FORTUNE — In his new book The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, which arrives in stores today courtesy of HarperCollins, Ben Horowitz offers his advice on building and managing a startup company.
As the co-founder of the firm Andreessen Horowitz — not to mention the enterprise software company Opsware — he should know. Here are five lessons from the book.
1.) CEOs should tell it like it is.
As a group, CEOs tend to be a constitutionally upbeat bunch, and it’s not hard to see why. Who would follow a leader who is not relentlessly positive? Who would go work for a company whose top executive doesn’t paint a rosy picture of the future?
In The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, Horowitz says honesty is far more important than positivity. Why? First, it helps build trust. “As a company grows, communication becomes its biggest challenge,” Horowitz writes. “If the employees fundamentally trust the CEO, then communications will be vastly more efficient than if they don’t. Telling things as they are is a critical part of building this trust.” Second, concealing problems from your employees is self-defeating. “In order to build a great technology company, you have to hire lots of incredibly smart people,” he writes. “It’s a total waste to have lots of big brains but not let them work on your biggest problems.” Finally, honesty in the CEO helps to build the right culture, “a culture that rewards — not punishes — people for getting problems into the open where they can be solved.” Oh, and employees usually can figure it out pretty easily when a CEO is not telling it like it is.
2.) There is a right way to lay people off.
Much of Horowitz’s advice to CEOs confronting layoffs sounds like common sense: Focus on the future of the company, not its past; don’t delay; be clear about why you are doing it (hint: you fell short of your plan); train your managers to handle layoffs directly, rather than delegating the dirty work to HR employees. But Horowitz also makes a point that’s not entirely intuitive: How you handle layoffs matters as much to those getting pink slips, as to those who stay. A layoff tends to break whatever trust a CEO has earned from his employees, and in order to rebuild that trust, the CEO has to be seen as fair and forthright. “Many of the people that you lay off will have closer relationships with the people who stay than you do, so treat them with an appropriate level of respect,” Horowitz writes. In short, how you handle layoffs could be the difference between a shot at success in rebuilding your company and the beginning of a downward spiral.
3.) Company perks are good, but they are not culture.
People describing the culture of tech companies often focus on outward signs: the free, organic, and locally sourced meals at Google (GOOG) or Facebook (FB); the dog-friendly policies at Zynga; the yoga classes, meditation rooms, or full-service gym at, well, just about every ambitious Silicon Valley startup. Horowitz says those are all nice to have. But culture is defined by traits that help a company achieve its goals, preserve its values as it grows, and make employees feel like they want to work there. Examples? The desks made out of doors at Amazon (AMZN) helped to cement the notion that frugality was essential if Amazon was to deliver every penny of value it could to its customers. The strictly enforced $10-per-minute fine for being late to a meeting with an entrepreneur at Andreessen Horowitz laid out the firm’s priorities. (“If you don’t think entrepreneurs are more important than venture capitalists, we can’t use you at Andreessen Horowitz,” Horowitz writes.) And Mark Zuckerberg’s “move fast and break things” maxim helped to establish that, at Facebook, innovation is paramount and goes hand in hand with risk. “Ideally, a cultural design point will be trivial to implement but have far-reaching behavioral consequences,” Horowitz writes.
4.) There are only lead bullets.
Most companies at some point in their lives face a rival who is beating them in the market and putting their future at risk, and it’s bound to be scary. “So scary that many in the organization will do anything to avoid facing it,” Horowitz writes. “They will look for any alternative, any way out, any excuse not to live or die in a single battle.” When his own company, Opsware, faced such a challenge from a rival with a better product, Horowitz told his troops it was not the time to pivot or look for an escape hatch. In other words, there were no silver bullets. They had to fix their product. “After nine months of hard work on an extremely rugged product cycle, we regained our leadership and eventually built a company that was worth $1.6 billion,” he writes. Horowitz ends this lesson with the following tough-love message: “There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, ‘If our company isn’t good enough to win, then do we need to exist at all?’”
5.) You must screen for the right kind of ambition.
At some level, every employee views the world through his or her own eyes. Still, Horowitz advises managers to look for signs that indicate whether a candidate will put personal goals ahead of the company’s or focus on collective success. The former may excuse a stint at a prior company that failed as a step to build his resume, while the latter will take responsibility for the failure and describe his own misjudgments in detail. The former may brag about prior successes but be vague on the details, while the latter will credit his team. Screening for the right kind of ambition, especially for positions of great responsibility, is essential, Horowitz says: “While it may work to have individual employees who optimize for their own careers, counting on senior managers to do all the right things for all the wrong reasons is a dangerous idea.”
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