Matt Plays, HubSpotMarketing software company HubSpot has gotten attention from media and even academics for its radical transparency.
The Cambridge, Mass. company reveals everything from cash burn rate to valuations on its Wiki page.
It turns out this is only the start of HubSpot's push toward a modern corporate culture that's vastly different from most companies out there.
We got the lowdown from CEO Brian Halligan, who started the company in 2006 with MIT Sloan classmate and current CTO Dharmesh Shah.
Here's our conversation, lightly edited for length and clarity.
BUSINESS INSIDER: Did you have a clear focus on culture from the start or did it evolve?
BRIAN HALLIGAN: We didn't think at all about it when we first started the business, we didn't ever talk about it for the first two years of HubSpot. Then two things happened at the same time. I joined a CEO forum of 10 Boston-based CEOs who got together once a quarter. In the first forum [I attended], the topic was culture, and I kind of rolled my eyes about it, and I thought, "Well that's stupid, when are we going to talk about selling or hiring — the meaty stuff?"
I remember during the meeting one of the other CEOs was this brilliant guy named Colin Angle, he's the CEO of iRobot — they make the the Roomba — and he spoke so eloquently about it, and talked about how powerful it was as a tool to manage a growing business. He sold me on the fact that I was missing the boat, and I needed to get going. So I came back all fired up about culture. It turned out that at that exact same time we had done our first survey of the HubSpot employees. When we surveyed them one of the questions was something like "what do you like about working at HubSpot?" Almost everyone came back and said that they really liked the culture.
I remember talking to my co-founder and saying, "Well that's funny I didn't think we had a culture, we never talked about it." Those two things sort of came together at the same time, so we decided we needed to invest in this and figure it out because it seems like it's a key asset. It also seems like a key tool we can use to scale the business.
BI: What's something that people get wrong about culture?
BH: At the core of it the happy hour and the ping pong table are not culture, they're like health insurance or a 401k. I think of culture the way I think about marketing. The main thing behind Hubspot is that we feel like humans have radically changed, they've changed the way they shop, and Hubspot is building a modern marketing platform that enables marketers to change the way they market to match the way humans actually buy stuff.
The way I think about culture is that modern humans have radically changed the way that they work and the way that they live. Companies need to change the way they manage and lead to match the way that modern humans actually work and live. We're trying to re-craft culture in a way that really matches that. I think that 99% of companies are kind of stuck in the '90s when it comes to their culture.
BI: What's the biggest change you've had to make going from being an employee to being CEO?
BH: In a weird way, going from employee to CEO hasn't hasn’t changed me that much. The way I think about management is, it’s overrated. I think it's a little silly and antiquated how in startups that the frontline employees are talking to customers, and the CEO has like a 50X difference in salary, it seems a little silly to me.
We’re trying to create an extremely flat organization, an extremely transparent organization, and there's all sorts of things we do around that. I think that if you were in the company, on a day-to-day basis, you’d have a hard time figuring out that I was the CEO of the company versus just one of the employees.
I’ll give you an example: I sit out with everybody else, I don’t have a desk inside of HubSpot, I don’t have an office or anything like that. My salary is not that different from regular employees. There’s a Wiki inside of HubSpot, probably the world’s most active Wiki, and people have no problem calling me out on the Wiki.
I believe the Gen y-ers coming into the workforce, the millennials, they like this idea of the highly transparent organization, and they expect transparency and authenticity from their leaders. So, I’m trying to be as transparent as I possibly can. I feel like people who grew up on Facebook and Twitter and social media sites just have a different a sense about hierarchy in life, and so we’re a little bit allergic to hierarchy over here.”
BI: What's your involvement in the hiring process?
BH: In the early days, I interviewed everyone and at some point that wasn't scalable. We hired 40 people last month, and of all the people we hired, we probably interviewed 10 for every opening. I work more on the criteria than I do on the actual interviews themselves.
Hiring sales people — it’s a pretty inefficient process. Most companies have very high turnover in their sales organizations. What I’m trying to put in place is a much more scientific way to hire sales people. What I'm doing is I want all of our existing sales people, and all of our past sales people who we've let go, to take a relatively long survey, and map the results of the survey to their performance. That’s why it’s key to have people leave; if we push them out for non-performance we need their data here. Then I want to get a sort of good profile of what the recipe is — here’s how they answered certain questions. Then I want to shorten that test and then for every candidate who comes in — for sales we get about a hundred candidates for every person we hire — rather than have the first step in the process be a big staged interview or role-play, that first step is just, take the test.
If you look and smell, based on the survey results, like a current star employee, then you get to that next step. And that next step isn't an interview, I think interviews are radically overrated. The next step in the sales process is you’ve gotta go and start a trial of our software and learn about it and, then we’re going to do a sales role-play with you on the telephone. If that goes well, then we’ll do an interview itself and we’ll hire you. So I want to have a much more scientific way for hiring sales people than most companies will.
BI: Have you guys experienced a tech talent crunch?
BH: Absolutely. And I have a theory behind it. I feel like there’s a massive supply and demand problem, and there are two reasons for it in my mind. One reason, I think for a long time people didn’t go into computer science because they thought the whole computer science industry was going to be outsourced to India. It turns out that wasn’t true. While that was going on, kids and fathers and mothers didn’t rush into computer science. That's one thing that really hurt from the supply side. The second thing that really hurt from the supply side is there are so many alternatives for good software developers today. They can go to a Google or Facebook, they can go to a HubSpot, they can start their own darn company. There's just this plethora of nice opportunities for them, so the supply and demand ratio is way, way off. There's a massive demand for high-quality developers and a low supply. We’re being extremely aggressive about it.
For example, our referral bonus for new software developers, is $30,000. If you know a software developer, and you refer them to me and I hire them, we cut you a check for $30,000. That's 10X more than we do for any other function inside of HubSpot. So we're working hard to try and get the best and brightest developers here.
We're doing crazy stuff to coax them in. That supply and demand problem doesn't exist for us on the sales or services side where we get 100 resumes for every opening, and it's all inbound. On the software developer side its 10x harder, so we think about our funnel, referrals, and everything about that in a very different way than we do the rest of the business. I think everyone's going to have to deal with that reality. You're going to have to think about hiring and raises and stock options and all of that stuff in a very different way for software developers than other parts of the company.
BI: Is there a particular company out there that you look up to?
BH: It's totally cliché but it's Google, and it's Google for a couple of reasons. A lot of companies, when they're in hyper-growth mode, they win awards for being the best place to work and stuff like that. Google always won those in the early days, and people are like, "Yeah, yeah, yeah, it's a goldmine — they've got AdWords, they're printing money, its growing fast, of course people like it, people like working for a winning team."
Now Google's in much more of a steady place, their growth is slower, their stock price is relatively stable, but it's still a remarkable place to work. People love working at a talent magnet — they've scaled that unique culture over time and they use that as a real competitive advantage. And when I say unique culture, what I like about the Google guys is that they reject conventional wisdom in so many ways. They'll look at a playbook of how to hire people, the playbook of how to motivate people, they'll look at the playbook for every aspect of culture: hiring, and motivation, and HR, and they throw it away and start from scratch on everything
They built a very unique culture which makes it a very attractive place to work not just as an early-stage startup not just as a high growth company, but as a big stable-state company.
BI: Do you remember the moment when you realized you wanted to start a company?
BH: When we were going to start HubSpot I had three choices in my career. At the time I was an entrepreneur in residence and a venture partner, so I could keep doing that. I could go run sales at kind of any company — I had grown up through sales I had a strong sales background. Or I could be a CEO at kind of a crappy company. I wasn't quite pedigreed enough to get a CEO at kind of a top-tier startup, so I was interviewing for CEO jobs at re-starts.
My fourth choice was to start HubSpot. I never thought I would start a company, and I'm absolutely thrilled I did it. But the idea was, "Could I start HubSpot and turn it into a great company?" Fortunately that happened. With lots of luck along the way, a lot of good decisions and good hires along the way but that was sort of the decision tree.
I don't consider myself born and raised to be a founder of a company. I always thought I'd be somebody who would help the founder of a company move it along. But I had the right idea, I had the world's perfect co-founder and we just kind of closed our eyes and did it.
BI: How'd you find that perfect co-founder?
BH: My co-founder's name is Dharmesh, and I'll tell you a funny story about him. He and I went to MIT together, and there was an event the night before the first day of classes at MIT and he's very introverted. So what he does at parties is he has his wife go out and kind of scout people and look for people who she thinks he'll like and get along with. So she came over to me and she chatted with me, and we had a nice chat. I realized about halfway through the conversation that she was the spouse of a student. So she went away and went back to Dharmesh and she said, "I met this guy Brian, I think he's kind of interesting, he's got a software background. I don't think you'll get along with him though, he's kind of a sales guy, kind of a jock, I don't think you'll like him very much."
I think that's so funny because two years later we started a company together, and eight years later we got one of the hardest startups on the East Coast together. We're pretty close and best friends at this point. We took some classes together and got along and I thought we were a good match. I think of the Venn diagram of so many firms is you've got a real tech person and a real kind of marketing sales person, and there's a Venn diagram that overlaps a little bit not too much. It's where you have somebody who can really sell, and somebody who can really build, and that really worked for us, it's a little one plus one equals three.
BI: How do you deal with rapid growth?
BH: We're growing fast, we've probably added 200 people in the past year, and we grow in kind of spurts. When we grow too fast the way I think about it is like a car, if I put my foot all the way down on the gas, the car starts to shake a little bit, you can physically feel it start to shake a little bit, the decisions aren't as good, and things start to break. And so we've gone through a couple starts and stops. When we've hit the gas hard and started to hire very aggressively things tend to break so we're a bit "fits and starts" on how fast we grow in terms of head count, and we've found it hard to manage that.
Interestingly along the way our culture's been a great guide. The culture and the systems and the processes really broke around 150 employees. We changed a bunch of stuff around then, and kind of got back on track. It's been relatively smooth since then. I don't know what that rate is but I can kind of feel it when we're growing too fast.
BI: Why'd you stay in Boston?
BH: There are a couple of reasons. I'm from here, I like it here, my network is here, so we didn't even consider moving to the Valley. I think there are a couple of big pluses to starting a company in Boston relative to the Valley, let's say.
One is just the corporate talent is rough here, it's not even close to as rough as it is in the Valley, particularly for that R&D talent, it's so hard to get up there. That's one big thing. The second big thing is the pond syndrome. We're a pretty big fish in a pretty small pond here in Boston and that pond in the Valley is a very large one and it's hard to get heard, it's hard to be seen out there. So I think Boston is sort of underrated in terms of a place to start a company. You walk around in the Valley and go to LinkedIn or Google or any one of many great companies, and it is chock full of kids from MIT and Harvard. So what we try to do is catch them before they go to the West Coast. The talent here is excellent and we try our best to keep it here.
In Boston we missed the PC revolution and we really missed the internet, and to bring it back I think we need to build anchor companies that really stand alone as a business. Employees make some money and they leave and they take some risks and start a company and the other employees fund it. Very much what happened with people at Facebook and PayPal and all these great companies on the West Coast. We want to be one of those anchor companies in Boston that's around for decades and spawns out lots of other companies. That's part of it; we're real Boston boosters.
BI: What do you think about the assumption that millennials are bad workers or narcissistic?
BH: I think the disconnect there is that Gen Yers think, work, act differently, and we're trying to manage them with the Baby Boomer or Gen X playbook, and it just doesn't match very well. If you have a new playbook that embraces them, they're plenty loyal, they're not narcissistic, and they're terrific.
I think when the history books are written they'll be the best generation that's come along. They're just smart. They grew up on the Internet, they know how to get stuff done, they're much more sophisticated, I've found, at least than I was when I graduated college. So we do a whole bunch of stuff to embrace that.
If your mission is to increase your bottom line by three-fifths this year, gouging customers and gouging the Earth — that really turns off Gen Yers. I don't think Gen Xers care about that stuff, but I think these new folks do.
BI: How do you maintain a work-life balance?
BH: I do work a lot. One of my hacks is that every Wednesday is my work-from-home day, so if I'm not traveling in a given week, or even if I am traveling, I keep Wednesday open and that's the day that I can just think and get stuff done, so that's one big hack — staying at home on Wednesdays.
The other hack I have, I find that people work work work and don't think think think, and that the percentage of time people work versus think is off. I've tried to shift that, and I try to think lot and try to increase the amount of time I spend thinking about things versus on the phone or in a meeting or emailing people. So I see people working a lot and I say what's your time spent thinking versus working?
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