Was hiring VPs the right answer…or should we have been up-leveling the Directors?

The reality is that Pantheon wasn’t unique in this regard. I see this over and over when I work with Series A/B/C startups. When I see companies stumble well past the point of proving out initial product-market fit, miss that growth goal, and delay the next raise – 

• 20% of the time it’s because they had the wrong strategy

• 30% of the time because they missed a market or economic cycle

• 50% of the time it’s because they didn’t have good middle managers to execute

So, my question is: why aren’t we hiring leaders based on their ability to build teams of lieutenants?

Not simply large teams of individual contributors – but impactful teams of potential successors.

I’ll attempt to break that down over the rest of the quarter.