FORTUNE -- In his new book The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, which arrives in stores today courtesy of HarperCollins, Ben Horowitz offers his advice on building and managing a startup company.
As the co-founder of the firm Andreessen Horowitz -- not to mention the enterprise software company Opsware -- he should know. Here are five lessons from the book.
1.) CEOs should tell it like it is.
As a group, CEOs tend to be a constitutionally upbeat bunch, and it's not hard to see why. Who would follow a leader who is not relentlessly positive? Who would go work for a company whose top executive doesn't paint a rosy picture of the future?
In The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, Horowitz says honesty is far more important than positivity. Why? First, it helps build trust. "As a company grows, communication becomes its biggest challenge," Horowitz writes. "If the employees fundamentally trust the CEO, then communications will be vastly more efficient than if they don't. Telling things as they are is a critical part of building this trust." Second, concealing problems from your employees is self-defeating. "In order to build a great technology company, you have to hire lots of incredibly smart people," he writes. "It's a total waste to have lots of big brains but not let them work on your biggest problems." Finally, honesty in the CEO helps to build the right culture, "a culture that rewards -- not punishes -- people for getting problems into the open where they can be solved." Oh, and employees usually can figure it out pretty easily when a CEO is not telling it like it is.
2.) There is a right way to lay people off.
Much of Horowitz's advice to CEOs confronting layoffs sounds like common sense: Focus on the future of the company, not its past; don't delay; be clear about why you are doing it (hint: you fell short of your plan); train your managers to handle layoffs directly, rather than delegating the dirty work to HR employees. But Horowitz also makes a point that's not entirely intuitive: How you handle layoffs matters as much to those getting pink slips, as to those who stay. A layoff tends to break whatever trust a CEO has earned from his employees, and in order to rebuild that trust, the CEO has to be seen as fair and forthright. "Many of the people that you lay off will have closer relationships with the people who stay than you do, so treat them with an appropriate level of respect," Horowitz writes. In short, how you handle layoffs could be the difference between a shot at success in rebuilding your company and the beginning of a downward spiral.
3.) Company perks are good, but they are not culture.
People describing the culture of tech companies often focus on outward signs: the free, organic, and locally sourced meals at Google (GOOG) or Facebook (FB); the dog-friendly policies at Zynga; the yoga classes, meditation rooms, or full-service gym at, well, just about every ambitious Silicon Valley startup. Horowitz says those are all nice to have. But culture is defined by traits that help a company achieve its goals, preserve its values as it grows, and make employees feel like they want to work there. Examples? The desks made out of doors at Amazon (AMZN) helped to cement the notion that frugality was essential if Amazon was to deliver every penny of value it could to its customers. The strictly enforced $10-per-minute fine for being late to a meeting with an entrepreneur at Andreessen Horowitz laid out the firm's priorities. ("If you don't think entrepreneurs are more important than venture capitalists, we can't use you at Andreessen Horowitz," Horowitz writes.) And Mark Zuckerberg's "move fast and break things" maxim helped to establish that, at Facebook, innovation is paramount and goes hand in hand with risk. "Ideally, a cultural design point will be trivial to implement but have far-reaching behavioral consequences," Horowitz writes.
4.) There are only lead bullets.
Most companies at some point in their lives face a rival who is beating them in the market and putting their future at risk, and it's bound to be scary. "So scary that many in the organization will do anything to avoid facing it," Horowitz writes. "They will look for any alternative, any way out, any excuse not to live or die in a single battle." When his own company, Opsware, faced such a challenge from a rival with a better product, Horowitz told his troops it was not the time to pivot or look for an escape hatch. In other words, there were no silver bullets. They had to fix their product. "After nine months of hard work on an extremely rugged product cycle, we regained our leadership and eventually built a company that was worth $1.6 billion," he writes. Horowitz ends this lesson with the following tough-love message: "There comes a time in every company's life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, 'If our company isn't good enough to win, then do we need to exist at all?'"
5.) You must screen for the right kind of ambition.
At some level, every employee views the world through his or her own eyes. Still, Horowitz advises managers to look for signs that indicate whether a candidate will put personal goals ahead of the company's or focus on collective success. The former may excuse a stint at a prior company that failed as a step to build his resume, while the latter will take responsibility for the failure and describe his own misjudgments in detail. The former may brag about prior successes but be vague on the details, while the latter will credit his team. Screening for the right kind of ambition, especially for positions of great responsibility, is essential, Horowitz says: "While it may work to have individual employees who optimize for their own careers, counting on senior managers to do all the right things for all the wrong reasons is a dangerous idea."
More Ben Horowitz on Fortune.com:
The Andreessen Horowitz co-founder shares his favorite songs -- and annotates them, too.
FORTUNE -- Ben Horowitz grew up listening to hip-hop and to this day remains an unabashed fan. It's the music that he listens to, what's in his head a lot of the time and what often inspires him to write some management lessons on his blog. Horowitz, who has become friends with some of hip-hop's biggest stars, also MOREMiguel Helft, senior writer - Feb 27, 2014 9:00 AM ET
SAP star will join venture firm.
FORTUNE -- Silicon Valley venture capital firm Andreessen Horowitz has a new general partner: former SuccessFactors CEO and SAP executive board member Lars Dalgaard.
Just last week, Dalgaard announced he was stepping down from SAP (SAP) to become an investor. The departure came about a year and a half after he sold SuccessFactors, a maker of cloud-based HR software, to the larger enterprise software maker for a MOREMichal Lev-Ram, writer - May 30, 2013 2:16 PM ET
Marc Andreessen and Ben Horowitz talk to Fortune's Adam Lashinsky about their investing philosophies, role models and business model.
FORTUNE -- When partners at the venture capital firm Andreessen Horowitz are late to a meeting with entrepreneurs, they pay for it – literally. That's one of the rules established by co-founders Marc Andreessen and Ben Horowitz, former entrepreneurs themselves, who started the firm in 2009. Partners are fined $10 for every MOREAdam Lashinsky, Sr. Editor at Large - Feb 15, 2013 3:06 PM ET
Fortune's curated selection of tech stories from the long weekend. Sign up to get the round-up delivered to you each and every day.
* Apple (AAPL) granted ABC's Nightline unfettered access to a Foxconn factory. Here's a preview of what they found. (The full segment airs this evening at 11:35 PM EST and PST. (ABC News via Fortune)
* National Security Agency director Gen. Keith Alexander warned that the hacker group dubbed "Anonymous" could have MOREJP Mangalindan, Writer - Feb 21, 2012 3:30 AM ET
Take a picture with Lytro's soon to come camera and change the focus to any spot, with the click of a mouse. The only question most photo geeks have is "how much?"
FORTUNE -- There's a new player in the camera market: Lytro, a Mountain View, Calif.-based startup with just 45 employees, is hoping to disrupt the industry with an innovative camera that lets users focus a picture after it's been MOREMichal Lev-Ram, writer - Jun 22, 2011 10:28 AM ET
A curated selection of the day's most newsworthy tech stories from all over the Web. Sign up to get the newsletter delivered to you everyday.
Groupon is reportedly in talks with various banks over an initial public offering (IPO) that would value the daily deals site for as much as $25 billion, roughly half of what Facebook is currently worth. Given Groupon's recent actions -- walking away from Google's $6 billion offer, building MOREJP Mangalindan, Writer - Mar 17, 2011 9:55 AM ET
Best known for its consumer tech investments, the fund ventures into enterprise cloud computing.
Venture capital firm Andreessen Horowitz is best known for high-profile investments like Zynga, Foursquare and Skype. But the fund, headed by Netscape co-founder Marc Andreessen and his longtime business partner Ben Horowitz, is also betting big on business-to-business upstarts, and these days that means backing companies that enable or rely on cloud computing.
Last summer Andreessen Horowitz made MOREMichal Lev-Ram, writer - Jan 28, 2011 9:24 AM ET
With the rise of cloud and social, it's time for the IT department to change the way they work -- and become company heroes.
By Aaron Levie, contributor
On a daily basis, a select group of individuals are making technology decisions on behalf of their entire organization. They're implementing services to solve real business problems, sometimes under the guidance of their IT department, but most often on their own. For the MOREJan 16, 2011 9:41 AM ET
How many CEOs have been head of HR, Engineering, Sales, Marketing, Finance or Legal? Probably none. Here's how they can overcome that and still hire good people in those roles.
By Ben Horowitz, contributor
The biggest difference between being a great functional manager and being a great general manager – and particularly a great CEO – is that as a general manager, you must hire and manage people who are MOREOct 13, 2010 3:34 PM ET
|AT&T cuts prices again|
|Ukraine crisis: Aid, sanctions and fallout|
|Asian stocks slump after plane vanishes|
|Winners and losers of the bull market|
|The medical marijuana ad that never aired, despite contrary media headlines|