"My product is the company" - Kevin Fishner on how startups can build better systems

[00:00:00] Employees could leave and new in place could come over the course of 30 years to the point where there's none of the same employees there, is it the same company I would argue? Yes. And that's because of the systems that are put in place and gradually refined over time, that becomes a company and companies compete based on if those systems are really strong or they're not 

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for today's episode of in-depth. I am thrilled to be joined by Kevin Fisher. Kevin works at Hashi Corp and he's worn a lot and hats since he first joined the cloud infrastructure automation company in 2014 as the first business hire, Kevin started the sales solutions, engineering account management and marketing teams.

Later, he spent a few years building the product management and product education groups as the VP of product. But for the last year and a half, he's been in the chief of staff role, he's responsible for refining the company-wide systems like operating cadence, knowledge management and communication frameworks.

As Hashi Corp has grown from a few hundred to over a thousand people, or more simply as Kevin puts it. Now, the company is his product in today's episode, Kevin unpacks, exactly what that entails and shares his thoughts on how other startups can take a similarly thoughtful look at their own internal systems.

In addition to chatting about why the system side of company building doesn't get as much attention we dig into the nitty gritty of how they run meetings, set in track progress towards goals and make decisions through writing at Hashi Corp, from a detailed look at their scorecard system and unique business simulation exercises.

To his thoughts on why companies often struggle with, okay, ours, Kevin takes us through HashiCorp's annual planning process in incredible detail. We also dive into how they write up requests for comments and problem requirement documents, to both capture and come to decisions across the company. Finally, Kevin reflects on why we all need to make more time for practice at work and the importance of being an observer, not a doer as a chief of staff.

What I most appreciate about our conversation today is how Kevin combines the philosophical with the practical. One minute, he's talking about how determinism relates to company building. And then a few minutes later, he's walking us through the exact template and meeting format. Hashi Corp uses in its highly structured annual planning process.

Whether you're eyeing a chief of staff role, or you're a founder hoping to set the right foundation for your company, or you're a manager, just hoping to make your team run a bit more smoothly. I think today's episode is unique chance to really dive into how a company functions and get inspired for your own startup systems.

I hope you enjoy the episode. And now my conversation, Kevin, thanks so much for joining us. And thank you for having me have for the past few weeks. Been really excited about this conversation because I think the way in which companies operate in detail as one of the topics that's not particularly well explored and the product that is the company, I think is something that isn't particularly well understood or often under invested in.

And under-discussed. So I thought we could just sort of start by having you explain how you think about the company as the product and how that relates to people and systems. And then we can start to dive into some of the details after that. 

[00:04:30] I think what you said is right, that a lot of early company advice that you read or listen to podcasts on or about the importance of your people over everything.

And while I definitely agree that people are your most important asset, especially from knowledge economy company, a lot of the thought leadership doesn't talk about the systems. So I've definitely read content about the first hundred employees set the company culture, or a founder has to interview the first a hundred employees.

But what I don't read is how the systems that those people build are the manifestation of the culture, or how, as a founder, you should think about your principles and how you want to manifest those principles as systems. So you should care about your first 10 systems or whatever the equivalent would be.

So that's the way that I like to approach company as product. What are the core systems that are the manifestation of the culture that you want to build? And importantly, this is not an either, or it's not that you invest in those first hundred people or your first 20 systems. It's both. And the comparison I like to draw is the nature versus nurture debate.

And I feel like every time that topic comes up, you start talking about, oh, well, how genes are the most important? I'm like, no, it's the medics. And the environments that you're raised in are the most important. And usually the outcome of that conversation is both, both nature and nurture are highly influential on an individual's outcomes.

So it's my belief that both your people and your systems are highly influential on a company's outcomes, but the system side doesn't get as much attention as it should. So. In my role as chief of staff in thinking about company as product, it really specifically thinking about what are the systems that you want to build improve, and really have ownership over like a product manager to make the company's culture and product activity come to life.

[00:06:35] how did you land on this? Or what was the evolution to sort of have this crystallized for you? 

[00:06:40] I feel like that deep philosophical question almost about my identity. The reason I feel that way is because I don't think there's such thing as a original idea. I think all concepts and ideas that we create are remixes of other ideas and you can create unique combinations for sure, but the ideas themselves are not unique.

The reason I'm saying that is my beliefs about. People and systems and how systems are just as influential are certainly not my ideas. And I'm trying to find where the origins of that are weirdly. I'm going to go back to in college. So I studied philosophy. My thesis was something like the political and economic impacts of subconscious advertising techniques.

And the basic premise was specifically theories of economics are built on the foundational belief that individuals are rational well-informed and autonomous. But none of those things are true. Like we are certainly have rational sides, but we're also very emotional. We're definitely not fully informed because that would be impossible.

And a lot of the information we consume could potentially be untrue and we're not autonomous because each person influences other people. So in my reading and research for the thesis, I started to come to the belief that freewill is overrated and our belief in the Supreme independence of the individual and our willpower to get things done is overrated.

And we're actually much more influenced by the environments that were put in. These points are really well-made and atomic habits about how, if you want to change something, if you want to eat better exercise, don't rely on your willpower instead, rely on changing some of your environmental influences to lead to those behaviors.

So if you're trying to cut out sugar, don't. Have things that have sugar in your house. So I think that the same is true in company building where you don't have to completely rely on the willpower and independence of all your employees, but you can think about how do I build systems, how do I create an environment where people can do their best work?

So I think a lot of research in this area about inclusive practices are really great and creating those environments. So I think that's where these ideas came from. And as I said, there, certainly not my own. I've been influenced by lots of philosophy. Reading about there is a mind and freewill and many other books and podcasts and things like that too.

So maybe it's a unique combination of ideas, but certainly not my own. 

[00:09:31] So if that's the more philosophical, let's talk a little bit more about the practical and really outline when you think about systems. Exactly what you're talking about. And then we can take each one of those tenants in turn and go into some level of detail.

[00:09:44] So first I think each company has their own systems that are really important for their culture. So everything I'm going to talk about are very important for HashiCorp, but I wouldn't say they're generalizable principles. So hopefully people can take them and remix them with their own ideas, but I wouldn't take them as absolute truth.

So for us, our most important systems are how we make decisions through writing as number one, number two is our operating cadence. So how we set goals, track progress towards goals and make improvements along the way. And then the third is how we run meetings and how we run meetings is particularly interesting for us because we are a remote company.

So most of the interpersonal interactions you have day-to-day are through slack and email. So written as well as Google docs. And through meetings. So it's very possible that many employees, their only face-to-face human interaction for the day is through a meeting. And if that meeting is good, then their day is good.

If that meeting is bad, then their day is bad. So meetings become this combination where people come together and the culture is truly seen. So that's why meetings are maybe more important for us as a remote company. Then other companies might treat them. 

[00:11:07] Let's come back to meetings in a few minutes and start with the idea of operating cadence 

So our operating cadence, we like to think of it as three speeds, annual, quarterly, and weekly, but before getting into the speeds themselves, I want to talk about the components and the components are sources of truth and rituals. And I've found that many companies, when they're building an operating cadence, oftentimes you don't hear the word operating, can instill here goal setting or okay.

Ours. And I think they're quite similar, but oftentimes what happens is companies will focus on the source of truth and not the ritual. And I think that's one of the biggest mistakes that you can make. So I think many people have the experience of someone decides that the company needs a goal-setting framework.

And usually that comes about because a team worked on a project that probably was a waste of time, or employees are confused about priorities or overall there's a lack of alignment. So the decision is all right, let's do okay, ours. And so the company goes through this month long process, and one unfortunate individual is usually tasked with making sure every employee has a set of, okay, ours.

And what happens is they go through this long process and the OKR is, are set, but then there's no ritual for reviewing them. So they easily get out of date and then employees start resenting them because the effort to actually create them was kind of a waste of time. So the importance of a ritual is that it keeps the priorities top of mind and keeps folks focused on what's important and forces a conversation about if there's an objective that was written down and it's not important that forces a conversation about that.

And it forces alignment as a result, as our operating cadence focuses on both the source of truth and the ritual. It's really the ritual. That is the most important part of it. So with that in mind, our operating cadence has three principles. The first is federated authority, but central visibility. So we have over a thousand employees.

Now we need to make sure that people closest to the information have authority and ownership over their respective goals, but we want to make sure there's visibility essentially with the exact team. So it can make sure that progress is being made and we can provide support if needed. The second one is reflection, not perfection, which goes back to the emphasis on rituals, where goal setting is a process of reflecting on progress, not trying to get your goals so perfect upfront that you never need to change them.

It's just not possible. Like you're either going to get it wrong because the goal is to hire too low or maybe like one of the goals was completely wrong and that's fine. The process of reflection is the most important. And then the third principle, which again, kind of comes back to rituals is find and enact leverage.

And this is one of the key lessons I've learned in the chief of staff role is leverage is the most important thing you can find. So whether you're doing OKR or QPRs or whatever your goal setting acronym is at the heart of it is trying to find leverage by which I mean, finding the actions that you can take that have the most positive cascading impacts across the company.

So, as an example, renewal rate could be a very important metric for the company. What is the primary action that you can take to improve renewal rate? Because renewal rates are a lagging indicator. It's pretty much set six months ago after the customer is onboarded. So what are the things that you can do, whether that's changing the way you onboard or changing incentives, what is that thing?

Or a group of things that you can do that have the most leverage to make the positive change that you want? So those are the three principles, federated authorities, central visibility, reflection, not perfection and find an act leverage. So as I go through the annual quarterly and weekly speeds, keep those things in mind.

So with that preamble on the annual side, the source of truth is scorecards. And the ritual is our annual planning summit and scorecards are effectively our incarnation of, okay, ours. And I personally don't care what goal-setting framework people use. I think they're all pretty much equivalent. And basically what one of our scorecards looks like is imagine a table with the first column being key results.

And then from there we track progress on those key results quarterly. So the other columns are quarterly snapshots of where we are. So as a very simple example, imagine if I'm just gonna use random numbers. Our revenue goal is a hundred dollars then in Q1, it was 30 Q2, 60, et cetera, et cetera. So you track progress quarterly.

And the format of that forces you to go through the ritual of review. So we do scorecards at really just the highest level of the company. So we do a company scorecard, which sets the overall company priorities for the upcoming year. And then we break that down into what we call our four plans. So a go-to-market scorecard that the sales marketing and customer success executives collaborate on product scorecard, which our product management and engineering executives work on.

And then on people's scorecard and a finance scorecard, which our VP of people and VP of finance work on respectively. Somewhat interesting about the go to market and product scorecard specifically is that they're jointly owned. You oftentimes don't see that in other goal frameworks and that you want to have one directly responsible individual.

It's my opinion. That software is not something that can be broken down into very tiny constituent parts and delegated out. It's more complicated that it's not a assembly line. So we have the company's core card. There was four plans, and then the go-to-market scorecard with them break down by field geography.

So we have Americas, EMEA and APJ. And then the product and engineering scorecard, we break down by our product lines and we have four product lines. So the reason we break them down in those dimensions is because of Simpson's paradox. And if you're not familiar with Simpson's paradox, it's when you take aggregate data and use averages, the actual nuance of what's happening gets lost.

So the famous example is pretty sure it was Berkeley graduate admissions, and they found that women were accepted to graduate programs at a much lower rate than men where they're confused because they did gender blind admissions. So what ended up being was if you break it down by department, so like physics, literature, MBA, it was actually the same.

For men and women, but women were on average applying to harder programs at greater rates. So when you look at the average women's acceptance rate is lower, but if you compare department by department it's equivalent, that's why we want to do the scorecards by product line. So if vault is doing really well and Terraform isn't, we don't look at the average and say like, great, everything's fine.

We look at vault and Terraform specifically and manage accordingly. So those are the source of truth from the annual perspective. And then the annual ritual is our annual planning summit, where we bring basically the top 70 senior leaders of the company together. And we run a business simulation. We work with a firm called VTS where we'd take a simplified view of the company, build a, essentially a game board and break folks up into teams of six.

And they are CEO or the executive team for the two days that we do the simulation. So they can not only understand what the priorities are for the year, but kind of feel them in the simulation itself, which is a cool experience. Can 

[00:19:02] you explain that? That's obviously, I think quite a unique thing that you do.

Can you explain more about how the simulation works and then how that ladders into the outputs, which are these annual 

[00:19:14] scorecards. Yes, definitely. First we start with the company, scorecard comes first and that's where the executive team determines usually the three executive focuses for the upcoming year.

So last year it was focused on one of our product lines, which was console a focus on defining a segmentation model for our customer base. So grouping the largest 500 companies, then the next two, 2000 companies, et cetera. And then the third one was cloud-first orientation for our products. So we had historically provided our software as downloadable software, but this year we've been providing them as cloud services.

So those are the three focuses and then we build the simulation basically. So 

[00:19:57] before the annual planning offsite, the executive team comes up with these three focus areas. Yes, exactly. And then that is sort of what. Guides the sort of overarching simulation. And then how does that foot with we're going to get this number in terms of net retention or revenue or whatever, sort of might be considered more classical high-level goals that everything kind of ladders off of.

[00:20:22] So we have three north star goals that don't change, but they change in magnitude each year. So our three north star goals are to win the practitioner and that's, that's measured as a monthly active user account. Our second goal is to enable the customer, which is measured through ARR. And the third is to grow the ecosystem, which is measured as a percentage of revenue attributed to our ecosystem partners.

So like what percentage of our revenue comes from opportunities through our cloud partners or our systems integrator partners. So each year we set specific goals for those three north stars. So last year, again, these are random numbers. So let's say our ARR target was 50. And our goal of this upcoming year is a hundred, whatever that might be.

So we take those and then our finance team builds a long range plan, which is a five-year financial model that takes those north star goals and builds derivative financial metrics. So that's what you were talking about around renewal rate, net retention rate, operating margin, everything that you would expect in a financial statement effectively.

So together we have this rich five-year financial model, as well as the three executive focus areas, which are really the leverage points that we as an executive team think will have the most positive impact on reaching that five-year long range plan. And then we build the simulation around the simplified version of the financial model and the executive focuses that are coming up.

So the game board is effectively the financial model, and then you play in rounds where each round your team gets to determine what initiatives to invest in. And we also have what the BTS folks call wobblers, which are events that come up that probably throw you off track. And you have to make a decision about how to adjust.

So behind the scenes, the game mechanics are built so that if you invest along the same lines as what the executive focuses are, the financial model and the game board itself, the game mechanic you'll have better results. So that's how the interplay of our financial model and the executive focuses come together through a business simulation.

[00:22:36] It does. And so if you weren't able to have the company create this simulation. Are there simple versions of this that would get the benefit of that part of the annual planning process? 

[00:22:48] I'm sure. I think it also depends on the size of your company. And I think this is a really good example of what works for HashiCorp certainly might not work for other companies.

So if you think about what the essence of this is, you might be able to build it up in a different context. And the essence of this is the notion of practice. This is something that I think about a lot and I grew up playing competitive soccer and. We probably practiced four or five times a week for club soccer.

And then you played games on Saturdays or Sundays, but basically you spend 90% of your time practicing and 10% of your time actually having to perform. And this is true for plays and people who were playing instruments and many things growing up, you spend so much time practicing, but then when you get into a work environment, that notion of practice kind of gets lost.

So the essence of the simulation is it's a practice and it's a time to make mistakes and that's completely okay. And learn from those mistakes. So if you were to create a simplified version of this and maybe not build a simulation. I would build it around the notion of practice and that could look like a smaller group offsite, where you're sitting in a different person's shoes and going through one of their day to day activities, whether it's like answering support tickets or something like that.

And it's a notion of practice, practice, and empathy for what other people are going through in the company and the problems that they're dealing with. I know that wasn't a very direct answer, but hopefully that idea of what is the essence. And can you rebuild that essence in a different context is helpful.

[00:24:23] I liked that. One of the things I read recently was this piece that Tyler Cowen put out, he basically said one of his favorite questions recently is. What is it you do to train that is comparable to a pianist, practicing scales, and that sort of exactly what you're getting at it. I think it's a super interesting question for whatever you do for work, continuing to build, hold on the annual piece.

What else happens at the annual planning summit? And then how does that lead to this annual scorecard? And then we can talk about 

[00:24:49] quarterly, a monthly. So, as I mentioned, the company scorecard comes first, then the four executive scorecards, the go to Michael one product, people in finance come after and they usually get refined leading up to the annual planning summit.

We build our company's core card, the first draft of it by the end of September, then the finance team and myself, we work on. Both the resource allocations and scorecards for the executives. So we give the executives a scorecard template and say, fill out your goals. And we also give them budget and headcount allocations and determine your organizational structure and budget to reach those goals.

And then that goes from mid October to mid December. And then the first week of December is when we do our annual planning summit, which was where we bring the 70 senior leaders in the company. And after that is when the field geography and product line scorecards start after that, the other things that happen at the annual planning summit, our CEO will give a presentation that reflects on the previous year and then projects on the next year, which is largely focused on what the three executive focus areas will be for the upcoming year.

And that's the details on the company scorecard. And those are the things that you simulate out in the business simulation itself. So this year, it's all remote. Last year, we did it in person in San Francisco. It's two days and it's four to five hours per day. So not too crazy. But the other important thing about this is for this year, at least we normally do an in-person all company conference.

We call it hex, the HashiCorp exchange, but for this upcoming year, we're doing it remotely because of COVID. And what we're going to do is do the business simulation for all employees this year. So the annual planning summit is a way to get senior leaders comfortable with it and refine the simulation itself.

And then they kind of become guides or proctors for the rest of the company when we do it in the first week of March. And we do a few other things around the employee conference there too, but that's really the heart of the planning 

[00:27:01] summit. Can you talk about the different voting systems you use to discuss and debate the different objectives?

[00:27:08] So this is for the company scorecard itself. And this actually, we might touch on this later with how we run meetings. The process that we use to figure out the executive focuses is through a fairly well-structured brainstorming. And there's a few studies that the Harvard business review published around how brainstorming, when you just bring people together and ask them to put stickies up on a wall.

It doesn't work that well. The preference is if you allow people to think independently beforehand, this has two benefits. One is they will approach it from more unique perspectives rather than getting stuck in group. Think if you do it all together. And the second is usually there are more folks who are more thoughtful when they just have more time and there's not as much urgency.

So that's what we do is we give executives two weeks before we do an exec offsite where each executive writes down what they think the three focuses should be for the upcoming year. And then each exact gets five minutes to talk through their suggestions. And then we'll usually debate some of them or discuss them along the way.

But what this does is it gives every executive, an equal opportunity to have their voice. There's no person who's talking over another or anything like that. So at the end, we do do the suggestions. Oftentimes there's a lot of overlap, which is very good. And then we put them into a list there's usually about 15 and then each executive can rank five initiatives, five being the most important one, being the least.

And then we just do a sorted ranking from there. So what happens is usually we'll have three very clear priorities and then maybe one or two below that, that we discuss. And then those three or a combination of those three become the executive focuses for the upcoming year. And it's surprisingly not very controversial.

I think through a different approach. If you had 13, strongly been an executives in a room, trying to figure out what the three focuses should be, there would be a lot of controversy and people would get more tied to their suggestions rather than collective ideas. So that's the way we do a structured brainstorming and then a way to voting and then distill it down to the top three from there.

[00:29:26] well when we move on to quarterly. Can you, re-establish the different steps along the way before and after the annual planning summit, just cause it's a little bit confusing about rituals that go into the summit, then what happens? And then what happens after the 

[00:29:39] annual summit? The annual process has the source of truth, which is the scorecards.

And then the annual planning summit, which is the ritual and leading up to the annual planning summit. The way that we build scorecards starts with a exec offsite or virtual session in September, where we do a structured brainstorming around what the top three executive focuses should be. And then those get refined for a few weeks to determine those focuses and then also build quantifiable measures for them that we put into the scorecard.

And then that's done by late September, early October. And then from there, the finance team and myself, we distribute the scorecards for the executives, which is a go to market scorecard, product scorecard, finance scorecard, and people scorecard as well as their resource allocation. So how much head count and budget they get for their respective functions.

And then those executive scorecards get built from usually mid-October to mid December. And they're pretty much done by early December, which is when the annual planning summit is. And then once annual planning seminar is done, we do the remaining scorecards, which are the field geography ones. So north America, EMEA APJ, and then the four product lines that we have.

[00:30:54] And so if over those few months you're getting more and more granular and these are kind of different stops along the way. And you're kind of going top down in that fast. 

[00:31:02] Yep, exactly. But importantly, we don't force it further than the field geographies and the product. 

Today's episode is with Kevin Fishner, the first business hire, former VP of Product, and current Chief of Staff at HashiCorp, a cloud infrastructure automation company. Kevin takes us through the most important systems at HashiCorp, including how they run meetings, structure annual planning, and make decisions through writing. His detailed explanations and practical advice will help other startup leaders remix these practices at their own companies.

"My product is the company" - Kevin Fishner on how startups can build better systems

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Focus on Your First 10 Systems, Not Just Your First 10 Hires