Congratulations! You've gone public, something to which many founders aspire but few achieve. In addition to the extra wind in your sails from the capital markets and the quarterly scrutiny of your performance (both huge factors to adjust to), you have a third concern: the stock price.
The stock price is a brand new unknown for founders of newly public companies, and (like everything else) no one really gives you a guide on how to do it well. For instance, how do you handle the balance between retaining the stock you own personally to show confidence in the company with your prudent desire to sell some stock and diversify? How do you keep in check your own PR, which can distort your perspective? And perhaps the most important to the health of your company, how do you mitigate the stock price's effects on your company's culture and prevent it from becoming a daily distraction which can impact employee morale and motivation? These are all questions I grappled with in my journey leading Zillow as a public company, and they are questions I receive periodically from CEOs of newly public companies.
1. Preset a Plan To Protect Yourself.
The roles of founder and personal shareholder will inevitably lock horns from time to time, and you need to protect both. My advice is to pre-set a plan for selling stock and creating liquidity for yourself, because every sale you make as CEO will be subject to scrutiny. A programmatic 10b5-1 plan helps you do this, as it allows you to sell a predetermined number of shares at a predetermined time. You don't have to pick and choose a date or price, and you don't have to explain to anyone -- shareholders, hedge fund managers, employees -- why you sold because it's all programmatic.
With a predetermined plan, you still need to decide frequency and quantity. It's nearly impossible to give blanket advice here, because everyone's situations are different. I've always opted to sell small amounts of stock along the way, and even though I've sold plenty of stock at lower prices than today's, I've never regretted a single sale. With a distributed approach, you can't really "mis-sell" at the "wrong" price.
In terms of how much to sell, if you haven't taken much liquidity to date, think in terms of what percentage of your holdings you'd want to sell in a given period of time. For example, a starting point could be aiming to sell 10% of your holdings each year for the first five years post-IPO, then reassessing this approach two or three years in. Taking more liquidity early on puts a premium on building your nest egg, enabling you to let plenty of stock ride in the long term but still putting away potentially life-changing money in the short term.
2. Invest in Objectivity To Keep It Real.
I cannot emphasize enough the importance of an outside advisor to help with personal money management and investment strategy. As a founder, you are the number one believer in your company because you brought it into existence. Of course it can be worth $100 billion someday. Why would you ever sell a single share of such a promising venture?
An outside advisor provides the more conservative end of that spectrum, tempering your unshakable conviction in the reality that most companies don't reach that stratosphere. Neither one of you is absolutely right, but representing both perspectives will land you somewhere in the middle where you're committed enough to the cause but diversified enough to protect yourself.
Please don't think you're immune from this blind spot; even the most cynical and risk-averse founder will believe their own PR and fall victim to it in the absence of objectivity.
3. Don't Let Stock Seep into Your Culture.
For newly public companies, stock is a valuable lever for attracting top talent. But once that talent is in the door, they shouldn't hear about stock anymore, outside compensation statements. Owning and selling stock is their business because they've earned it, just like they've earned their salary. Never give your people, including executives, a hard time for selling stock. Sometimes I hear stories about CEOs berating employees for selling shares, and I think it's one of the most ridiculous and damaging things you can do as a leader. As with everything in your culture, you set the tone for this at the top.
At Zillow, it was taboo (intentionally) to even talk about the stock price; we discouraged focus on the stock among our leadership and employees because it's terribly short-term, and companies that last focus on the long-term. There was, however, a time when I broke my own rule: The year we launched Zillow Offers, a game-changing evolution that expanded Zillow's business from media into hard assets, our stock price plummeted and many newer employees were completely underwater. There was anxiety afoot, and we needed to address it.
At our annual meeting, I showed charts of Amazon's stock price when it launched major innovations like third-party marketplace, Amazon Prime and AWS. In each of these instances, the stock took significant dives: -94%, -56% and -60%, respectively. I then showed Amazon's ascent to current day to make a point we'd made all along: Stocks go up, and stocks go down. Take care of our customers and focus on the long term, and the stock price will take care of itself.
My team and I debated the decision to break precedent and discuss the stock price internally because on the surface talking (at length!) about the stock price went against what we'd ingrained in our culture. But a couple days after our meeting, an employee emailed me with a heartfelt thank you for doing so. He appreciated the message to focus on the long term while recognizing the short-term realities of the stock fluctuation for employees -- in his example, money he and his wife were counting on to pay off student loans. Stock can be life-changing for many of your employees (not just you), and sometimes you need to talk about it.
The final point to this story, and to all of this advice, is that stock is personal. Sometimes you need to change the plan. Sometimes you have to break your own rules. Be strategic, not dogmatic, and you'll find the best path for you and your company as a public founder.
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I've always hated annual reviews. That's not an encouraging start to giving advice, I know, but it's my reality, and unfortunately it's all too common. So why do so many of us loathe annual reviews?
For starters, they take too long. At all of my previous companies, we would spend at least three months on the process, from individual reviews to manager feedback to compensation and promotion approvals. The annual review conversation has also never been very useful outside of inducing anxiety at the end of the year; Due to its infrequency, the ups and downs of the year aren't accounted for, and we learn very little as managers and employees as a result. Topping it off, annual reviews have historically just been about performance, leaving a critical piece — employee engagement — unaddressed in the most influential evaluations throughout an employee's career.
Leaders and technology providers are grappling with how to solve these challenges now that company culture and employee engagement are widely accepted as performance drivers. We now know through data that business success is no longer just about "human engineering," or how we deploy our workforce effectively; it's now also about whether people are motivated and driven by the mission and culture. And, critically, success comes down to how these two pieces intersect to drive success forward.
To make annual reviews worthwhile and valuable to both managers and employees, we need to re-engineer the process. Your approach will be company and culture-specific, and in fact, mine has changed with each company I've founded, but focusing on these three areas will help guide a modern approach:
Check in Frequently with Two-Way Feedback
Having a review once a year sets both the employee and manager up for failure. So much happens within that time span, particularly at high-growth companies, and if you only talk about performance and engagement once a year you are leaving so many success-driving opportunities on the table. In fact, abandon the term "annual review" entirely.
Instead, focus on frequency. Conduct weekly 1:1 meetings to cover tactical work and ways in which managers can remove roadblocks, use quarterly check-ins to assess the overall state of employee engagement and have slightly longer check-ins every six months that focus on bigger picture performance as well as engagement topics like quality of work, delivery, collaboration, connecting to the mission and career development. Frequency ensures the end of year conversation — often the hardest one because it dictates promotions and compensation — will not come as a surprise.
Equally important, make sure these conversations or check-ins incorporate 360° feedback, anonymously and through technology so the employee feels empowered and safe to share honestly. It's just as critical for the employee to share what the manager can do to help drive performance and engagement as it is for the manager to provide feedback to the employee. This was something we did well at Zillow, and our implementation of 360° feedback ended up producing great insights that led to successful leadership training programs and artifacts like the "leadership playbook," a guide of principles that became words to live by similar to our core values.
Be intentional with Time and Topics
Help your teams keep the process manageable by providing specific guidance through time-boxing, ie. self evaluations should take no longer than 30 minutes, 360° feedback should take no more than 5 minutes per leader and manager feedback should take no more than 30 minutes per direct report. It's easy to get carried away, especially on the employee's side, when they know their evaluation is tied to their compensation. Time-boxing helps avoid this.
Focusing your topics is equally important, particularly when it comes to compensation. Limit conversations about compensation to once a year (because that's typically the only time you can do anything about it), and separate compensation discussions from those about performance, if only by a few days. This ensures employees hear both critical pieces; if you combine the two, they'll only pay attention to the numbers.
Invest in an HR Platform
Everything I've recommended thus far can be made better, less biased and more efficient with HR technology. But understanding engagement is where this space is getting really exciting and game-changing for companies, because as we lose cultural artifacts we've relied on, such as office environments, other aspects of our culture like how we communicate and how we make decisions shine brighter and have a greater influence on engagement.
At my latest startup, Pacaso, we use Officevibe to conduct weekly pulse checks of our virtual workforce, and these help us assess in real-time whether our employees are inspired by and mapping to the mission, understanding their role and feeling represented and supported by their manager and the company. It gives us actionable information to keep us on the right path.
Pulse checks are just one piece of the puzzle. CultureAmp, for example, provides insights on peer feedback and company-wide performance reviews that help combat bias and support representation. Qualtrics links regular engagement and pulse survey results with milestones like promotions, role changes and returning from parental leave — all at the company level to protect the individual employees but help the manager navigate performance and engagement needs. AllVoices (in which I'm an investor) provides an anonymous, direct line from employees to leadership to report bullying, harassment, bias or other cultural concerns with the goal of creating safer, more inclusive companies. There is so much we can do with technology to connect performance and engagement and just create better workplaces in general. HR platforms are quickly becoming a critical investment for companies.
Spencer Rascoff is the co-founder of dot.LA, Zillow and Hotwire, as well as the recent proptech startup Pacaso. He was CEO of Zillow for 10 years. He is a sponsor of Supernova Partners Acquisition Company, a special purpose acquisition company. Do you have a founder question? Let him know here!
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As a CEO, your time is a vital company resource. How you spend your workday — the meetings you're in, the initiatives you weigh in on, even where you are physically — influences how decisions are made.
I've long described decision-making as the defining factor of company culture because it determines how leaders lead and how teams collaborate, and every competitive advantage (or disadvantage) stems from these two factors. This means you set the tone for your entire culture, whether you realize it or not, just by how you spend your day. No pressure.
Determining how you spend your time is much easier at the start of your company because it's driven by necessity. Everyone is in the trenches and wearing multiple hats, which means in addition to being CEO, you're also part of sales, marketing, human resources and facilities. You're part of every decision, because every decision as a young company is a big one. Eventually, though, you scale enough to hire people to make those decisions. Then what do you do?
The Biggest Mistake Leaders Make
Here's where many leaders at high-growth companies trip up: You keep doing what you're used to doing, long past the point of necessity, not because you're a micromanager but simply because of inertia. Once you're in a routine, you tend to stay in that routine unless you have a mechanism to force a change or at least a reevaluation. And this mechanism needs to trigger frequently, not just when you expand your leadership team.
I've learned this through experience. At several points in my tenure at Zillow, particularly when we entered rapid growth as a public company, I found myself sitting in meetings that I didn't need to be in, my team deferring to me on a decision that they should be making, my calendar morphing into a hamster wheel and my inbox into a game of whack-a-mole… all eating into the time I should have been spending on the bigger picture as CEO. I needed to recalibrate.
How to Break the Cycle
To reclaim and refocus my time, I developed a system: Every three to six months, and even more frequently during phases of hyper growth, I forced myself to rethink how I managed my day. I would delete all recurring meetings and start from scratch -- declaring "calendar bankruptcy." I'd also declare "data bankruptcy" by removing myself from all data distribution lists and weekly reports which I'd accumulated as regular emails. I'd revisit our company priorities, determine how as CEO I should be engaging, then rebuild my calendar and inbox from there. It took time, but it was invaluable and oddly cathartic.
As a leader, recalibrating is so critical, because you outgrow certain decisions. A tangible example: Early in Zillow's time as a publicly traded company, we began hosting a ton of trade marketing events that were central to our industry engagement strategy and a sizable investment. I was actively involved in the decision-making throughout the process in the first couple of years, but once we got to a certain size I removed myself entirely from the details. I'd attend the kickoff and the "know before you go" two weeks prior, but every other decision was delegated to my capable team.
Do It for Your Team
Recalibrating is not just about making the best use of your time. It's also about the health of your organization. Layers of decision makers slow things down by reducing autonomy and adding approval hurdles. Fast-growing companies don't have time for this, and as CEO you can actively fight this entangling web by setting the example of delegation. Good things happen when you trust and empower your team.
The one caveat I'd add to all of this: When you delegate, you need to be prepared to accept the decisions... even when you disagree. But that's another article altogether.
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