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EPISODE 0041 - MAY 7, 2019

KNOW YOUR TEAM

with Claire Lew
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Claire Lew is the CEO of Know Your Team, a company dedicated to solving the problem of bad bosses. The company has its origins as a product developed within Basecamp and today is not just a software tool, but a deep vein of resources for managers of all experience levels. In this episode, Claire shares her unconventional path to becoming a CEO, how she completely revamped her company’s focus and business model, and why so much “thought leadership” around management gets it wrong.

Transcript

(00:00:00) Broken By Design by Clip Art plays.

Wailin: (00:00:02) Welcome to REWORK, a podcast by Basecamp about the better way to work and run your business. I’m Wailin Wong.

Shaun: (00:00:07) And I’m Shaun Hildner. Today we have a guest that we’ve been wanting to have on for a while and the stars finally aligned. Claire Lew is the CEO of Know Your Team, a company that actually started as a product by Basecamp and got spun off under Claire’s leadership. Since taking over in 2014, Claire has renamed and repositioned the company and developed a ton of resources around leadership and management. She writes, she gives talks, and most recently, she launched a podcast, herself, called The Heartbeat Podcast where she interviews CEOs and founders.

(00:00:39) Claire’s path to becoming a CEO is a pretty unconventional one and we wanted you all to hear it. So here’s Wailin’s conversation with Claire Lew.

Claire: (00:00:51) I’m Claire Lew and I’m the the CEO of Know Your Team. We are a software tool that helps you avoid becoming a bad boss.

Wailin: (00:00:59) You write on the about page of Know Your Team, you say, Know Your Team is what I wish had existed seven years ago. Can you talk about what was going on in your life seven years ago?

Claire: (00:01:15) Yes, we can definitely get in that time machine and travel back. So, at the time, seven years, maybe now eight years ago, I went to work at this early-stage e-commerce company right outside of Chicago. And, I really enjoyed the work. I loved my coworkers. I did not like my boss. And I, in fact, hated my job, unfortunately, because of who my boss was at the time. And I sort of reflected and was like, maybe it’s just me being a disgruntled Millennial, maybe there’s just this sort of malaise that I’m having because I’ve never worked for anyone before. And I really sort of chalked it up to that for the first year.

(00:01:57) And then as time went on I realized, well wait a second. Now what’s really driving my unhappiness in the workplace, and also is it just me? I’d studied Learning and Organizational Change when I was in college and it was interesting to sort of see these different concepts come out to play, which there was just a lot of organizational dysfunction, mainly stemming from the leader at the time.

(00:02:16) And so everything from lack of transparent communication to favoritism in the company. Lack of vision, and most sort of glaringly, a lack of feedback in a company. So people were unhappy or felt like things could be better. But the CEO at the time had absolutely no idea that this was the case. That’s what I was thinking. I was like, oh my God, I hate my job because of my boss. And my boss unfortunately has no idea. Like, how terrible is this? And you know, when it’s not his fault, like, he’s not a bad person, it’s not like he’s unintelligent. He’s a wonderful person, but he’s completely oblivious to the fact that he’s, you know, being at a terrible manager.

(00:02:57) And so the inspiration of Know Your Team has been taking that experience seven or eight years ago to heart. I mean, so, what I ended up doing Wailin is, I quit job at the time and decided, all right, I’m going to start a company around helping managers see the truth of actually what’s going on. How do you help a leader realize for themselves that things are broken? And then once they’ve accepted that, how do you help them change? How do you help them learn how to get better?

Wailin: (00:03:23) When you left that startup, were you able to tell them why you were leaving and how you had felt unhappy about the certain elements of his leadership or was there not even a space to do an exit interview?

Claire: (00:03:37) Yeah, so thank you for asking that question. It’s possibly the only regret I think I’ve really ever had in my somewhat short life in the sense that I didn’t speak up at the time. I didn’t say, here’s why I’m leaving. At the time I said I’m leaving, in truth, just start my own company. But I didn’t say that there were all these other factors driving it. And it’s a regret in the sense that, you know, now as a CEO myself, it’s like, gosh, I would have just been dying to know if someone felt that way and they were in my company. Right? Like, you don’t learn unless you know. So there is a huge part of me that feels that way. There’s just this deafening silence in so many workplaces.

Wailin: (00:04:22) So then you started this company called ClarityBox, right?

Claire: (00:04:25) Yes. We are really going back in time.

Wailin: (00:04:27) This is the consulting firm?

Claire: (00:04:28) Yes. Oh man, I love this.

Wailin: (00:04:31) I find it so interesting that you started a consulting firm to tackle this problem you had diagnosed at your previous job because it seems like you had some information but not all the information. Does that make sense? When you left that previous job, like, you were able to diagnose the problem but—

Claire: (00:04:52) Barely diagnose it.

Wailin: (00:04:53) —you hadn’t had years of fixing said problem—

Claire: (00:04:58) Zero.

Wailin: (00:04:58) —before you launched the company?

Claire: (00:05:02) No, there’s, there’s definitely some audacity here in 23year-old Claire deciding to start a consulting practice to help CEOs decide how to become better when she’s just started one company before and has had no prior consulting experience ever. My whole goal was I just want to work with companies individually and become an expert on this and do all the research and collect all the data and do all the deep thinking. That was the only way I felt like I could manifest that commitment was like, all right, well I’ll just call it a consulting practice.

(00:05:36) And my other thought around it too, as I started to do some research, you know, on the problem and then become, an expert over time… But in the beginning of the thing that I found so interesting about this problem of CEOs and their blind spots and leaders wanting to become better, but having no idea how or not even knowing that they’re bad is that there is so much literature out there.

(00:05:59) There’s so many studies. There’s no shortage of effort and expertise on the topic. Pretty much all the work and writing and studies, etc. Have been done. Like the problem is the application. And so like that’s what I was fascinated by. And so I was like, well, how can I think about how to bridge that gap from theory to practice better? You know, narrowing that gap in particular from theory to practice didn’t necessarily require that the person to figure that out would have had 20-plus years of consulting experience. What would be more important is understanding like why things have worked or haven’t worked in the past.

(00:06:36) So what I did originally was for the first few months in building the business, I focused exclusively on trying to become an expert on the problems. So reading, talking, interviewing tons of people, pouring over studies, right? And then after I initially did that, I felt like I had sort of the preliminary hypothesis for what would be an approach or what would be a methodology for thinking about how to help a leader see their blind spots and become better

Wailin: (00:07:06) Basecamp was Clara’s first paying customer. She met Basecamp CEO, Jason Fried through a mutual friend.

Claire: (00:07:11) So I ended up meeting this Jason. And you know what I thought was going to be just sort of like your know your typical quick 30-minute coffee in and out and we end up talking for hours. Jason admitted, Claire, this is the biggest problem I’m facing as a CEO. We, as Basecamp are 40 people. It’s the biggest we’ve ever been. And, and I feel like I don’t know my company. And so it was there on the spot where he said, can we hire you to, and we’ll be your first consulting client. And he said, you’re not going to believe this, but we happen to be building our own product. Ironically enough that product was Know Your Company, which today is Know Your Team.

Wailin: (00:07:51) For listeners who aren’t familiar with Know Your Company as it first existed, because this actually predates my time at Basecamp, the development of Know Your Company. But it was an email… it’s a software and email tool where you would pose questions to the employees and then the feedback would be collected, right? Is that how best to describe it?

Claire: (00:08:13) Yes. Definitely. Yes. And I believe the initial iteration, that Basecamp had of Know Your Company, at the time it was called Honcho.

Wailin: (00:08:22) That’s right, yeah.

Claire: (00:08:23) Yeah. And I think the original versions were more centered towards sort of like an employee CRM, more sort of remembering birthdays and milestones and then over time evolved to be more focused on feedback.

Wailin: (00:08:36) Now at the time you met with Jason had Basecamp already been selling this product externally or was it only something they were doing internally?

Claire: (00:08:45) They were still in prototype phase and so I ended up giving Jason a ton of feedback and we ended up going back and forth on a lot of different things. And here’s what I’m working on because I actually ended building my own software prototype while this is all going on, too. Because I knew in the long run I didn’t want to build a consulting business, but no, they had not yet decided to sell it when we first initially met.

Wailin: (00:09:08) So then you came in and did your full kind of like consulting methodology at Basecamp. I know that you had interviewed employees, right? And kind of taken the pulse. And then when did that work shift from you presenting what you had found to, Jason, how did that work shift to a conversation around spinning off Know Your Company into a separate company that you would head up?

Claire: (00:09:37) I’m laughing as I reflect on the story. It wasn’t really a shift. It was more of a, you know, the consulting engagement ended, it ended up going really well. I think Jason and David, learned a lot. I got a lot of really positive feedback from the employees. They ended up making some changes in the company, which I heard was really helpful, too. Which, is always what you want to hear as a consultant, that things actually, you know, got changed.

(00:10:03) And then we sort of went our separate ways for a little bit. I focused on building out the consulting practice and building my software prototype. Had some companies who are interested in purchasing that, , had some clients starting to get lined up, but I won’t lie, Wailin, it was extremely nerve-wracking this period of time. Because at the moment, you know, yes, I’d gotten and collected the fee from Basecamp, but other than that I’d been living off… essentially I’d set aside about a year’s worth of runway and it was starting to run low at this point.

(00:10:36) So, here I am like selling, pitching to potential clients. I have a bunch of people who’ve told me yes, I, you know, I’ve got a bunch of people who are really interested in the product, but no one has sent me a check yet. And I’m like, oh my God, holy shit. I might run out of money.

(00:10:52) I’d taken up a part time job working as a restaurant hostess, for part of the time, but had gotten so busy with building the consulting practice and the product that had to stop doing that. And so I’d had a little bit of money coming in on the side, but I was like, oh man, like maybe… I might just have to throw in the towel. And it was literally right around that time, I want to say it was like October 2013, when I got an email from Jason and he’d reached out just wanting to catch up.

(00:11:20) So we met in person, got coffee. Jason was like, what if we spun out, Know Your Company to be its own separate company. You became the CEO though, Claire. We split ownership 50-50. When you do hit a million in cumulative revenue, you would get 75% of the company. And that really, we would just be on the board though. David and Jason would be on the board and you would run the whole thing and grow the whole thing. What do you think?

Wailin: (00:11:45) What did you think?

Claire: (00:11:45) I mean, I almost peed my pants. Like, you know…

Wailin: (00:11:53) Of course.

Claire: (00:11:53) Literally like, I thought, oh my God, that’s my dream job. Like, that’s what I’ve been, it’s why I was building this prototype. It’s, you know, why I made this commitment with wanting to build the consulting practices. I just wanted to solve this problem and what a perfect platform to help solve this problem. But also to have a little bit of like up and to get guidance and support from a company and from people I respect and to have the freedom to do it on my own terms, like does it get any better? I was floored. I said yes. Couldn’t have said yes faster.

Wailin: (00:12:27) And so you had a pretty interesting deal, which Jason also posted about publicly, which I thought was interesting. So, you had mentioned this earlier, you split it 50-50, you didn’t have to put any money in. You were basically given a 50% stake and then that stake would go up to 75 when you hit $1 million in new sales, right?

Claire: (00:12:48) Correct. Yeah. And to be clear, they also did not provide any initial capital, so we started with zero in the bank account. Right. Um, so even, til like…

Wailin: (00:12:58) So, you were still like, I need to buy groceries, like…

Claire: (00:13:01) Well, yeah, so no, I mean, very true. Again, in all transparency, I got a small loan from my dad to pay for the lawyer fees to even negotiate the terms to accept the deal. So we started at 0.00. However, like you said, did get an equity stake without having to put any of my own capital in, did also get all the customers that they had originally, the entire software. So, definitely a leg up. I mean, I’m not saying we started, with dirt but didn’t get an initial capital. And the other thing that I think is important to note is didn’t receive technical or design help from Basecamp. Some people in the past have asked me, oh, Claire, did you get to work with their designers and engineers to build the product for the first few years? And I was like, no no no no no, no.

Wailin: (00:13:49) It was all you.

Claire: (00:13:49) It was just me. It was me, zero in the bank account, a bunch of customers, which is great. A great product. But that’s where we started.

Wailin: (00:13:57) Did you enter this experience, this new phase with an expectation of when you would hit that million dollars in new sales and how did the actual experience match up with those expectations?

Claire: (00:14:10) No. Didn’t have any expectations. I mean you have to keep in mind, I was 24 when I took over as CEO. I had really no idea what this was going to become. And I had asked David and Jason very frankly like, you know, do you have a timeline? Like do you, and they were like, no. Actually the most beautiful thing about having them on board, and probably the most unique thing is the things that Jason and David would ask me during our board meetings would be like, are you having fun?

Wailin: (00:14:39) Really?

Claire: (00:14:40) Yes. Dead serious. They just very much wanted to make sure that I was getting out of this, what I had wanted. Which is very rare, I think.

Wailin: (00:14:52) Were you having fun?

Claire: (00:14:52) I was having the time of my life and also terrified at the exact same time.

Wailin: (00:14:58) Yeah.

Claire: (00:14:58) Because it was a really interesting transition, Wailin, in the sense that it was… Basecamp, as you know, has a very active supportive audience who are very, very curious about everything that the company does. And since this was the first thing, spin-off of its kind and Know Your Company to begin with was this very weird product that they had originally created. There was a ton of interest and so I got a ton of emails. A lot of sort of inquiring minds. And, I think being young at the time, that definitely affected me. I felt this sort of pressure. I worked way too much and I was way too concerned with if I were letting people down. Like I didn’t want to let Jason and David down. I didn’t want to let customers down. I didn’t want to let followers of the company down. I didn’t want to let myself down. And I was really, really wrapped up in that. But, I think I would have had even more fun and maybe even better outcomes that I just not cared as much.

Wailin: (00:15:56) What do you think you would have done differently had you let go of that feeling of not wanting to let people down?

Claire: (00:16:02) I think I would have tried some stuff more, like weird stuff. A big barrier to me in the beginning—and self-imposed, by the way—was because when you have a fear of not wanting to let people down, it also goes high risk aversion. Which can be very healthy for a business. And it’s the reason why as a business we were able to be profitable in the first month, that we became extremely profitable throughout the year. I was extremely conservative with hiring and with getting our margins up and not making big changes in the product. And the first thing I focused on for the first six months to the year exclusively was just talking to customers.

(00:16:39) Like I literally, I mean in the first month alone I remember I had 80-plus phone calls with CEOs from all over the world. Just trying to understand and really get the best grasp on what the problem was and, and how the product is working, etc., and just essentially be as much of a servant to them and their needs as possible.

(00:16:56) And I wouldn’t have changed that, but I do think there was a fear of like, oh Claire, well don’t touch things too much. The product’s selling really well. So like when things are going really well and when you have good feedback from customers, like people really liked the product, you’re more resistant to shaken things up and trying new things. And not just for the sake of trying new things, but because you only are able, I think, to make something better if you start thinking about it and trying something new with it way before the time where you’re ready to make that move.

(00:17:30) There’s this weird gestation period of like the brilliance that you have in like a new feature or a new angle or a new market. It doesn’t just like appear when you want it to appear when you’re like, huh, we kind of need to, you know, find a new revenue stream or we need to expand our audience or we need a new feature that increases engagement. Like, when you reach that point it’s the thing that you need to fill that isn’t really there. Like, you should have likely, hopefully, have been thinking and experimenting and sort of forecasting that out a lot further.

(00:17:59) I wish I had done, I think, in that first year, just given myself more freedom to mess up to try some weird things. To do things that may have made Jason and David go huh? Wait, why are you doing that Claire? Right. Like my big priority actually in year one was like don’t rock the boat.

Wailin: (00:18:17) Yeah. I mean, I think it makes total sense because you were so unexpectedly given this opportunity, and as you mentioned, it came with all sorts of interesting advantages built in. A customer base and this incredible brand equity and this kind of halo effect from Basecamp. And so, it’s like you don’t want to mess it up, right. It’s—

Claire: (00:18:42) Totally.

Wailin: (00:18:42) —almost easier to be like, I’ll just be the best caretaker I can be, right?

Claire: (00:18:47) Right.

Wailin: (00:18:47) Rather than looking out and saying, where do I want to take this company that is 50% mine and really 100% mine in terms of the vision.

Claire: (00:18:54) Exactly. Yeah. But you nailed it. Yep.

Wailin: (00:18:56) So speaking of, then, having the audacity to make a major change, when did you realize or start realizing that your audience and the people you wanted to reach were managers and not business owners and how did you see their needs being different?

Claire: (00:19:15) Yeah. So yeah, to provide a little context for listeners. So, in the beginning as you mentioned, Wailin, we were called Know Your Company and our audience was very, very focused in the sense that we found that the product worked best almost exclusively for CEOs. So not VPs, not HR managers actually like just CEOs. So, for the first two years of the business, that’s what I focused on. So, I spoke at tons of conferences that were geared towards CEOs, spoke at a lot of CEO groups, CEO focus podcasts and publications, right. We sponsored conferences that were focused towards owners. And, I would say probably around the end of 2017, I was reflecting on the business and really taking stock of our growth and what was working and what wasn’t. There were a few things that I noticed.

(00:20:05) One is that there was a general sort of fatigue. And that’s natural of any software product. But I was wondering, well, the problem still exists though. So it’s not like there’s fatigue because they’ve solved the problem and then our product is, is too much. They still have this problem that they don’t know their team as well as they’d like. They feel like they could be a better leader but they’re stopping to use the product for some reason.

(00:20:31) And then in terms of the sales front, we definitely noticed a stagnation. So, a lot of folks might remember that the way that we charge for Know Your Company originally was it was $100 per person one time for life and that was it. So, if you were CEO and you had 30 people, it’s three grand for Know Your Company, and then you’d pay that once and it was obviously the higher the price, you know it’s a barrier to sales.

(00:20:55) So the sales cycle ended up being really long and so it was a combination of all those things where I was like, hmm, we are plateauing. Like, we are going to have to change something. 2017 was actually when we brought on a new CTO and my current business partner, his name is Daniel Lopes, and he’s amazing. He had this great idea of, well, Claire, what if we tried catering to all these other people who seem to be reading our blog and our knowledge center and writing us and loving what we put out. But they seem to be managers. Like what if we had an online community for all these managers to talk to each other.

(00:21:29) So we built an online community for leaders and we launched that at the end of 2017. And that took off and we have today over a thousand people who are part of that online community and—

Wailin: (00:21:45) And they pay for it, right?

Claire: (00:21:45) Oh yeah, exactly. And they pay for, it’s not free. So it’s $20 a month and thousands and thousands of conversations on everything from hiring to firing to how do you run your all hands meetings? To, what do you do for your team retreats or what benefits do you have as a company or what do you do when someone asks for a raise? Etc. So, the building of that community, which was a big sort of first initial light bulb that went off.

Wailin: (00:22:09) I mean when you look at the current resources around leadership, it seems like there’s so much it would make you want to throw up. And sometimes when I look at my inbox…

Claire: (00:22:18) It does, it does.

Wailin: (00:22:20) When I look at my inbox of people who are pitching me like, their books or their thought leadership and they want to come on the show and talk about all of their insights around leadership. I’m like, ugh. All of it sounds the same but… And there’s so much of it. What is the problem or what are the gaps and the shortcomings in the current “thought leadership” we have around leadership? Like, what are they saying that’s like missing the mark for all of these people who are coming to you?

Claire: (00:22:53) I think the reason why—again maybe I’m projecting here—that you might want to be throwing up, and that I definitely feel like throwing up when inundated with all this content as well is a few things. One, a lot of it’s actually wrong. And I mean it in the sense that a lot of it is platitudes that are based off one person’s successful experience that they then broadcast as truth. And so because it’s then sort of generalized and made to be so widely applicable and has no nuance or contexts, that’s when you get the ugh feeling.

(00:23:27) And the second thing that I think is so fascinating about this space is that it’s catered oftentimes to what we want to believe as true. And that’s why these platitudes exist. The best leadership is personalized to each individual, takes into account the specific context and situation and understands that what works for other people on other teams might not work in this situation.

(00:23:59) And my goal, at least when I, when I try to write and I claim none of it to be the ultimate authority on any one topic, be it decision making or vision or feedback, is that there are no easy answers. That you actually have to ask a lot of questions about yourself and about the people. And that putting these into practice takes a lot of work.

Wailin: (00:24:21) My last question for you is how have you seen the fruits of this transition pay off in your company?

Claire: (00:24:29) So we decided to make this transition to focus purely on managers, and to change. I mean we went through a huge sort of upheaval to make this change as you know… But listeners might not know. So we changed not only our company name, so, from Know Your Company to Know Your Team, and not only our audience but our entire product. We added the water cooler into the product, we added guides, we added new features, we made it all very cohesive. We created a brand-new billing system. So we changed the pricing of our product. So we threw away the, one-time, lifetime fee. And because we focused… we wanted to focus on managers and making the product accessible to them, we moved to a monthly subscription, $65 per month. So, new pricing system, new on-boarding system. Had to redo the entire blog. New marketing site. And keep in mind, we are a tiny, teeny tiny company.

Wailin: (00:25:25) It’s just you and Daniel, right?

Claire: (00:25:27) Yup.

Wailin: (00:25:29) Okay.

Claire: (00:25:29) Yeah. Oh yeah, no, that’s us. And you know, we support, it’s two of us supporting over 15,000 people who use the product and you know, over 25 countries. And we have a few contractors who help with media relations or some of the water-cooler membership, social media, etc. But for the most part it’s just the two of us and we, did this change in about seven to eight months and then launched the new Know Your Team in December of last year.

(00:25:55) So it has been, to date, about four months.

Wailin: (00:26:00) Oh, okay. Yeah, not very long at all.

Claire: (00:26:01) Yeah. So it’s still really fresh. So, so far, knock on wood, it’s been a really good change. We definitely so far have seen just from the initial usage of the product, from the number of whether visits and signups to the site, Know Your Team is resonating so much more with our audience than Know Your Company was. So, so far, so good, Wailin. But as you know, as with business, like you can never sort of rest on your laurels to too easily.

Wailin: (00:26:36) Are you still having fun?

Claire: (00:26:37) More fun, honestly, than I think I have ever had with the business. Which is saying a lot because I’ve really enjoyed these past now almost five years. Again, I think back to man, if my boss at the time had maybe been able to use Know Your Team, would I have been as miserable, right? Like I just think about that potential, so that’s fun.

(00:26:58) Broken By Design by Clip Art plays.

Shaun: (00:27:03) REWORK is produced by Wailin Wong and me, Shaun Hildner. Our theme music is Broken By Design by Clip Art.

Wailin: (00:27:08) You can find Know Your Team at knowyourteam.com. Claire is on Twitter @ClaireJLew, that’s C-L-A-I-R-E-J-L-E-W. You can also find the Heartbeat podcast wherever you’re listening to this show.

Shaun: (00:27:25) Next week we’ll run an episode of the Heartbeat podcast on this feed. It’s an episode from Claire’s archives where she interviews fan favorite Basecamp CTO David Heinemeier Hansson. That’s next week on REWORK. See you then.

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