‘I’ve read my fair share of business books and have friends that work at places like Google, so I know something about the steps that major companies take to keep their employees happy.  Big conferences, overseas trips, bonuses and fancy offices all help to make people love their job no matter how boring the actual work may be.  Start-ups have to compete with large, established companies for staff.  We have little time, money or resources.  We can’t employ an in-house chef, pay big bonuses, construct slides between floors or send team members to stimulating overseas conferences.

Startups recruit team members who have vision, passion and the drive to make a difference.  It’s hard but possible to hire people from companies like Google; it’s tougher to develop a culture that sustains team enthusiasm during hard times.  I believe all startups can be successful if they have the money and energy to power through obstacles, to learn and evolve until they hit the right formula.  We’ve heard the stories of Airbnb who, after two years of struggle, sold cereal at the 2008 political conventions to make money, keeping their startup dream alive.  Or Twitter, who floundered for three years as a podcasting company before pivoting to the concept we now know as Twitter.  Imagine the culture in those companies during the tough years.  We’ll never hear the stories of team members who left for jobs with better conditions when times got tough.

We had a hard year at Posse.  We’ve been working hard for two years and launched our latest product in March at SXSW.  I spent the next six months in New York, raising capital and building a community of US users.  The team stayed behind in Sydney.  The lease on our office expired, so they temporarily moved into a garage underneath a friend’s office.  I ‘met’ with the team on Skype most nights NY time and could see they weren’t enjoying the premises, which were cold and lacked natural light.  I couldn’t be there to lift morale and was often exhausted myself.  A couple of people gave up and left, which further deflated the team’s resolve.  It was brutally hard to keep going!

I came back in August, ultimately successful at raising both money and our profile in the US.  I felt more positive than ever about our chances, and was excited to return, working directly with our team again.  When I arrived at the office I found a tired, miserable group.  People were coming in late, leaving early and productivity was low.  It was obvious that, after closing the funding round, my next challenge was to rebuild our company culture.  Here are five things I did to shake things up.

Team breakfast (when we were still in the garage)

1. Productivity & Community.  

The first issue I had to address was low team morale and lack of productivity.  I’ve found that one of the best ways to lift morale immediately when you’re in a slump is – communicate with everyone every day.   This enables you to reinforce the company’s objectives, ensure that everyone’s ideas and concerns are heard, and create transparency. That’s easy when your team is small.  And I had to address the team’s low productivity, caused by people coming in late as much as lack of motivation.

I solved this by holding team breakfasts every morning at 9am.  I’d buy cereal, fruit and baked treats; we met as a team and chat about life and work.  It was a great opportunity for me to hear everyone’s ideas as well as get the team back onside with our goals – and the last person to arrive was responsible for washing up.  It was rare for anyone to arrive after 9.30, though I can’t imagine why.

Our beautiful new office

2. Location.

Only recently did I realise the importance of office environment.  I worked in the garage office for six weeks and hated it.  Even I couldn’t wait to escape at the end of the day.  I started looking for new premises as soon as I returned to Australia, and with a bit of effort found an awesome spot on Oxford St, in the heart of Sydney’s trendy shopping and cafe district.  I cut a deal with the council, which wanted to encourage creative young companies like ours into the area, and paid less rent than for the garage.  We ran an online competition for interior design students to fit out our office on a budget of $2000.  More than ten entered, and the winner has completed an amazing job, making our space feel like a palace.  It’s a delight to arrive at work in the morning, and I often find myself working late into the evening with several members of the team.  People want to stay behind and work because it’s an awesome place to be.

Dev team hacking together a new feature idea at the offsite

3. Offsite events.

Every 3 – 6 months we hold a company offsite, renting a house in the country and spending a couple of days discussing our progress and planning for the future.  A few weeks ago, we went to the Blue Mountains and were there when the fires broke out!  Being trapped between two large bush fires is pretty powerful for team bonding!  Other than calling the RFS to track the fires close to us, we spent two days reviewing our company values and user personas, brainstorming user stories, featuring ideas for the product, and prioritising the next few months of marketing and development.  We had a great time together and returned to work excited about the future.

4. Progress.  

No matter how great your culture may be, a smart team only remains motivated if they feel they’re making progress.  Nothing is more disheartening than slogging it out on site, then marketing a product that people don’t use.  We’ve been lucky; our cultural changes have coincided with a major release of our new iPhone app, on which the team have worked for four months.  It hit the app store on Wednesday afternoon and we surged to #10 in our category on the Australian & NZ App Stores and #1 in Singapore.  I can’t express enough how motivating this is for the team; it trumps every other initiative.

Our office party last week

5. Celebrating wins.

Every start-up has a mile-long list of desired achievements.  Every time we finish something, I’ve mentally moved on to other things that haven’t yet been completed.  It’s hard to stop and celebrate victories, but it’s incredibly important for team morale.  Last week we threw an office party to celebrate the launch of our new app and invited friends, investors, ambassadors, media and retailers to check out our new premises.  More than 80 people packed out our office, the dev team demoed their creation and another exciting new feature that’s not yet launched.  It was a great way to get the community talking about Posse, and gave the team an opportunity to be proud of the company.  Magners sponsored the drinks and Mad Mex served up tasty Mexican food.  The whole event cost us less than $200.

The dictionary definition of company culture is:  ‘The behaviour of humans who are part of an organization and the meanings that the people attach to their actions.’ Some companies define the success of their culture by a ‘Net Promoter Score’ which measures how likely an employee is to promote working at the organisation to a friend.  I think culture determines how excited team members are to come into work in the morning.  How hot is the fire in their belly.

Culture can’t be dictated.  For instance, I’ve learned that mandating work hours doesn’t lift productivity but inviting everyone to a team breakfast does.  Startups can’t afford the time or money to build culture in the same way as Google.  We have to be creative, using what attracts people to work at a startup in the first place.  People join startups because they want to make an impact, for their ideas to be heard.  They want to be a part of building something they believe in, to sense rapid progress and be part of a tight team that has fun and respects each other.  None of this costs much money – just a bit of effort and creative thinking.  Two years in, I agree with the investor who encouraged me to focus on culture.  Culture determines what else is possible.

Celebrating our superstar designer’s birthday last week

Wow. That took me a couple of minutes to process; I’d never thought of honesty like this.  As a child, I learned that telling lies was bad.  To be good, I should tell the truth.  As an adult, I don’t tell outright lies but there are times when I’ve been guilty of exaggerating or omitting facts for my own advantage.  I’d only ever thought about honesty as bad verses good.  Peter views honesty as the access to ultimate power.

If we were honest about it, we’d admit we all lie every day.  A recent study of 2000 Britons found that the average man lied six times per day and the average woman three times per day.  The same study found that 40% of people lied on their resumes and a whopping 90% of people looking for a date online lie in their profile.  The study didn’t investigate the number of lies told by entrepreneurs looking for investment, but it would be interesting.

Peter asks the same two questions after every pitch he sees.  “What is your customer delight story?” and, “What’s the lie in what you just told me?”  He says there’s always one, and as soon as the entrepreneur admits it and opens up with the truth, they can start managing what to do next.

Some lies are big and others small.  Children lie to avoid punishment or impress other kids in the playground.  Adults can lie to gain respect, like a former coffee getting intern who told an employer he’d worked with us as a ‘research assistant’.  People lie to stave off the consequences of making a mistake or to spare someone’s feelings.  Their heart may be in the right place, but they’re still telling a lie.

Peter thinks telling lies is the #1 reason why entrepreneurs fail.  Not because telling lies makes you a bad person, but because the act of lying takes you out of the present moment and prevents you from facing the truth about your business.  Every time you exaggerate a metric, under-report a cost, or are less than transparent with your team, you create a false reality, and start living in it.  In that moment when you told a lie you knew the right action and chose another.  You separated yourself from what was happening around you, lost control of the situation and soon focused on managing the fallout from the lie.  I know people who appear to spend their entire careers inflating the truth and fighting to meet the expectations they’ve set.

Peter’s philosophy is based on Buddhist teachings: the present is a more peaceful, creative and productive place from which to operate.  Everyone knows the right actions to take; by having the confidence to accept your surroundings you can make right decisions and be open to opportunities that come your way.  His commitment to remaining in the present borders on spiritual; only by remaining in the moment, being honest with yourself and others, can you trust that the true outcome will emerge.

Our conversation inspired me to test the theory over the past couple of months.  I’ve focused on telling the absolute truth all the time and being ultra transparent even when I didn’t need to be.  It wasn’t easy but I have to say it transformed my sense of peace, and coincided with the company’s most productive period yet.  Coincidence?

Two weeks ago, I experienced the dark side of dishonesty.  I’ve been involved in a charity organisation for a few years now.  We do a lot of great work in the community, but as a group we’ve always floundered, and our projects never reach their potential.  We’ve had a stream of difficult people in the organisation but I couldn’t identify the root cause of the problem.  Then it struck me: I discovered a senior member of the organisation lying.  Not a whopper, just insignificant tales about why someone couldn’t make a meeting, why emails hadn’t been read, why he was late and so on.  When I confronted him, he immediately admitted them, justifying his actions by saying they avoided irritating consequences.

As soon as I caught the first lie, it was obvious why the organisation wasn’t working.  Within it lay a culture of avoiding reality; no one trusted each other.  The result was a culture of obfuscation and back stabbing in which nothing was achieved.  Volunteers became disheartened with the politics and lack of progress, and eventually they left.

Truth and its relationship to creativity, peace and ultimately success have played on my mind in the past couple of months.   If you’ve read this post and thought, “that doesn’t relate to me – I never tell a lie,” then you’re probably lying to yourself.  For one week, try being honest and transparent about everything.  I’m confident you’ll find it both difficult and worthwhile, and that it’ll make a big difference to your business.  I seldom adopt esoteric business philosophies but its impact has been such that I believe this powerful secret should be talked about.

I’ve not been able to find other articles or books on this topic.  If you have, it would be awesome if you could share them on the comments below.

When I started Posse I didn’t know much about company boards.  A family lawyer helped establish our companies.  He suggested I set up a board and try to find some impressive-sounding people to join it.  His objective was to make the ‘team’ list in my fundraising presentation look more appealing to prospective investors.    So off I went on a mission to meet big name folks who’d look good on my deck.  It didn’t seem to matter how many, the more the better.

Within a month I’d assembled a board of eight, including myself, and we called a meeting.  A friend lent me his board room, a big office in the city.  I expected a casual, friendly affair where we’d chat about business and strategy and they’d agree to introduce me to some potential investors.  I was in for a surprise.  First of all they wanted to know everything.  How much money did we have in the bank?  What were the liabilities, the budget, how many people had visited the site last week, last month, how long did they stay for, how much money had we made?  And so on.  I wasn’t prepared and it was overwhelming.

After a couple of hours of grilling, I gained a sense of what a board expects from a founder.  I’d run my own business for eight years and didn’t report to anyone.  In time I came to appreciate the rigour of reporting.  For the next meeting, I made sure I sent out the cash-flow report, budget, metrics, and a presentation outlining what I wanted to talk about — all in advance of the meeting.

Six months in, our group hit its first challenge.  The business had started well; we’d raised some money and gained traction.  Everyone became excited, then out of the blue one director presented us with a proposal involving a full-time job and a lot of equity.  The group wasn’t sure how to react.  He left the room while we discussed his proposal, and when we rejected it he was hurt and embarrassed.  He quit the board and sent us a huge invoice for his time, which we spent a year fighting and eventually settled.

Some members of our original board were excellent and are still active in various capacities today.  Others drifted off: they had an expectation that we’d be a huge hit within months and when hard work set in they disappeared.  Some stuck around and were destructive when things didn’t go their way.

I learnt the hard way how bad things become when you have the wrong board.  I’ve also learnt how powerful it can be to have the right board behind you.  Here are five tips for start-up founders looking to build and run an effective board of directors.

1. Set expectations up front.

It’s easy to procrastinate finalising deals with advisors and directors.  Everyone is there to be helpful, and at the start it doesn’t seem worth negotiating to pay them a share of nothing.  The problems kick in after few months when things start going well, and you realise you and they have different expectations about payment.  Most start-up directors will expect to receive equity rather than cash, and in my experience the standard rate is 0.5% to 2% vesting over two years.

You must determine what you expect of the director.  How will they help with fundraising, strategy, introductions and the like?  If appropriate, you might want to agree on how much time they’ll commit to your business — although when you have the right people onboard it’s likely they’ll be bugging you with ideas and suggestions for how they can help.

2. Be transparent and organised.

Your board should be the one group of people with whom you can be completely transparent.  It’s their job to help you work through challenges; so they must understand those challenges if they’re going to add value.  I remember at one of the first meetings of our new board, I announced that the product we’d created wouldn’t scale.  We had to go back to the drawing board and try something else before we ran out of money.  No one flinched.  We put a process in place that would devise a better strategy.  I’ve also found that board meetings are much more effective when I’ve put time into thinking through the agenda and have written a presentation to talk through.

3. Make sure your directors have the right experience.

My original board sounded impressive, but many were impressive in the wrong industries.  They had no experience of the challenges of a start-up like ours.  So I received bad advice which led us to hire the wrong team and spend too much too quickly.  A couple of our early directors had never used Facebook or Twitter and wouldn’t even join Posse.

Everyone on our current board has incredible expertise in different areas of early stage companies in our space.  They know what other businesses are doing to grow, engage users, monetize, save costs and much more.  Almost every day, one emails me with an idea or opportunity that I wouldn’t have thought of.  And through them, we can access almost anyone we’d need to help our business anywhere in the world.

4. Keep the numbers small.

We have four directors on our current board, including me, and one regular observer who acts like a director except he doesn’t vote.  It’s a tight group: everyone knows the others’ strengths; everyone is committed to making Posse a hit.  I’ve heard that the reason to keep boards small is to ensure that as a founder you won’t be outvoted.  I suggest that if you even think this, you either have the wrong board or you’re the wrong founder.  For me, the benefit of having a small board is that I can spend time with each person regularly. Everyone is in touch with what’s happening and can contribute.

5. Make sure you like and trust people before inviting them to join.

Directors have much more influence than I originally thought.  They decide who leads the company, what deals to do and when to exit, so you must make sure you all share the same vision upfront.  You must know they’ll do the right thing, and that they’ll stick around and support you when you hit tough times.  I’ve heard many stories from founders whose advisors and directors vanished when it looked like the company might fail.  We’ve had hard times and I can honestly say that our group pulls together and digs in, no matter what the circumstances.

At my first board meeting I learned what directors expect from a founder.  It took me quite a while to work out what founders should expect from their directors.   Our board helps me refine our strategy and operation plans; they’re constantly suggesting new ideas and making introductions; they’ve been involved in fundraising; they hold me to account and oversee the governance of the company.

The names on our board are impressive but that’s not why they’re there.  I’ve learned that a top notch board of great people with relevant experience and a shared vision is a wonderful advantage and has made my founder’s journey easier and more fun.

I’ve struggled with this, in both Posse and my former music company ‘Scorpio’.  Sometimes at Scorpio, when our artists hit #1 on the chart I focused on the next goal, working through rather than celebrating.  As my team expanded, I learnt that this approach weakened motivation.  The team didn’t feel appreciated and productivity dropped.  Worse than that, we weren’t having fun!  I discovered the importance of setting goals and celebrating their achievement, every time.

The Posse team celebrating our app launch

Last week we hit one of our small goals: 50,000 signed up users (stores and people).   Everyone on the team has worked incredibly hard over the past few months in the lead up to SXSW.  It paid off at the conference: a number of media declared Posse one of the standout startups, and our user numbers exploded as a result.  We still have the next goal and the next – but won’t we always?  I decided that we celebrate this milestone.  I’m in New York just now, away from the rest of the team, so I sent in a massage therapist to treat the team, along with a box of champagne and chocolates.   We’d usually go on a group activity like bowling; that’s what we did when we hit the first 5000 users and we’ll plan an activity when I’m next in Sydney.

In the chaotic, pressure-cooker of a startup, where time and money are critical, here are five reasons for celebrating small wins.

1. It reminds people that goal setting works.

I want everything to happen all at once, but accept that this isn’t achievable.  Our team make steady progress because every quarter we agree on a plan and set of goals.  The goals are challenging but achievable, and when we hit them it feels great!  Celebration underscores the success of our process.  It motivates everyone to set and reach for the next goal.

2. It unifies everyone around a positive outcome.

In a small startup team, each person is often responsible for their own department.  On our team we have one Community Manager, one Business Development, two retail engineers, two mobile engineers, two web engineers and so on.  We set company-wide goals but everyone contributes differently.  Celebrating company-wide success rather than just individual achievements unifies everyone around the goal and reinforces that we’re working on something bigger than ourselves.

3. There’s an opportunity to look at the big picture.

Celebrating provides a great moment to reflect on the big picture.  What are we planning to achieve?  In previous blogs, I’ve mentioned our end of year goal: gaining a million users.  Stopping to reflect as we reach each milestone in the journey enables the team to reflect on what’s working, what’s not and where we should focus our resources next.

4 Everyone wants to be on a winning team.

Everyone likes to be on a winning team.  Success is the best way to boost team morale.  It can’t be faked but when it’s achieved, you should make the most of it by celebrating!  Our engineers slogged away for months when people weren’t using the website, and the community manager struggled to engage our audience.  Now that we’ve turned a corner and lots of people are using the platform, I’ve found that the team’s enthusiasm, creativity and productivity have exploded.

5. It makes everyone feel appreciated. 

Startup teams work much harder than regular people – well, ours does.  It’s vital that founders demonstrate how much they appreciate and value their team’s contribution, and celebrating is a great way to do this.

Team bowling last year to celebrate hitting the first 5000 users.

Everything about running a startup is hard.  I find the challenge of leading a team – keeping everyone motivated and focused in the right direction incredibly difficult.  It’s even harder at the moment when we’re in different countries.  I’ve tried everything I know to build a great culture: bringing inspirational shareholders to speak, running regular offsite events, and hosting regular team lunches are a few.  All these help, but there’s only one way to make a smart team happy in the long-term and that’s progress.  Regularly celebrating wins guarantees that progress is felt as much as possible.

Disclaimer.

I don’t claim to be an expert; I’m learning too.  Posse is my first tech company and we’re not home yet.  Please consider my suggestions, but form your own opinion.  These posts aren’t ‘lessons’; they’re my notes on what I think I’m learning along the way.  In fact, I’ve changed my thinking on some of the views I expressed in earlier blogs! 

I’ll clear that up later.