15/02/12

Connections with Integrity

Published: Februar 13, 2012

Organi ations & People

Connections with Integrity

The venture capitalist who cofounded LinkedIn reveals the surefire s stem that he has used since high school for evaluating potential business relationships.
b Reid Hoffman

As a v enture capitalist, and the cofounder of the leading online professional networking site, I am keenly aware of the v alue of good alliances. Indeed, m y interest in the nature of alliances began long ago, when I was a freshm an in high school. Thinking about what I would do with m y life, I cam e up with a perfect plan. My friends and I would all seek positions of power: One of us would be president of the United States; another would be president of IBM; another would run a powerful nonprofit. We d coordinate our efforts and change the world together. Seem s like a lofty am bition for a high schooler, I know, but we truly believ ed that if we joined forces, any thing in life was possible. Thinking now about the kinds of people who m ake good allies, I realize that ov er the y ears I v e com e to group the behav ior of m y friends and acquaintances into four categories based on the way they m anaged the relationships in their liv es. These categories hav e becom e the clues, signs, and guideposts I look for when assessing whether I want a certain person in m y corner and if so, what that alliance should look like. The four categories also serv e as a fram ework for m e in deciding who to engage with in business partnerships and other professional relationships. They influence ev ery thing from the com panies I choose to inv est in, to the people I hire to work at LinkedIn, to the acquaintances I try to get to know better ov er lunch. Som e leaders hav e difficulty with alliances, either because they do not understand the im portance of alliances in a networked world, or because they do not understand the ty pes of alliances that are possible with different people. Still others struggle because they fail to see that true alliances are not just a m eans to an end; they are authentic relationships built upon m utual respect and trust. This understanding has helped m e adopt the right kind of alliance with each indiv idual I encounter professionally . In the course of their careers, people in professional life who succeed at least in part because of the quality of their encounters with one another m eet a wide v ariety of other people. One could see these acquaintances, in effect, as standing on a continuum of trustworthiness and accountability . At one end are people who treat the world as transactional, judging each indiv idual encounter by its benefits for them alone. People in the m iddle are m ov ed and inspired by a higher order of sensibility ; they perceiv e their effect on the world at large to m atter m ore than the short-term benefits of any indiv idual deal. And at the far end, som e people are m otiv ated prim arily by the quality and im pact of their relationships. For ev ery indiv idual y ou m ight do business with, it s essential to know where he or she stands on this continuum , to know how m uch y ou can trust him or her and how the relationship can be m ost beneficial to both of ou.

Four Attitudes about Alliances

It can be difficult to see the character and m otiv ations of other people clearly , because m any of us keep those facets hidden. All successful professionals learn to interact reasonably well with others, ev en when som e of them hav e little care or regard for other people. But the way people m anage alliances is a powerful clue. It rev eals not just how they approach business dealings, but how they will actually behav e in an alliance with y ou. Here are the four basic categories. 1. I ll do somet hing for y ou, if y ou ll do somet hing for me. These people lim it them selv es to deals in which their im m ediate benefit is at least as great as the benefits for others. If they re inv estors, they put their m oney in a com pany only when the deal is certain to reward them financially ; they insist on either im m ediate pay off or som e
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guaranteed term s for the future. They re generally unwilling to do som ething for other people without certainty that in the future they will be paid back. For exam ple, I once m et two partners in a startup software com pany who were negotiating a deal with a m ajor com pany interested in licensing their technology . It was clearly in the startup s interest to participate, though they would hav e to wait som e tim e before they saw a direct financial return. One of the partners im m ediately understood that this represented a v aluable opportunity , with potential strategic im portance. The second partner kept asking: Why would we do this? We hav e no interest in what they want us to do. He saw no reason to take a risk without the iron-clad guarantee of a future pay off. In this way , the second partner rev ealed his own attitude about trust. He would extend him self for others only if com pelled, and thus did not trust others to do the sam e for him . If y ou do business with people who hav e this attitude, in which trust is lim ited and so are the kinds of alliances y ou can form with them , y ou need to ensure a stream of short-term rewards for them so they constantly feel they are getting som ething back. These kinds of alliances are inherently risky . The m om ent y ou run into problem s and the rewards dry up, ev en tem porarily , these people will seek an escape route. They are unwilling to share y our pain. They will not inv est in an authentic relationship with y ou, because they do not trust y ou to honor that relationship in the future because they them selv es would not. The m om ent y our interests no longer align with theirs, y ou will hav e problem s. 2. I ll do somet hing for y ou, but I m keeping t rack of what y ou owe me. Som e people approach life as if it works on a tally sy stem . When they do y ou a fav or, y ou owe them som ething in return. May be not today or this m onth or ev en this y ear, but before too long, they expect y ou to pay them back in som e m anner. This attitude can rear its head at the v ery beginning of a business discussion. A prospectiv e inv estm ent partner m ight say : I'll show y ou this deal, but I expect y ou to show m e y our next good deal. This attitude, too, is highly correlated with a form of risk av ersion. These indiv iduals are no less focused on reward than those in the prev ious category . They are sim ply willing to wait a little longer for it. In a way , this m akes them ev en less attractiv e candidates for a professional partnership, because they are too focused on their m ental scorecard to inv est in the relationship in a m eaningful m anner. Furtherm ore, if y ou giv e them som ething, they ll believ e it s only because y ou want som ething at least as v aluable in return. That s just the way their m inds work. This ty pe of alliance can run into trouble when y our allies tally sy stem s their way of accounting for costs and benefits are different from y our own. This happens m ore than y ou m ight expect, because of a subtle aspect of hum an nature: Ev en when people are well intentioned, they tend to ov erv alue their own contributions and underv alue those of others. If there is tacit disagreem ent about the v alue that has been exchanged, or if stress prev ents y ou from fulfilling y our part of the bargain in good tim e, the alliance m ay not bear the load. These people are likely to get fairly hostile if they feel that the score is unev en or that they v e done som ething for y ou and y ou re not giv ing them som ething that they specifically want in return. 3. I ll invest in t his relat ionship, and I expect y ou t o invest commensurat ely over t ime. Unlike those who are alway s keeping score, tracking who did and gav e what, these indiv iduals often m ake alliances with the understanding that each side can be trusted to honor its com m itm ents to the other. Each is expected to prov ide a reasonable lev el of return, at least in the long run. But these people don t expect y ou to explicitly say what form that reciprocation will take, or to offer a deadline by which it m ust be prov ided. There s a m utual understanding that the relationship itself is im portant and that som etim es one party m ay do som ething v ery one-sided on behalf of the other, with the v iew that it helps the alliance and the relationship, and that all fav ors ev en out in the long run. An alliance with this ty pe of indiv idual can be an excellent foundation for a long-term , trusting partnership, so the relationship should be nurtured. The key to this kind of relationship is com m unication, talking explicitly and respectfully about what the boundaries of the relationship are, and how y ou can inv est in each other, professionally or otherwise. When there s a com m unication gap, or one of the parties is not quite sure of the signals, y ou will run into trouble. If one person believ es that trust has been v iolated, or that the other has m isrepresented
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what he or she intends to bring to the relationship in the long run, all bets are off. 4. I ll invest in t his relat ionship because it is t he right t hing t o do. These indiv iduals hav e no explicit expectation of return. They are prov iding great v alue with only the knowledge that they are im prov ing the relationship and the satisfaction of hav ing helped another person as com pensation. These people seek out relationships with others who share their v alues and goals, and they believ e that helping the other person will adv ance those v alues and goals. Underly ing these relationships is the assum ption that when the right people are inv olv ed, an alliance is extrem ely v aluable in its own right; we partner with each other to change the world. This ty pe of alliance can ensure a successful, long-term , satisfy ing outcom e ev en if the personal rewards are lim ited or curtailed. To reach this optim al lev el of exchange requires a v ery high lev el of trust. Once y ou hav e earned that kind of trust, the relationship can m ov e m ountains. I hav e seen the v alue of this ty pe of exchange m any tim es in m y career. For exam ple, in m y new book I tell the story of how, som e y ears ago, I form ed a partnership with Mark Pincus (now CEO of the gam e com pany Zy nga) to buy a social networking patent called Six Degrees. About a y ear after that, I was presented with the extraordinary opportunity to inv est in Facebook. My initial response, like that of any intelligent inv estor, was to m ake the entire inv estm ent personally . But on reflection, I realized that giv en m y relationship with Mark, the right thing to do was to giv e him the option of taking half of it. Mark and I had no agreem ent to bring each other any inv estm ents. But because of our collaboration on Six Degrees, we were im plicitly allied across our shared professional interest in social networking com panies. I felt the only honorable thing I could possibly do in that circum stance was to present the opportunity to Mark. I ll adm it, this wasn t purely selfless; I was also aware that if I opted not to do so, the deal would create a conflict of interest that could threaten the relationship, as Mark s interests and m y interests in how to deploy the Six Degrees technology m ight sharply div erge. Mark s interests could ev en becom e fundam entally different from m y own, and that would m ake it difficult to continue working together. In the end, I com m unicated to Facebook that we needed to split m y portion of the inv estm ent with Mark. Yes, I knew that decision would cut the inv estm ent s financial v alue in half for m e, but I also knew the return on the inv estm ent of trust and m utual com m itm ent would be infinitely m ore v aluable in the long term . And it was. Later, when Mark form ed Zy nga, I inv ested and joined its board; we continue to work together in building huge com panies, as deep allies. I use this sam e fram ework whenev er I am deciding whether to work with or hire new people. First of all, I listen closely not just to what people say , but also to the questions they ask; this can speak v olum es about how they will behav e in the relationship. For exam ple, if the first question out of a job candidate s m outh is about the prom otion schedule or com pensation package, I know this is an untrusting indiv idual who is unlikely to inv est m uch effort without the explicit prom ise of im m ediate reward. On the other hand, if the candidate asks how his or her skill set can be deploy ed to com plem ent those of colleagues, this is clearly som eone who will m ake a trusted ally . I also look for less-obv ious signals. For exam ple, I observ e not only how people treat m e, but also how they treat others. Are they dism issiv e and rude with waiters and clerks, or are they generous and willing to ov erlook relativ ely m inor m istakes? Do they talk about others with respect in general conv ersation, or do they routinely disparage others behind their backs? Do they talk about what they like and trust in other people, or do they talk m ainly about how other people are dangerous? These signs can indicate whether people see relationships as prim arily transactional and the transactions as fleeting, or as strong candidates for future trusting alliances.

Mov ing toward Integrity

This isn t to say that y ou should av oid dealing with all transactional people at all tim es. I regularly establish alliances with people who exhibit any of the four categories of behav ior, but each category requires a different approach to the relationship. Working with som eone in the first group who is solely in it for him - or herself can be tricky , fragile, and tim e-consum ing. The alliance tends to be unstable and relativ ely brief. But if the ground rules are established correctly , such a person can be a v aluable partner in the v ery short term perhaps as an inv estor in a one-tim e deal, or as a bridge to an im portant introduction. It s also possible to form good alliances with people in the tit-for-tat second group, but generally only if y ou create
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clear agreem ents and boundaries. If y ou re hiring or going into business with one of these people, m y adv ice is to put all term s in writing. People in the third group are for the m ost part great allies, since they will inv est proactiv ely in the relationship and will be reliable, ev en when there is no im m ediate personal benefit. These two m iddle groups are the m ainstay s of m ost business transactions, as m ost professionals hav e v ary ing needs for explicit signs of com m itm ent to a partnership or deal. Alliances with people in the final group are m ore rare in the business world, and they work only when y ou share v alues and goals. Generally , y ou both hav e to hav e a fair am ount of self-knowledge about what y ou stand for, and y ou m ust believ e in each other s m ission in the world. Usually people in this fourth category hav e deep personal integrity , and they prize doing good for the sake of doing good. These are ideal partners for a long-term business relationship, but they m ay also dem and a greater com m itm ent from y ou, or a higher lev el of shared v alues, than a sim ple professional alliance requires. Of course, these four ty pes of attitudes aren t m utually exclusiv e; people v acillate am ong them . I know m any people who tend to start their professional relationships with relativ ely high lev els of trust. But under stress, they feel wronged, or when they see y ou doing som ething that they dislike, they rev ert to the m ore explicit, transactional alliances. On the other hand, som e people can start by inv esting in the relationship with their ey es toward som e future pay off, then ascend to the m ost altruistic lev el when they realize that they share significant trust with y ou, and a m ission in the world. When it com es to y our career, although it m ay be tem pting to forge lots of transactional alliances after all, by their v ery nature, there is pay off for bo h parties in the long run those alliances built on trust and integrity are m ost v aluable. As I instinctiv ely knew back in high school, these relationships open the door to m ore possibilities, and are m ore likely to lead to great accom plishm ents. I believ e that the people who tend to becom e m ore effectiv e in the world are those who build and nurture the best alliances. One way to help nurture good alliances is to prov ide early and explicit signs of y our own com m itm ent, showing people that y ou actually care about helping them . My nam e for this practice is the theory of sm all gifts. There are m any sm all way s to inv est in a relationship and create m ore v alue for ev ery one, without expecting any thing tangible in return. For exam ple, y ou can offer to introduce people to others in y our network; if the introduction is well chosen, it can be one of the m ost v aluable things y ou can do for som eone. When I introduce two people on LinkedIn, m y expectation is that both people will appreciate the introduction, ev en if a specific business transaction does not happen. In fact, I had the theory of sm all gifts in m ind when we dev eloped LinkedIn. At the m ost obv ious lev el, LinkedIn is a sy stem that helps m em bers use their networks to find people with relev ant knowledge, experience, and resources. If y ou re interested in open source program m ing and search LinkedIn for that phrase, y ou will see a list of experts connected to y ou through m utual acquaintances. You can easily ask for introductions without hav ing to phone som eone, ask them to do the hard work of thinking who would be the right m atch, and then m anage the logistics of connection. It seem s counterintuitiv e, but the m ore altruistic y our attitude, the m ore benefits y ou will gain from the relationship. If y ou insist on a quid pro quo ev ery tim e y ou help others, y ou will hav e a m uch narrower network and a m ore lim ited set of opportunities. Conv ersely , if y ou set out to help others by introducing them to the right people, sim ply because y ou think it s the right thing to do, y ou will rapidly reinforce y our own reputation and expand y our univ erse of possibilities. For m e, that is the greatest v alue of understanding alliances; it can help y ou build the kind of network on which great careers are built.
AUTHOR PROFILE:
Reid H ff a i a pa ne a G e lock Pa ne , a en e capi al f nd in Silicon Valle . He i al o he e ec i e chai man and cofo nde of he p ofe ional ne o king i e LinkedIn, and he chai of he We Coa ad i o boa d of Q e B idge (a nonp ofi o gani a ion ha link b igh , mo i a ed lo -income den i h chola hip oppo ni ie ). He i he coa ho , i h Ben Ca nocha, of The S a - p of Yo : Adap o he F e, In e in Yo elf, and T an fo m Yo Ca ee (C o n B ine , 2012).
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