Embracing Public Company Readiness in Scaling a Private Company

TriNet’s IPO was the culmination of contributions from a ton of people over a very long time period.

Few outsiders were aware that our management team adopted a philosophy of being “public company ready” way back in 1994.

Over the two decades from then till going public last March, our leadership team had several themes related to readiness that served as key filters for decision making in both setting expectations and allocating resources.

Being accountable to a budget

Paramount on the list of readiness factors is defining a realistic growth budget and then delivering on the results.

While all CEOs espouse the importance of this basic principle, now that I’m an active early stage investor with an inside look into a large number of fast growth private companies, it seems only a small minority of those I see come even close to that deep commitment of learning how to deliver on budget expectations as they are scaling up revenue.

All companies going through a rapid growth phase encounter uncertainty around market adoption as well as unexpected bumps from the external environment – be it competition, market forces, technology changes and government regulation to name just a few.

And the faster the growth, the harder it is for the team to adapt as they have to evolve internal processes that affect consistency in how the company attracts, prices and services customers at higher volume – all of which ultimately drives the forecasted results.

But the public company principle is that as leader, I was never in doubt that my tenure as CEO was directly related to my ability to accurately predict the future in terms of where our revenues and profitability would be up to a year or further out from where we were at any point in time.

So developing competency in how to do that wasn’t something that I could learn in a single year or delegate to someone else, but instead had to work towards instilling commitment to setting and delivering forecasted results throughout the entire company every single quarter.

Institutionalizing Accountability Begins With CEO Direct Reports

Even if the CEO is “all in” on the importance of setting realistic targets and delivering on that, no single person can make that happen on his or her own.

If I was being measured by how accurately I could predict future quarters, it wasn’t a big stretch to say that should be the same approach in how I looked at my direct reports.

That put my focus on making sure I was getting that intense commitment from my direct reports to both setting expectations within their respective department, and that those commitments were direct linkages to support achievement of the overall budget – especially on how everyone in each department was contributing to growing revenue.

It was up to me to define the process by which we would define and track progress of goal achievement and set the example of holding my direct reports accountable by showing consequences to the reporting executive if goals were not achieved.

Consistency in doing so, as well as supporting systems to report and track goal progress both helped push this approach company wide.

Transparency with Investors and Team Members

Predictability in delivering forecasted results is closely linked to having enough detail in the assumptions driving the budget to be understood by key stakeholders.

Initially, this is the Board and management team, but we found it very high impact to expand the knowledge and transparency through the entire company.

We boiled down a set of business drivers appropriate for full team consumption internally and then constantly reported on our progress so everyone knew where we stood against a full range of operating metrics and budget assumptions.

Another aspect of transparency was our internal mantra of “no related party transactions” as we knew any hint of executives or shareholders having anything less than an arms length arrangement would be a red flag that blows management credibility with sophisticated investors.

Having a “Big 4” audit firm is a huge boost for transparency. We took that on 20 years before going public and never looked back, notwithstanding the extra layer of fees we paid even through the lean years just we could hold to that standard.

Earlier start builds competency

In TriNet’s case, our public company readiness philosophy got a big boost after taking on a large public company as our controlling shareholder in 1995.

Even though we were a small entity rolling up into a big corporation, the public company principles were very top of mind to us as we planned and executed corporate governance over the next 10 years.

Our public company readiness ended up being a significant factor in TriNet’s successful transition from the corporate controlling shareholder to General Atlantic, our financial partner and controlling shareholder since 2005.

I can look back now and see how critical these steps were to laying the foundation for managing through challenges of an evolving institutional shareholder base – the most important undertaking any CEO who wants to be around for the long haul can take on.

And while few high growth companies will find their shareholder exit in the form of an IPO, those same public company principles will insure a stronger company on every dimension that is important to success for both internal and external stakeholders.


Confidence and humility are not mutually exclusive

As I meet entrepreneurs seeking to launch their first startup, I’ve begun noticing behavioral traits I wasn’t paying much attention to before.

Signals I’m picking up more frequently are from entrepreneurs coming across as super confident (even aggressive), perhaps in an effort to show they are hard driving and ambitious.

While confidence in one’s beliefs is indeed a critical asset for a startup entrepreneur, my BS detector begins kicking in when I see a total absence of humility. The tells are things like:

– working their accomplishments into the conversation
– no hint of what they don’t yet know or are seeking to learn
– expressing no curiosity about whom they’re interacting with
– interactions appear motivated only by potential self interest – no evidence of “pay it forward”
– how they interact with others who serve or bump into them seems different than their style of interacting with those in a professional context

Because I’m an investor who looks hard at leadership qualities of the CEOs I want to work with, my mind gravitates towards thinking: “If this is what I’m noticing now, I wonder how it translates to future interactions this entrepreneur has with others they seek to recruit and lead?”

Humility as a leadership trait

If you’re looking for thoughtful insights backing up the quality of humility in leaders, check out Jim Collins’ Good To Great and his work profiling Level V leaders. His research supports the thesis that CEOs embodying the unusual combination of fierce resolve and personal humility ended up being a critical leadership trait for top performing companies in the study.

My own view was shaped most by my Dad and my wife Krista, but also the good fortune of having close contact with a bunch of exceptionally strong leaders who personify humility in how they lead and interact with whomever they meet.

Jack Stack, Founder/CEO of SRC and visionary behind the Great Game of Business would certainly top my list in exemplifying resolute commitment and personal humility. SRC is not only a phenomenally successful company that has transformed thousands of lives, but beyond Jack’s Southern gentleman’s humble style, his open sourcing of the GGOB and open book management practices empower a generation of entrepreneurs like me to embrace principles around getting everyone in a company to think and act like owners – the ultimate management humility as it means running an organization with the power bubbling from the bottom up.

Back in 1995, Anthony Martin, now retired Chairman/CEO of global staffing giant Select (and subsequently Vedior) picked TriNet to invest as one of the 40+ companies in his portfolio. Much to my benefit, he traveled “across the pond” for 10+ years to sit on TriNet’s Board of Directors. Soft spoken with never a wasted word, his gracious, gentle, almost patrician manner helped set the tone for our board meetings with wisdom that came through penetrating observations and questions that were so much more effective than the contrasting style of boards featuring competition to demonstrate who is the smartest guy in the room.

In the emerging tech world, anyone that knows or interacts with uber VC Brad Feld (@bfeld) will attest he gives so much of himself to so many causes (building entrepreneurial ecosystems, women in tech, computer science education and entrepreneurship globally to name just a few) and notwithstanding an incredibly packed and productive schedule and contact list, still shows an uncommon curiosity and willingness to pay it forward with each new person he bumps into.

Humble, super successful people stand out

So I take notice when I encounter a super successful person who isn’t showing the expected trait of being the center of attention in a dialogue among a small group.

My respect grows as they instead show curiosity in others and demonstrate care and concern for people they don’t know, as well as how they contribute talent towards things not driven by self interest.

Encounters like these also reinforce my not losing sight of humility in what I say and do.

Paying it forward is going to be a theme I hope to keep shining more light on. Not only to help keep me centered, but also my belief that raising awareness of success beyond financial measures is the real story behind entrepreneurs with the most impact.


Numbers not the only measure of entrepreneurial success

While most of my inbound startup inquiries come from first time entrepreneurs, this one was different. Even though he was still pre-launch, the aspiring entrepreneur is on the founding executive team of a company that went from startup to a successful IPO in six years.

Now with a year of public company executive team experience on top of managing through multi-year hyper growth, his view of the challenges and decision making to build a true enterprise were things I could relate to right away.

He was getting ready to leave the public company and venture off to start a venture where he would be a first time CEO. Plus he was in the enviable position of choosing to self fund or take his pick of investors at the door with Series A checks in hand before he even showed a pitch deck much less form a company.

What was surprisingly refreshing in our conversation were the entrepreneur’s thoughtful questions, and even a degree of humility that I almost never see from someone with that success pedigree.

After discussing the topic that prompted his call, he shifted into asking me about insights I might offer for the chapter 2 journey he was about to embark on. This was kind of fun for me, since sharing with someone who had been through what he had could be done with a lot of shared context so we breezed through some heavy topics quickly.

Imagining if I were in his shoes, three quick highlights came to mind:

1. Take some time off between gigs. Even though his vision for the new startup was a burning ambition, he is coming off six years of continuously running full tilt. Taking the helm to build a startup from scratch is an all consuming endeavor. The opportunity to recharge now, especially with family, might not be coming again for potentially several years or longer. No matter how quick the market might seem to be moving, there is no doubt that opportunity would still be there for him even if he took 6-12 months off now – time that could never be recaptured again.

2. Finish Big means a lot more than liquidity. When you’re in the trenches going through all that’s involved in building a high growth company, it is way too easy to fall into the trap of thinking how great life will be if you exit someday with a big payoff. However, in my own experience of speaking with quite a few other exited entrepreneurs, I’ve found many more of them unsettled with their lot than those who were leading fulfilling lives. Bo Burlingham’s recently published Finish Big – How great entrepreneurs exit their companies on top, covers this phenomenon with such great insight that I am now giving it to every startup I work with as they approach Series A financing. That’s right, putting the lens on what makes a successful exit (beyond financial measures) can guide decision making on influencing the kind of company culture to build and how to set expectations with those around you that you will want to deliver on.

3. The reward is the journey. In the 20 years of my serving as TriNet’s CEO, this became a mantra incorporated into my closing remarks at our quarterly all hands meetings. The thought is often attributed to Steve Jobs and to me embodies belief that reward isn’t measured so much by the imagined big exit, but instead by the little successes experienced by team members at every step we took along the way. No matter how hard we worked in constantly adapting to change, we sought out ways to reap reward from things like crazy ways to make meetings fun, hiring people we enjoyed spending our time with and friendly competitions to do things we could see made a difference for our customers and their employees. Memories of those shared interactions and successes will last a lifetime for me and many others who found intrinsic reward from being part the TriNet journey.

I’ll be watching with interest on how this new startup entrepreneur’s journey unfolds from here. He has the maturity that points to the right stuff. Those getting on his team are likely to benefit in ways they’ve not yet imagined.

Prior post with related themesStartup to IPO: An Entrepreneur’s Reflections