It Always Comes Down to the People

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Ben Horowitz, partner at Andreessen Horowitz, had a post this week criticizing the new organizational structure at Zynga. The founder, Mark Pincus, is stepping down from his CEO role to the Chief Product Officer role, while Don Mattrick, the former head of the Xbox business for Microsoft (although I believe his remit included gaming for PCs as well), is the new CEO. So far so good, except that Pincus remains the Chairman, so Pincus reports to Mattrick reports to Pincus?

Truth is, executives who are also on the Board of Directors are always a challenge. On the one hand, the internal knowledge they bring can be crucial to the Board; on the other, having your boss report to you while he is your boss really messes up the chain of command. The only way to make it work is to have very clearly defined rules as to what is the authority of each role - CPO, CEO, Director, Board, Chairman. The problem, as anyone who has worked in a company knows, is that the next level up often gets involved, even if the lower level has the authority. CEOs often get involved and override their CMO; the VP Engineering often gets involved and overrides the Director of Web Platforms; etc. This is especially true if the company is startup culture, or if the situation is a turnaround. Zynga is both, which almost guarantees that Mattrick the CEO will get involved with Pincus the CPO's Product decisions, and Pincus the Chairman will get involved with Mattrick the CEO's strategy decisions.

As Ben points out, I have almost never seen this structure work. So why do people do it?

One word: avoidance. No matter how many excuses, rationales or reasons, in the end, someone doesn't want to have to make the tough (and often emotionally painful) decisions involved in stripping someone of their position. I don't know if Pincus or Mattrick (or someone else) should be CEO, but I am fairly certain that the Board avoided dealing with the personalities. Last week, an investor told me of a company he was involved with that failed spectacularly. The CEO was finally canned two months before the implosion, but the Board already knew it wanted to fire the CEO 12 months (!) beforehand. They did not because they didn't want the spat, the emotions, the "temper tantrums."

Back in the early 2000s, I worked at a prominent financial firm that was a composite. A European financial firm had bought 2 US firms, and merged them with its own US arm, leading to a "2.5 firm" structure. The 2.5 firms were all headquartered within not more than a 2 hour domestic flight of each other. I could (and often did), spend Monday at the New York office, leave early Tue morning for one subsidiary's HQ, and fly that evening to the next subsidiary's HQ, home by Wed evening. These two firms had an immense amount of overlap, yet the new owners could not get their act together and pull the trigger on, "who runs retirement funds," or "who heads up sales," or even, "who owns email." I was brought in to fix the back-office, and at least have the operations run smoothly and cost-effectively, which our team did in under a year, even though the front office was still a competitive mess!

In the end, it is always about the people. If you put the right people in the right place, and give them the structure, authority and responsibility to do the job well, they will. If you avoid difficult decisions, it will come back and bite you. Pull the trigger.