[The following is the full raw transcript for a LEADx Podcast interview, which has been lightly edited for clarity.]
Kevin Kruse: Today on the show, I talk to a startup CEO who's grown his company to 100 million dollars in revenue in less than ten years, and he's doubled his headcount in the previous 12 months. He also won the best place to work in the state of Washington along the way. He talks about their slow start and the value of patience, he shares their discipline around goals and metrics, and why you shouldn't be thinking about cultural fit when you're hiring. But first, don't forget to visit LEADx.org where you can get a free training video each day of the week and check out the LEADxAcademy, where you can get on demand access to over 30 world-class management and productivity courses LEADx.org.
Our quote of the day: “Great works are performed not by strength, but by perseverance.” By Samuel Johnson.
Our guest today is the CEO of Smartsheet, a work management software company doing 100 million dollars in revenue, and they were recently valued at over 800 million dollars in their last round of venture capital. Smartsheet was also named the best place to work in the state of Washington. Our guest is Mark Mader. Mark, welcome to the show.
Mark Mader: Thank you, Kevin. I appreciate it.
Kruse: So, I always start our guests off, no matter who they are, with the same first question, because I'm fascinated by failure stories. I always say I don't really believe it's win or lose, it's only win or learn. So, I'm hoping you will start by telling us a story of one of your best failures, and what did you learn from it?
Mader: Well I think one thing, Kevin, is, failure's an interesting topic because a failure is somewhat in the eye of the beholder. What one person thinks is an utter failure is another person's massive success. I think one of the things that I would describe as a sort of something that was out of calibration, and I would say it's borderline failure was the expectation we set for ourselves in starting our company Smartsheet, and the speed with which we could/would experience success, as measured by customers, revenue, employee size, what have you. Getting funding. And I would say we were so optimistic out of the gate that it was going to be a 12-month, 18-month get market fit, get funding, do the investment.
At the four-year mark, when my lovely spouse said, “Mark, weren't we supposed to be further along by this point?” That was an incredible challenge, and I would say in one part of failure in the sense that we had such unrealistic, yet driving, expectations, where we missed the boat on that actually.
Mader: But in the same vein, those failures are incredible teachers. And I've very grateful for the team we had that we recognized that, and in the second pass when we doubled down, we actually had a much more finely-tuned expectation model, one that ultimately succeeded.
Kruse: So it takes some patience, especially in start-up mode. I think entrepreneurs by our nature, it's optimistic and risk-taking and impatient, and sometimes we just need to assume it's going to take a little bit longer than we think.
Mader: Yeah, and when you think about most, and again looking at it now more than a decade after we sold our first customer, you realize that some good things in life, they actually take time.
Kruse: Yeah, that's a great reminder. Great reminder.
Mader: Which is such an interesting statement alongside “fail fast,” and “Make the decision in the moment.” It's like yeah, sometimes you just have to let the game play out.
Kruse: Yeah, that's great. And a follow-up question I sort of ask all of our guests, this being the LEADx Leadership show, I'm curious what leadership advice would you give to a younger first-time manager who, she really wants to develop as a strong leader, but it's her first time with a team of her own. What would you say to her?
Mader: Mm-hmm (affirmative). I would give advice to not over-index on the things that you believe great leaders do. And what I would say there is, you have to really coach yourself to be a continuous learner and a listener. And very oftentimes people associate leadership with setting direction and having all the answers. It's actually not the case. I think the best leaders that I respect that have really helped teach me have been those who are so insanely curious, and they realize that anybody on the team whether it's their second day, their tenth year, they're Ph.D. status or they're a recent grad, everybody has a piece of knowledge to contribute. And if you believe that, I think that is something that young leaders often forget.
Kruse: That's great. Great advice. A topic I've been curious about a lot lately is the use of how as managers, as leaders, business builders, how we can use goal setting and metrics along the way. And I think Google certainly didn't invent it, but they have objectives and key results, OKRs that they kind of became known for. Other companies use key performance indicators, KPIs. And I'm just curious, personally have you relied on goal setting and metrics in your own leadership journey?
Mader: We have, and I think the one piece that I would say people tend to focus on heavily is the output goal. And that's great so you can have your objective and your key result. And people might think of what's our average sales price? How many customers do we have? How many in the global 2,000 do we have? At what time did we ship that product? And those are all great output goals. But it is also extraordinarily helpful, what we've tried to do in the last couple of years is to go upstream and go to the input goals. So what are the things that influence the outcome? And very often, it's the obvious outcome metrics, revenue, customer count, et cetera, which people are fixated on. But when you look at that output goal, you need to look at the things that drive the result. So, I think the term OKR, super popular, used by many, we try to be very intentional about that input goal. What are the things that actually are upstream indicators?
Kruse: That's great. Things that are in your control earlier in that process, in that cycle.
Mader: Yeah. And I think one of my leadership philosophies and management philosophies is, break the problem down. And we might have an output goal of customer count or large companies. Well, that could be influenced by a multitude of inputs: What is the awareness we're doing? What type of enterprise features that are we building? What type of sales reps have we been able to hire? And when you break that down, it’s much more palatable and not as intimidating. And part of onboarding the team and getting people confident is simply, break it down, make it feel reasonable and achievable. And I think the input method is a really helpful way of doing that.
Kruse: In your own company, I mean, how closely do you watch these metrics, these goals, whatever they are? I mean is this sort of a quarterly review, end of the month, do you have real-time dashboards? I mean, how intense is it?
Mader: About that closely. Super closely, Kevin. This has to be part of your cadence, and this is not something that is just done in conversation. This is done using tools. It is done using business intelligence platforms that give you both real-time in some cases, and other times factored results. And if you do not stay mindful of the KPIs and those inputs, what ends up happening is you get fixated on the things that are on fire. And again, you might miss some really important, less compelling, less interesting maybe, inputs that are still really important. So, you actually have to do that checklist.
You have to go through that, and we use mechanisms like monthly business reviews, we do an extended management meeting every month, we do a management meeting weekly during which we identify a select number which we review in person every time. And then we also, leading into those, require there to be a pre-read. So, when you come to that meeting, you're not looking and say, “Oh Kevin, well thanks, I'm going to interpret that on the fly and see if I have a question.” You come to that meeting prepared, and the business owners are not only responsible for their inputs and outputs and how they track the objectives, but also their peers. So, it's that cross-border support and management that we are very high on at our company.
Kruse: And does this cascade down? I mean, does a frontline manager typically have one or metrics that he or she is looking at planning these monthly review-type forums?
Mader: They do. And in these monthly business reviews, it's not the VP who is presenting. It is the person who is owning that metric or that input. And there's nothing lost in translation because they are the team. And so that team is pretty big. We have an overall team of close to 800. We probably have close to 45 people participating in that MBR.
Kruse: Oh wow, that's a big group.
Mader: Big group of people.
Kruse: Yeah, that's great. Yeah, there's nowhere to hide in that kind of setup.
Mader: No. But it's enlightening, right? That's where you also spark some of that innovation, so you may be on the engineering side. They may be on the marketing side. I hear something that you're presenting on or you're struggling with or trying to figure out. I am a big believer in cross-discipline ideation, and we've seen some really neat stuff come out of that forum.
Kruse: Not to go too much deeper into this, but now you sparked my curiosity about your monthly business review. About how long of a meeting is that? Is that an hour? Is that a day?
Mader: Half a day.
Kruse: Half a day, and people present, roughly 45 people that are there present opportunity to challenge or question on these metrics as well.
Mader: Mm-hmm (affirmative), and that's one vehicle. I mean, we have other vehicles like we do narratives on the key investment areas of our product. So, that is someone you don't get to sort of short arm it with a Preso slide, you actually have to write. The written word, paragraph form. What's your point? What's your hypothesis? What are the dependencies? So, there are a multitude of things that we do, but the MBR is obviously a big one. And as we go into the annual planning process now, the narratives play a larger role. I'm responsible for strategy document, which each of the divisional narratives should support and relate to. So that at any point when we hire a new employee or we expect a team to do something, they should be able to say, “Ah, I'm doing this in support of, my job has a purpose because, it is in benefit of a customer, a partner, a shareholder”. And again, that's the aspirational statement.
I'll be the first to say, “Do I give us an A+++ across it?” No, of course not. But that's the mechanism we utilize, and that's what we strive for.
Kruse: And clearly you're an industry veteran. You've been using these practices for some time. Where did you learn of them? I mean, was it business school? A great executive coach? Others who influenced you in some of these practices?
Mader: Well, part of it is working with a fantastic group of investors, and we have a very generous investor group with Insight Venture Partners, Sutter Hill out of California and Madrona Venture here in Seattle. So, across those team, that's a huge number of portfolio companies. And that's one of the values of outside investors and boards and really asking for guidance. Who are your top companies? What did they do? So that's one aspect. The other aspect is really developing a team that is not entirely from one prior company or sort of up from within. So, it's a combination of amazing people we've had on board for a long time combined with people we've hired from Oracle, NetSuite, Box, Amazon, Microsoft, and you have a lot of this meld going on where you pick and choose. You pick and choose and you create your own method as a result.
Kruse: Now, Smartsheet was named as one of the best places to work in Washington for 2017. You've actually won several great workplace culture awards. While you've had incredible growth, it's one thing to maintain great workplace culture if you've got a small team or even a large team that's not growing. You've been growing fast over the last five years. So, what are some of the secrets to creating that great place to work environment?
Mader: Yeah. Well, I think it's an interesting year, Kevin. We're just finishing the last month of our fiscal year. And this year we will have added more team members than we had on the roster heading into the year.
Kruse: Oh wow.
Mader: And we also won the best place to work in Washington State this year, and we're very proud of that. And but what I would say the thing that I highlight most in my new employee orientation is really making sure that the team members regardless of title, age, gender, what have you, everybody's voice has an opportunity to be heard. And that's easy to say, I mean everyone else, “Oh, of course, that's rational. That makes sense.” It's really flipping hard, Kevin, to live that. It's really hard. So, that means when you have feedback forms, which my Head of People Operations and I have been using our product, we enable people to provide feedback anonymously, have their name associated to it. We look at every Glassdoor post. We are always listening. And if somebody has the courage to speak up, and it's somebody with who you have an interaction once every three quarters, you better receive that well and you better treat that like gold.
Mader: And I mean, I get pretty passionate about that when I describe it, I see so many people solving the most incredibly complex things in the world, and then the basics of civility, responsiveness, acknowledgement, support, they screw it up, Kevin. And it's like, “Holy smokes, do the basics.” They're hard though. It is not free. So, that is my very passionate plea towards engagement and support and openness. I would also say that I start off my new employee sessions by saying, “Values don't matter.” And they're like, “What the hell did he just say?”
Kruse: Where did I sign up?
Mader: Yeah, that sounds like a really awesome, warm, supporting environment. And my point to the whole thing is values obviously do matter, but it's the method by which we deploy those values, and live those values. If I say, “Kevin, I'm supportive, I'm innovative, I'm driven.” You're like, “Mark, would you please zip it? You have not given me, shared one story as to how you actually are that.” So, when I think about what I value, sure those attributes and adjectives are important, but I think about how observant is someone? Are they deeply curious about how you as a customer or a partner, an employee, a shareholder are experiencing Smartsheet? What do you do with that observation? If you care, you probably have an idea that comes from it.
Most people give themselves the gold star once they've observed something and have an idea and say, “Kevin, look how smart I am.” Watercooler talk, “Hey isn't that terrible. Isn't that great?” And it dies. The hard part in life is actually checking down and ask that next question, what I call the research. And I think a lot of young people also coming into the workforce believe that best idea wins. It's actually not the case. It's the best idea that is most effectively presented, and where other people are enrolled and develop a caring for it and a support for it, that even get the chance to be executed. So, observe, ideate, research, recommend, execute. Those, alongside values, you create an unbelievably strong, durable culture. And I would not want to compete against a company that has that.
Mader: Because that creates sustainable, continuous innovation, customer love, revenue growth. So, we're in out eleventh year now of north of 60% year on year growth. And that's super exciting, but it's not because it's a great product. It's not because we got lucky once or twice. It's because you celebrate the little things that go into them, and a lot of those things don't get the headlines. But it's what creates a very, very strong foundation.
Kruse: The challenge that you mentioned as we're talking about culture is, I'm curious how you found and recruited all those employees in a 12-month time period. It's not like you're the only tech company in Washington, right? You've got some stiff competition. What's your advice or what are your secrets to really, I mean, being able to recruit and onboard that many people in an environment where there's a lot of tough competitors?
Mader: Yeah. I think you have to, I can speak to what I respond to and how I try to project that in interview settings. I need to wake up every day feeling like what I'm working on, and who I support, matters. It's that simple, Kevin. And there needs to be some intellectual sort of challenge as well. So, there is no substitute for customer stories and how it is positively impacting an individual, a team, a company who in turn is helping their customers. And the beautiful thing about our model is as a team of 800, we serve about 74,000 distinct brands around the world. So, whether you're talking about sending spaceships into there, running the football championship which we've done for the last four years on our platform. Whether it's helping the Holocaust Museum on the East Coast. Pick your poison. Any industry, we help people work better together and to achieve a level of insight and sanity which our employees are proud of.
Now, what you have to do though, you have to figure out; how do I convey that in the context of a job posting and an interview, right?
Mader: It's good for us to know it. And I think that's where the cultural advantage comes in, where if your next employee who joins you within months can speak to that candidate with that type of believable passion, people can sniff it out, Kevin. I mean, I give people and candidates a lot of credit. They have been around the block. They know what's true. And I'll be the first to say, we are not the perfect fit for everybody. If you are more mechanical and you're not very empathetic and you're kind of like, “Yeah, Kevin was awesome last month, but he's kind of dragging this month. We should swap him out and not give him a chance.” You're probably not going to be a great roster spot.
The one thing I learned from a really successful Northwest company, this is an example of sort of taking a play out of someone else's playbook, I was at a CEO meetup, and the CEO from Eagle View Technologies, which was a very successful imaging company, he said, “Mark, we do this thing called the Spokane test. And I have adopted the Spokane test in full in my interview process. So, what that means Kevin, is if you and I were interviewing, and you meet all the criteria and all the skills, the experiences and all that, you would think that you'd get the offer. But the last step is the Spokane test, which is, I look at you and I say, “What is the likelihood if Kevin and I drove to Spokane from Seattle, which is 250 miles east, would Kevin throw me out of the door, or would I throw Kevin out of the car?”
And again, one interaction interview doesn't a love connection make always, but across the set of interviews, if everybody believes that, hey, this is not only a culture fit, but a culture add, that's a huge de-risking mechanism. And I take the culture fit, culture ad from a book I recently read from Magdalena Yesil who's a new board member, a fantastic new board member who came in this last year. And she talks about the culture fit statement, which is often heard in debriefs. It's really just maintaining the norm. And you shouldn't do that. How do you improve it? So, I give her credit with the culture add moniker.
Kruse: Yeah, you saw me jotting that language down. It's the first time I've heard that, and it really explains a lot and packs a lot into just a few words, and especially as we're all now trying to get more diverse in thought and everything else, whether it's at the board level or through our organizations, culture fit can often sort of that code word for like, “Not like us,” and out the door they go. And instead, we should be thinking about a culture add. I like that a lot.
Mader: Yeah, I should shout out, she just published her book called Power Up. I cranked through that in a weekend and see really some wonderful insight. She's an amazing lady, first generation, came over from Eastern Europe, the first investor in Salesforce. I mean, she is a heavy-hitter with amazing insights. An incredible lady.
Kruse: That's fantastic. So, when it comes to Smartsheet, what are you most excited about these days?
Mader: I think the reach and the impact. I still, I'm so grateful for being able to serve tens of thousands of businesses globally. And one of the things that we've been able to do over the last couple of years is to continue to innovate at a fairly torrid pace. And that is when we started the company, it was all about how do we help people better track and manage and report on the information that they manage day-to-day? And it was observed that people had for so many years used basic productivity tools like Excel and Word to track their work. And those think like heavy systems like a European CRM, but think about the 60% of the job that isn't those things.
Mader: And when I think about what we satisfied initially by enabling people to just track this work and then share it, and now helping them get into this realm of automation, and the automation is one where, as a non-developer myself, I have a tremendous passion for empowering people who are not necessarily technically skilled. And when I think about markets that are ripe for disruption, if you are underserving 90% of the population, there's an opportunity. So today, there are about 900 million knowledge workers globally, about 25 million technically competent knowledge workers. Okay, well you're alienating 800 plus million human beings from using technology to its full advantage. So, my passion in upcoming years, continuing to increase the value that technology brings to everyday business users, their leaders, and not be gated by, “Hey, can we get that dev? Hey can we get that?” Because whenever you add that, you introduce cost, you introduce latency and you introduce scarcity. And that scarcity thing is not actually improving, it's worsening.
So, I'm very excited about what we're doing in the automation space. I am so bullish on the potential of technology for people that I think when you actually ignite the potential in hundreds of millions of people who otherwise have been just sort of hand-to-mouth using basic tools, I think the returns are going to be extraordinary.
Kruse: They certainly are, and it shows, again, despite all the success and growth you've already had, how it's still early in your own journey. Because there are so many more people to serve. So many more organizations that can benefit.
Mader: Yeah, so early. Early innings.
Kruse: Early innings, for sure. So, how can our listeners find out more about you and Smartsheet?
Mader: Smartsheet.com is our website. That's where our 75,000 come every day to use us. And we have a blog out there. My LinkedIn profile is Mark Mader. And we post to that occasionally as well. And that's the best way. But a lot of our philosophy and beliefs are projected through our product and service, so we encourage everyone to try.