I had a real struggle preparing to be a public company CEO. And it had little to do with having scalable internal systems or making the quarterly numbers… I just couldn’t keep secrets from my employees.
As CEO of IronPort, I wanted to be completely transparent with my entire team but my board of seasoned industry veterans was sharply opposed… They raised several serious issues: do you want to leak critical weaknesses to your competitors? Do you want to panic your employees? Do you want to completely reconstruct your culture when you go public? It was just a bad idea. However, the more that I thought about it, the more I believed that sharing absolutely everything would create massive advantages and that we should live with whatever consequences resulted.
So, after board meetings, we would assemble the company and go through every board slide… How much cash in the bank? What’s our burn rate? What are the biggest problems we are facing? Did we decide to build, buy or acquire a critical component? The first couple of go rounds, there was dead silence. No questions—just head nodding and a couple of blank stares. After some probing, we realized that people needed to feel comfortable speaking up, that it didn’t just come naturally. We brainstormed a bunch of different ways to get over this hurdle and here were some experiments that ultimately worked:
Over time, the benefits of transparency coupled with an emerging cultural norm of speaking up became more apparent:
I thought we would surface creative answers faster. When everyone had a clear understanding of the hard problems, their collective brains were on the table for parallel processing. The best information rarely sat with the senior executives but with the employees that were closest to the product and closest to the customers. And the best answers would often come from the most unlikely of places. For example, some of our most innovative features came from customer support reps identifying customers trying to use the product in ways it wasn’t intended.
Initially, it worked better than we expected. IronPort experienced zero voluntary turnover for the first three years. Because we let everyone’s head under the tent, we implicitly trusted them and it worked both ways. For instance, it wasn’t a shocker when we stopped hiring as we were raising money. Everyone knew exactly what was going on: we were running low on cash and had no idea how long the process would last.
Lastly, nobody was confused about what was important and people would point out any inconsistencies and solve them in the background. I remember standing up at a company meeting talking about how excited I was that IronPort anti-spam was working and we’d finally be able to drop our partner Brightmail. After the meeting, the accounts receivable clerk knocked on my door and said, “I thought you should know that two customers are withholding payment because IronPort anti-spam isn’t performing.” Oh crap. But much better to know about it and fix it than go on believing there wasn’t a problem.
As we were preparing to file our S-1, we hired a CFO with public company experience that insisted that we start “practicing” as a public company. Hmm—I knew that our level of transparency would have to change but what did that mean exactly? “You can’t tell everyone how we did this quarter at midnight quarter-end” and “You can’t go through all the board slides like that—too much sensitive information.” So, we started editing, putting shrouds on issues because we were afraid that the information would leak. I remember our first all-hands during the “practice” time. I felt muzzled and cautious, trying to strike a balance between our wonderful transparent culture and an intricate set of Sarbanes-Oxley rules. As it turned out, the practice was critical in working out the kinks. Here are a few things we did:
Although we eventually opted for an acquisition by Cisco versus an IPO, I came to believe that our type of total transparency was a competitive weapon that applied primarily to private companies. In the end, my board members were right—we did have to limit what we shared with employees on the way to going public. That said, I believe it was much healthier to set the default to full disclosure while we were private. When you prepare for an IPO, it’s definitely a high-class problem to have to work backwards with concrete reasons to withhold information from the employees. And when that time comes, they totally understand.