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The Rituals You Need at Your Company

The Rituals You Need at Your Company

A conversation with Shishir Mehrotra at Coda

I’ve always appreciated systems-based approaches to solving problems, because they facilitate scaling. More specifically, creating thoughtful processes can enable high Growth Endurance – the subject of this Substack series – which means sustaining 70-100% growth rates even once you’re approaching $100M in ARR.

Shishir Mehrotra, Co-Founder and CEO at Coda, has spoken and written extensively about company “rituals.” I was curious to hear his take on how strong rituals can help companies grow fast for many years in a row — and I’m glad I did, because this conversation was jam-packed with actionable suggestions. We covered questions such as:

  • What rituals can help companies tackle new revenue streams — new product launches, new geographies, or acquisitions?

  • How should you adapt your rituals as you grow?

  • If you’re looking to “get in shape” with respect to rituals, where should you start?

You can listen to the podcast or else read the lightly edited transcript of the conversation below. Let's dive in!

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Allison: Shishir, I am so excited to have you on this podcast today to talk through rituals for teams that are looking to sustain high growth endurance, which is the subject of the current Substack series. Thanks so much for joining us today.

Shishir: Thanks for having me, Allison. I’m a longtime reader.

A: I know you've written and spoken a lot about rituals, which is not usually a term that I hear when people are throwing around jargon about how to operate a company. Usually it's “operating cadence” or “processes.” I think you probably have a different lens in thinking about how to make a company scalable through the use of your term “ritual.” What is the ritual? How did you land on that term?

S: It's a fun word and I hope it makes its way into everybody's vocabulary. I’ll just tell a little story about where my first experience with the term came. I sat on a board with Bing Gordon. Bing was one of the founders of Electronic Arts. He’s now famous investor in Amazon, Zynga and many great companies.

He is one of the best non-linear thinkers I know. We were on this board and he kept asking the company, "What are your golden rituals?" And at some point we said, "What the hell does that mean?"

He said that every great company has a small list of golden rituals. They have three criteria. Number one, they have a name. Number two, every employee knows them by their first Friday. And number three, they have a template.

Bing has a list that he rattles off, like Amazon has six-pagers, and Google has OKRs, and Salesforce does a thing called V2MOM. They are these iconic rituals that have been framed into these companies.

I ended up talking about this on a different podcast a couple years ago with Reid Hoffman on his Masters of Scale podcast. I got all these wonderful responses afterwards in which people asked what are my rituals and said they have one to share. I then started to research a little bit and interviewing people. I’d tell them Bing has this definition of a ritual and ask them what comes to mind. It was fairly open-ended and it was amazing to me what people respond with.

One of the people I was talking to was Naveen Gavini, the Chief Product Officer at Pinterest. At the end of our interview he told me about a thing they do called Pyramid OKR. It's a fun way to think about planning. Then he asked if he could sit in with the next person I was interviewing. I thought that was weird, actually, but I said I’d see if I can work something out. Then he suggested we do it as a dinner. So, through the pandemic, basically every month, I would host a group of people to show off their rituals to each other.

I learned a whole bunch of things in this process. First off, I learned people have more rituals than you might think. People were very forthcoming about them. They were very excited. Everybody has little secrets from how their business operates, but this isn't one of them. People are very happy to talk about the rituals.

People are also very interested in each other's rituals, which is fun. But probably the most interesting thing I learned about rituals is that the reason they're so exciting is they're a bit of a code word for culture.

Dharmesh Shah is the founder of HubSpot. He gave me a really good way to think about it. He said that as companies, we produce two things. We produce a product for our customers, and we produce a culture for our employees. When you've asked people what their culture is, sometimes they give you culture statements and so on. When you wonder what that means or how that works, generally, they get tangible-ized into rituals. If we have this open culture, it’s because we do this open Q&A on Fridays and this is what it feels like. It’s some ritual that really makes it happen.

I started seeing rituals not just as a fun topic, but actually as a secret to these companies' success, because they're really a mirror of culture. They're almost synonymous terms.

I decided to turn my sort of side project that I did as a hobby into a book. And so I'm now writing a book called Rituals of Great Teams. I'm basically taking the top 100 rituals I picked out and putting them into this book.

I thought this would take a few months. I'm now two years in. I've gotten quite obsessed about the term and the idea and trying to learn as much as I can about everybody's rituals.

A: I'd love to think through with you how great rituals help you grow when you're at scale. And particularly how you might adopt different rituals at different stages of your company. For example, I'd love to hear what's an example of a great ritual when you're at $10 million in ARR, a great ritual when you're at $50 million ARR, a great ritual when you're at say, $100 million in ARR.

S: The book has five major sections of five different types of rituals. One is focused on strategy and planning. Another focuses on how meetings and cadence works, and so on.

Some of them definitely change with scale, and some of them I would view as universal.

And there's actually some that have a diseconomy of scale. Cheryl Sandberg talks a lot about rituals, such as celebrating everybody's birthdays in your team meeting. That works great up to a certain number of people, and then it doesn't work anymore. So, there are rituals that naturally age.

There's a bucket of rituals that I'll call “decision-making rituals” that definitely get pressure as you get bigger. The stakes get higher as you get bigger.

The best ones I got were from companies where you don't think they actually need it. They’re not at that scale yet, but it's just part of their DNA to do it.

One of ours that I end up talking a lot about is something we do called Dory and Pulse. It's a very simple idea. Basically every meeting or write up or code up, you'll have a Dory and Pulse. The Dory is where we'll have a document that says what we're trying to decide. Rather than go through all the comments in the right-hand rail, I had one of my interviews tell me that it feels like all important decisions in their company are made in the right 100 pixels of a Google Doc. That can't possibly the best way to do it.

So, we'll have a Dory, which is a list of questions where people can vote them up and down. It's named after the fish who asks all the questions.

Then we'll do a thing called Pulse. The way pulse works is everybody gets a row, and it's meant to fill in their viewpoint. So we're trying to decide should we launch this feature? Should we hire this person? Should we buy this company? Everybody fills in, yes or no, or a scores it on a scale of one to five.

We hide everybody else's response until it’s done. That way, you remove that groupthink out of the process. I get asked a lot about this with companies at scale. If a company has hit 1,000 employees, decision-making is really tough and very diffuse. I'll end up talking about Dory and Pulse.

Many companies have variations of this. Zoom does a thing called RCR—Root Cause Reasoning. Square does a thing called Spade, which is their version of this. Basically, they codify the decision-making process in some way that is built around how they want to take feedback on making those decisions.

The role of each person in this process and their importance changes as you grow. This is because the dynamics change. When you're small, the Dory Pulse thing works fine because you just need a way to get everybody's viewpoint without biasing each other. When you're big, the reason for using almost the exact same ritual has changed.

Coinbase does something that I really liked. They have a very similar thing to Pulse where they make everybody write what their viewpoint is. You don't go around the room and let everybody bias each other. But they tag each person with what their role is. They use Rapid as a framework, or Recommend, Agree, Perform, Input, and Decide.

They take everybody's input, but they’re very clear on identifying which roles are in the interested group. Those will be read. But if you’re in the approved group, they need to wait for those answers. So, the core ritual changes as you grow, but the heart of it is, understanding how do you want to structure decisions.

I’ve probably gotten 100 examples of different decision-making processes. The one that is the most common is a caterpillar turning into a butterfly. As this thing grows, you have to molt the old planning processes in order to get the new ones.

There seem to be three buckets that mostly correlate to the size of the company. The early ones, I call the big rock benders. You're early on, all you really need to do focus on is your top three or five priorities. That’s enough. You just need to decide you’re going to work on X not Y.

The second bucket becomes what I think of as a responsibility matrix. OKRs become a very common tool. It’s not enough to say these are the three things we're trying to achieve, you have to figure out what each team is going to do along that path. You can't just have one goal and assume everybody will figure it out.

Bucket three of planning is the resource matrix. All of a sudden the output of planning is a budget. It's often a cross-matrix budget because almost every company at scale ends up with some spreadsheet or Coda doc. On one axis is the teams, and the other axis is the priorities. You fill in how many org resources you’re going to put on which priorities.

Planning are the kind of rituals where people will get to a new milestone, and realize the old way doesn’t work anymore. You’ll start in the big rock world, you cross into the OKR world, then you move into the resource and budgets world.

I highly encourage people to build decision-making culture as early as you possibly can because once it's cemented your company it probably won't change that much.

A: Those are great examples, particularly the planning process. I've been writing a lot and publishing stuff that other people have written about OKRs over the past couple years. It’s been fascinating to see that kind of methodology be developed and also to see how companies evolve it, as they become bigger.

I'd love to chat about other rituals that make you excellent at growing at scale. I'm thinking about for example, getting good at new product launches, which might be something that you have to do in order to generate additional revenue streams as you need to meet higher and higher revenue targets.

Or for example, rituals that help you get good at acquiring other companies, or entering new geographies. Again, thinking through what are the different revenue streams that help you get to $100 million ARR and still grow fast at that rate.

S: Some of those things that you mentioned, new product launches, rituals around new geographies, there are companies that have ritualized it and companies that just take it as it goes.

Of the companies that have ritualized new product launches, probably the most iconic interview I can remember was learning about how Zynga does new product launches. It's so built in their DNA because they do it all the time. They have game after game, and they've learned some patterns around it.

Probably the most interesting one that I interviewed on this topic was Pixar. They’re an amazing company. They've done so many movie launches, and I think their first 15 movies were all hits by any standard—revenue standards, by winning awards, and so on.

We don't always think about movies as products, but I guarantee they do. And they've got a bunch of rituals around how they do it. One of their main rituals is this thing they call the brain trust. It’s a pretty simple idea. They have a group of people who are intentionally not part of the team that's working on it. You bring the product to them at regular intervals, and that group is trusted to give you very direct feedback. That has become part of their culture. If you squint a little, that culture is actually very similar to a thing Amazon does called Bar Raisers.

Bar Raisers is usually heard about in a hiring context. You go through your interview loop and then the one person who's a Bar Raiser is intentionally not in the hiring chain. It is meant to maintain the hiring bar across the company.

And it turns out is that they use the same Bar Raiser process for 15 other things. So if they're launching a new product or in a new market, they have a set of Bar Raisers that are accountable to do this process and they train them. You apply to become a bar raiser. You get trained. You do a shadowing program. You get the authority of being blessed as a Bar Raiser.

On the other hand, there are a lot of single-product companies where they're about to launch their second product. But all of your logic has been created only by what it was like to launch your first product.

I was talking to the Figma team about this. They have a massively successful product, then they came out with FigJam. They had to start from zero in a new market, and it's addressing a slightly different target. The right ways to build products like that is to let them wander around a little bit. You’ve got to be a little bit careful about depressurizing too quickly before they find that fit and that draw. Before they find what people really love about it. It is actually quite hard to do.

You asked about geography and a good example is companies for which launching new geographies is their bread and butter. You talk to the people at Uber or DoorDash and so on, and they have a complete playbook. And in fact, it was the secret of their success that they could launch a market. One of the things that Uber got really good at was launching a market without putting any boots on the ground in that market, which is a really crazy thing to do. And for that product, it's very physical. You’d actually kind of need to know geography, but they would do the entire thing virtually.

One of the guys who used to run the Uber driver program turned around and started a real estate company. They are basically buying and selling houses in tier three markets. They applied the exact same philosophy of launching a market while putting zero people in the market. They used that same set of methodologies and rituals to launch. That became their ethos.

The best rituals I saw were from companies where the ritual represented their bread and butter, launching new markets and so on. For the ones where that's not their bread and butter, you mostly saw confusion.

A: That’s probably one reason why so many new product launches and acquisitions and new geographic entrances fail, right? It's not part of their bread and butter.

S: Yes.

A: When you're trying to do something new, when companies reach a certain stage, it's often difficult to maintain that kind of spirit of innovation. Maybe the people that you had at your company when you were initially going from zero to one are no longer there. As you said, maybe you've just forgotten what it was like as a founder to do that zero to one stage initially. So there's something paradoxical about saying that you need rituals to remind and help you do new things.

S: Incentives really matter. There's a really good line in Peter Thiel's book Zero to One about how a startup is defined by the smallest group of people you can convince about your crazy view of the world. And it's very important that that team have a team dynamic, that they’re in this together.

One of the mistakes that companies make is they try to run new products through the same cycle as their existing product. And to use the planning methodology example: they went from big rock mode, to OKR mode, to resource budget mode, and then decide the way they’re going to launch a new product is to assign half the responsibility here, two thirds of it there, a quarter of it there, and then we're going to launch this new product. What they miss is that the group of people really needs to feel like this is all that matters to them. The incentives have to be very aligned to the teams.

One of the rituals that Google did for a long time, that unfortunately faded away, was a thing called Founders Awards. Every year Larry and Sergey would pick one project and grant that team a big bucket of stock and cash. The key was it was a team award. There's no way for an individual to win the award.

One of the early ones that won was Gmail. It caused this side project that was doing just okay to create a dynamic of showing how they should do new products there.

When I joined YouTube, it was this weird backward side of Google. It wasn't really working. We were losing a bunch of money. But every person I talked to believed that if we could hit certain milestones, we'll get a Founders Award. And now all of a sudden, it feels like the equivalent of a company going public.

A: A lot of folks have spent the last year or more thinking about how to get through a potential significant downturn. There's certainly a lot of uncertainty in the macroeconomic environment right now. Are there any rituals that you think could help founders may get through this stage very well?

S: I’ll start with what changes when the macro environment changes. This is the third upturn to downturn I've seen. I started my first company in 2000, I watched that set. I got into YouTube in 2008, and watched what happened in 2009. I've been through a few of these and there are a couple of philosophies I've learned and developed.

One is, as a company we create value, not valuation. It's really important to keep in mind it is our job to create value. We're focused on delivering great products for our customers that they love, and in most cases pay for. That's where we need to stay focused. If you spend all your time obsessed with valuation, you'll drag your company the wrong way. If, in this environment, you spend all your time thinking about the stock price, you've probably gotten it backwards, and you're probably going to end up doing a disservice to all of it.

The second thing is, scarcity breeds clarity. I remember when I got to YouTube in 2008, and we had a year of the go-go years. We thought money was free.

We could invest in anything and all the people wanted was to go. The CEO of Google the time was Eric Schmidt. All he wanted was, go, go, go. Grow as fast as you possibly can. Then the market starts turning and I remember my first meeting with the new CFO at Google, a guy named Patrick Pichette.

He sits down and says he’s been studying the business, he has these three charts, he’s trying to make sense of them. The first chart said how much money you're losing per year. And it was hundreds of millions of dollars about to cross $1 billion dollars plus.

Second one was how much money you lose per view. And it was almost a penny a view. Not quite, but pretty close.

The third chart said what views are doing. And it wasn't a little bit up and to the right, it was a complete hockey stick. He said he knew I thought this was all good, but he said this was the worst business he’s ever seen and asked me what I was going to do. His next question was who we could sell it to. Then he said no one else would buy it because it’s never going to work.

He’s in the middle of a big downturn and facing lots of market pressure. Obviously he's feeling that Google, which had never felt any real market pressure, was all of a sudden wondering how do we hold down costs and produce money? All of this is floating downhill, to all of us.

Larry and Sergey are in the room, and Sergey made a statement that he's made many times I really grew to love. He said, "Scarcity breathes clarity.” And so this is what you have to do. And now you can't have an infinite resources to do it, but you still have to do it.

Those two frames—we control value, not valuation, and scarcity breeds clarity—think about them as you consider what rituals really drive that viewpoint.

So, scarcity breed clarity—how do you get your team to empathize with the company's level of scarcity, and that breeds clarity. Like with all humans, very natural incentives happen in a company when things are scarce, where the natural emotion is the inverse of what you want.

Everybody's first reaction is that they better grab the food while it's here. This is a very human thing, People feel they should probably grab what they need, not just for themselves, but for their team, for their family. All of a sudden everybody's asks go up.

Many leaders will get frustrated by this. Don't they know what's happening in the market? Yes, but you haven't gotten them to put on their company hat.

So, there's a set of rituals I've seen for doing this. There's now a whole book written about it called Games Forming and they have a whole series of how to use games to change behavior.

I think it's an interesting word to think about in the workplace, because games sounds trivial. But it actually is very effective. One they talk about is $100 voting. It's a very simple exercise. We each get $100. We have a list of priorities we can go through and you've got to allocate across them.

I actually do this now in annual planning. I make the board do it, which is really interesting. I also open, usually in our Q4 board meeting and I'll say that I've outlined the seven or eight things we could do next year. We can only really do three of them. You each have $100 and vote.

You allocate and then next to each one you say why you think this one should get $40, why this one's should get $30, and so on.

Everybody on the board has a company hat. But with your management team or with the extended management team, all of a sudden it forces them to wear the company's hat, and describe one.

And they can't just say, give all the $100 to my team because we're the only one that matters. You get out of that defensive mode and it frames that context better.

So, the principle of it is that scarcity breeds clarity, but saying that will create the opposite emotion unless you create the ritual that allows everybody to act like a company.

A: There's a very clear call to action for founders, and I know many of them are thinking through big decisions like this about capital allocations. So, this is very timely.

As a final question, let’s say there is a founder and they’ve just raised their Series A. They’re trying to get into shape with respect to their rituals. What’s one tip that you would you tell them?

S: What I would probably tell them is related to your first question on what is timeless and what is not.

There's some rituals related to planning or how to run your staff where you just need to realize that the moment you grow by 10x, it all has to go out the window.

And then there's others that are going to form your culture forever. And if you get them right early on, they will be the same forever. The handful of rituals that fall in that bucket, the hallmark of good versus great companies tends to be how they make decisions. I'd pick decision-making rituals, but in particular I'd pick one that has been really impactful to us called Eigenquestions. It's a name we made up actually at YouTube.

When you're making a decision, there's a list of questions to answer. Eigenquestion is a term that refers to the one question that if they answer, will answer the rest of the questions as well. It's the most discerning question of the set of questions. It’s a simple idea but a very hard technique, and there's a good writeup on it. I'll let people go read that separately.

What I'll often see people do is they'll spend a lot of time in decision-making focused on getting to the right answer and not on getting to the right question. We're here to make this call. Let's start with asking if we are we asking the right question.

There's a story called the Modern Family story about how we did this at YouTube. This was a question of should we link out to Modern Family or not. That’s how the question was framed.

It often turns out that in a list of ten questions, the one at the top, because it's the most visible is the most impactful. But it sometimes turns out that there's a question five or six questions down the list that if you answer that question, all the other ones go.

How you make decisions as a company is the most important thing you can embed in your culture early on. And then, learning how to ask the right questions is actually more important than learning how to make the right decisions. So that's why it topped my list.

A: Shishir, thank you so much. This was super actionable advice. I love how specific we can get with the subject of rituals. I know that's what founders want. They want specific steps that they can take to drive revenue growth and prove the way their company works. So it was great to have you today and I'm sure everyone's going to be really excited for when your book comes out.

S: Thanks, Allison. Great questions.

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