there are only two ways for a manager to improve the output of an employee: motivation and training. - Ben Horowitz

Once we’ve taken all of this into account, we see that the results against objectives or “black box” results are a lagging indicator. And as they say in the mutual fund prospectuses, “past performance is no guarantee of future results.” The white-box CEO evaluation criteria — “Does the CEO know what to do?” and “Can the CEO get the company to do it?” — will do a much better job of predicting the future.

Recently, a large company offered to buy one of our portfolio companies. The deal was lucrative and compelling given the portfolio company’s progress to date and revenue level. The founder/CEO (I’ll call him Hamlet — not his real name) thought that selling did not make sense due to the giant market opportunity that he was pursuing, but he still wanted to make sure that he made the best possible choice for investors and employees. Hamlet wanted to reject the offer, but only marginally. To complicate matters, most of the management team and the board thought the opposite. It did not help that the board and the management team were far more experienced than Hamlet. As a result, Hamlet spent many sleepless nights worrying about whether he was right. He realized that it was impossible to know. This did not help him sleep. In the end, Hamlet made the best and most courageous decision he could and did not sell the company. I believe that will prove to be the defining moment of his career.

A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them.