The Catastrophe of Success


Or How To Build The Silicon Valley Back Office

About the Author

The journey to writing this blog is largely due to chance, the kind of happenstance that has made Silicon Valley synonymous with billion dollar success. Attending college here in the 1980’s was a stroke of good fortune that had nothing to do with my goals coming out of high school in Southern California. A dedicated jock, I attended college at Santa Clara University on a baseball scholarship, and my goal was to play professionally. Like many pitchers, injuries ended any hope of my playing further. But baseball, a game I loved, transported me like a golden carriage to Silicon Valley.
Here, I joined the accounting firm Ernst & Young (EY as we called it), where my clients included Intel, Seagate and many extraordinary start-ups such as Google and Digidesign (the creator of ProTools). My nine years at EY were a great training ground where I not only learned the technical aspects of accounting for technology companies, but got an inside peek at how they operated. I worked with some very gifted people. And I worked with some ethically challenged people, too.

At the end of 1999 my wife’s company went public. Since her company was an EY client, the best alternative for our family under then current auditor independence rules was for me to leave the firm. Again, chance favored me. During the 1990’s, friends and colleagues I met at EY filled the Valley. They hired and referred me as I moved from one top venture backed start-up to another, then to Google, and finally to Trulia (acquired by Zillow in 2015 for $3.5 billion).

This blog is an attempt to share what worked in the fifteen years, and what I witnessed first hand. I will write about things I’ve seen in my professional career, about things I have done, and failures and successes that I experienced. Everything I write here actually happened. The actions I recommend you avoid is based on the outcomes of my experiences. If the history of Silicon Valley is any indicator, neither you nor anyone else will be able to say what happens next. What I can promise you is that there are a thousand mistakes you can make, and if you avoid them you may actually have a chance at success.

1.Introduction: If You Notice Us, We Have Failed

This is a “how to” blog. It deals with the tasks that every business must perform in order grow their company to its full potential. Thus, it is about the back-office work that no one talks about as they raise seed money, brainstorm public relations interviews, and pitch to investors, but becomes essential at the moment a company begins to show even the hint of success. It is designed to help you perform the various activities that are not directly related to developing, producing or selling. Drawing upon 75 years of practical experience in roles ranging from CFO and Corporate Controller to Operations Consultant and outsourced Service Provider, we have developed a system for how to go about executing these back-office tasks. Everything you read here is being used in Silicon Valley today: an organized and purposeful approach – a Playbook, if you will – to managing operations that will create a foundational platform for profits, maximum efficiency, and dynamic management, whether start-up or established company.

That executives and entrepreneurs give neither sufficient time nor sufficient thought to back-office activities is the universal condition in Silicon Valley. Executives should spend as much time as possible developing and selling unique or distinct products and services that can exploit opportunities in their market. Their thoughts, like the resources they manage, must be focused on finding the right actions in their markets. A result is that few resources go to non-revenue producing activities such as Finance, Accounting, Human Resources, Operations and Facilities.

But imagine what would happen if back-office tasks were not performed? How motivated would engineers and sales teams be if they were not paid on time, or if their pay contained errors? How would stockholders react if they discovered that their company had to restate its financial statements? Finally, how could an executive team exploit opportunities in a market if it could not measure the results of its efforts?

Adverse impact, if improperly executed, makes back-office activities a dilemma for Boards of Directors, Venture Capitalists, and Executives. Ask a partner at any large legal or accounting firm about the weaknesses in structure and performance he or she encounters each year. Ask them how leaders in administrative roles are forced out of their roles because their teams could not keep up with sales growth, how inexperienced teams fell victim to fraud, or how many companies overlooked one or more of the endless domestic and international regulatory compliance filings to find that they owed huge penalties to one or more government agencies.These issues are chronic in the Valley, particularly for companies with explosive growth rates.

In “The Catastrophe of Success,” we will journey into the front line operations, where we implement integrated sets of principles and techniques that successfully overcome these issues. We will address how teams can perform back office tasks efficiently and effectively, while adapting to a constantly shifting environment. Our method is woven into a playbook that draws upon insights from the Toyota Production System, Six Sigma, The Theory of Constraints, military maneuver tactics, and practices learned working with many leading technology companies. This Playbook will not only enable you to achieve your objectives more efficiently, it will allow you to adapt to rapid change, to free your executives and board members to forget the back office, and focus on developing and selling in this, the most dynamic era of growth in the history of Silicon Valley.