#181 - When Things Fall Apart: 3 Lessons from Ben Horowitz on Leading Through the Struggle (Part 1 of 2)

What do you do on the morning when there are no good moves left?

In March 2001, Ben Horowitz took Loudcloud public in the middle of the dot-com collapse. The bankers cut the price from ten dollars a share to six in the week of the offering. The day before the deal, Yahoo announced its chief executive was stepping down. Neither of the two banks that took the company public offered the traditional closing dinner. On the plane home, Horowitz turned to his director of finance and said they had done it. The reply was that the company was still in very serious trouble.

He was right. What followed was a share price of thirty-five cents, three rounds of layoffs, four hundred people gone, and business magazines running cover stories on the collapse.

Six years later the same company sold to Hewlett-Packard for 1.6 billion dollars.

The distance between those two moments is The Hard Thing About Hard Things, and it is the rare book about building companies written from inside repeated near-death rather than reconstructed afterwards from the winner's chair.

[AFFILIATE LINK TO THE BOOK]

Horowitz opens by attacking the genre he is writing in. Most management books offer a recipe. He argues that the situations which decide a company have no recipe, and that hunting for one is itself the failure. He then organises the book around that claim, putting the endgame material first, and explains the choice by quoting the first principle of the Bushido: keep death in mind at all times.

Part one of this review covers the three lessons that belong together.

The Struggle. Horowitz names the psychological state every founder recognises and almost nobody describes out loud, and then refuses to sell a way out of it. What he offers instead is a set of survival habits and one instruction: find the move.

CEOs should tell it like it is. Shielding a team from bad news feels like leadership and works like sabotage. Trust is communication bandwidth. A brain cannot solve a problem it does not know about. And a healthy culture is one where bad news travels faster than good news.

Lay people off yourself. The hardest act in the book, executed as a written procedure rather than improvised on the day. Why the manager has to do it rather than HR, why a layoff and a performance firing are two different acts that companies constantly blur, and why the message is always for the people who stay.

Along the way: what Jensen Huang at Nvidia and Roland Busch at Siemens have in common, why Dale Carnegie's most famous principle has aged into something he never intended, and where Reed Hastings and Ben Horowitz disagree about what you owe the person you are letting go.

This is a practical review for founders, CEOs, board members, investors and senior executives who build or finance hard companies, particularly in deep tech and life sciences, where the conditions Horowitz calls wartime are the default rather than the exception.

Part two covers the remaining four lessons: wartime and peacetime leadership, the two halves of the chief executive's job and the half where founders reliably come apart, why the impressive executive you hire out of a large company so often produces nothing, and the rule about raising money that changes what a rejection means.

Chapters

(00:00) Introduction: The Least Celebratory IPO in History 

(02:26) The Big Idea: Keep Death in Mind at All Times 

(04:16) Who Is Ben Horowitz, and Why Trust Him 

(08:55) Lesson 1: The Struggle, and Why No Formula Exists 

(20:37) Lesson 2: CEOs Should Tell It Like It Is, and Why Trust Is Bandwidth 

(32:26) Lesson 3: Lay People Off Yourself, Because the Message Is for the People Who Stay 

(45:21) What Comes in Part Two

Follow Beginner's Mind for long-form conversations on leadership, capital, technology, and the people shaping what comes next. Ranked in the global top 10% of all podcasts, named #1 Deep Tech Podcast in 2025, and #8 Deep Tech Podcast in 2026

Join Christian Soschner for expert coaching.
50% Off - With 35+ years in deep tech, startups/scaleups, and public companies, Christian offers power video sessions. Elevate strategy, execution, and leadership. Book Now.

Transcript

Copy Transcript Copied

Christian Soschner 0:00

March 2001. A software company called LoudCloud is going public in the middle of the dot-com collapse. The week of the offering, the bank has cut the price from $10 a share to $6. The day before the deal, Yahoo announces that its chief executive is stepping down. The founders go ahead anyway. Ben Horowitz in his own words. The LoudCloud offering finally sold at $6 a share and we raised $162.5 million. But there was no celebration and no party. Neither Goldman Sachs nor Morgan Stanley, the two banks that took us public, even offered us the traditional closing dinner. It may have been the least celebratory IPO in history. On the plane home, Horowitz turns to his director of finance, Scott Cooper, and says, We did it. Cooper answers, yeah, but we are still fucked. Cooper was right. What followed was a share price of 35 cents, three rounds of layoffs, and business magazines running cover stories on the company's collapse. Six years later, the same company sold to Julit Baccar for $1.6 billion. The distance between those two moments is the subject of today's episode. The book is The Hard Thing About Hard Things by Ben Horowitz. Every founder I know has been somewhere inside that distance. Most of them go quiet about it, and the ones who try to describe it find the language music. Horowitz builds the language, and that is the first reason this book earns your time. The second reason is where he wrote it from. Almost every startup book gets assembled afterwards, from the winner's chair once the ending is known and the fear has faded. Horowitz wrote this one while he still remembered exactly how it felt, and it shows on every single page. So here is how the next hour looks like. Seven lessons, each one opens on a real scene from the book with names, dates, and figures. Then the principle underneath it translated for anyone building or governing a company at the edge of what is possible. Then one move to run this week and three questions to take into an export meeting. Let's get into it. So, what's the big idea of the book? Horowitz organizes this book around death, and he says so on the page where most authors would be promising new growth. The endgame material comes first. How to fire an executive, how to lay people off before a word about billing or scaling. He explains the choice in one sentence. I put this section first, even though it deals with some serious endgame issues as how to fire an executive and how to lay people off. In doing so, I follow the first principle of the Bushido, the way of the warrior. Keep death in mind at all times. As the organizing logic of a management book that stands alone on the shelf and it tells you exactly what you have picked up. As a wiring manual written by a man who needed one. Everything else follows from that choice, including the single skill he says the whole job turns on. People always ask me, what's the secret to being a successful CEO? Sadly, there is no secret. But if there is one skill that stands out, it's the ability to focus and make the best move when there are no good moves. Listen to that again. Not the best move, the best move available when every option in front of you is bad. That skill is why this book matters to anyone building a hard company or governing one from a bot site. What you take from it is vocabulary for the situations you will find yourself in and prove that somebody walked out of them alive. Which raises a fair question. Who earned the right to write that book? And why should you take his word for it? Almost every business book is written from a single chair. The founder who won writes about winning. The consultant who watched writes about patents. The investor who wrote the check writes about picking. And each system only from where they stood. Ben Horowitz has occupied all three chairs in the order that makes them count. He started at Netscape as a manager rather than a founder, running a product team while the commercial intent took shape around him. That is where he met Mark and Reason. In 1999, the two of them founded LoudCloud, a company with a good idea and appalling timing. They sold computing as a service about a decade before the market even existed and launched it into the dot-com collapse. What happened next is most of this book. I have put the details and the figures in the lessons that need them. The moment that explains everything he did afterwards happened right at the start. LoudCloud had just closed its first round of funding. Horowitz went with his co-founders to meet the full team at their new venture capital firm. He describes himself as excited, ready to talk about how they would build a great company together. Then one of the senior partners, David Barney, asked him a question in front of his co-founders. When are you going to get a real chief executive officer? Horowicz writes, the comment knocked the wind out of me. Our largest investor had basically called me a fake CEO in front of my entire team. He asked what that meant, hoping for a way to save face. Someone who has designed a large organization, someone who knows great senior executive and brings pre-built customer relationships, someone who knows what they are doing. And then comes the sentence that makes Horowitz worth reading at all. It was bad enough that he had undermined my standing as CEO, but to make matters worse, I knew that at some level he was right. Horowitz accepted the diagnosis and refused the conclusion. He stayed, learned the job in public over the next eight years, and took the company to a billion-dollar exit. Years later, after the side, he sent Mark and Reason an instant message. Our motto for General Partners would be some experience required. And Reason replied that he had been thinking the same thing. That firm exists because of the question David asked. Two convictions run underneath it in Horowitz's own words. First, technical founders are the best people to run technology companies. Second, that it is incredibly difficult for technical founders to learn to become CEOs while building their own companies. And his verdict on the industry, most venture capital firms were better designed to replace the founder than to help the founder grow and succeed. So he built the opposite. The epigraphs tell you what kind of book this is before you open a page. Every chapter begins with a rap lyric instead of a business quotation. The introduction opens on Kanye West, chapter one on DMX, the final chapter on Drake. His reason? Because hip-hop artists aspire to be both great and successful and see themselves as entrepreneurs. Many of the themes, competing, making money, being misunderstood, provide insight into the hard things of entrepreneurship. And that is the man. He earned all three chairs the hard way, and he now writes the checks for founders beginning the same claim. On to the seven lessons. Here is the first lesson, the struggle. The most honest sentence I have read in a business book comes on the first page of this one. That's the hard thing about hard things. There is no formula for dealing with them. That is Ben Horowitz in the introduction telling you that the book you just bought will not do the thing you bought it for. So let me tell you what this first lesson is. Horowitz has a name for the worst stretch of building a company. He calls it the struggle. He describes it with more precision than anyone else has managed, and then he refuses to sell you a way out of it. What he offers instead is a handful of survival habits and one instruction. Find the move. This lesson sets up the six that follow because every one of them assumes you are working without a recipe. Here is how Ben sees it. He opens the book by attacking the genre he is writing in, in his own words. The hard thing isn't setting a big, hairy, audacious goal. The hard thing is laying people off when you miss the big goal. The hard thing isn't hiring great people. The hard thing is when those great people develop a sense of entitlement and start demanding unreasonable things. The hard thing isn't setting up an organizational chart. The hard thing is getting people to communicate within the organization that you just designed. The hard thing is not dreaming big. The hard thing is waking up in the middle of the night in a cold sweat when the dream turns into a nightmare. And then the diagnosis. The problem with these books is that they attempt to provide a recipe for challenges that have no recipes. He puts himself under the same rule. I do not attempt to present the formula in this book. Instead, I present my story and the difficulties that I have faced. Later he names the state itself. The struggle is when you wonder why you started the company in the first place. The struggle is when your employees think you are lying and you think they may be right. The struggle is when food loses its taste. The struggle is not failure, but it causes failure, especially if you are weak. Always if you are weak. Then he does the thing that separates this book from every other one on the shelf. He gets right up to the inspirational line and he stops. Every great entrepreneur from Steve Jobs to Mark Zuckerberg went through the struggle and struggled at it. So you are not alone. But that does not mean that you will make it. You may not make it. That is why it is the struggle. And only after that, the struggle is where greatness comes from. Notice the order. He earns the second sentence by refusing to skip the first. Then he introduces his advice with a line no other management author dares to print. There is no answer to the struggle, but there are some things that helped me. Watch what that looks like at the worst point of his own company. LoudCloud is dying. Horowitz is trying to sell the cloud services business to one of two buyers, IBM or EDS. He takes his board member Bill Campbell through both conversations point by point. Campbell pauses, looks him in the eye, and says, Ben, you need to do something in addition to working on this deal. You need to do it alone with your general counsel. You need to prepare the company for bankruptcy. Horowitz then tells you a story about a young doctor. The doctor's senior colleague examines a 35-year-old patient with hollow eyes and Asian skin. They leave the room. The older man says, He doesn't know it yet, but he is dead. Three weeks later, that patient died. Horowitz writes, I felt that Bill was telling me, although I was walking around trying to get the deal done, that I was already dead and that I did not know it. So what did he do with the best advice from the best advisor he ever had? I never built that contingency plan. The EDS deal closed. LoudCloud sold the cloud business for $63.5 million, kept the software, renamed itself OpSware, and six years later sold to Juliet Backard for $1.6 billion. His conclusion? I don't believe in statistics. I believe in calculus. And the rule he draws from it startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are 9 in 10 or 1 in a thousand. The task is the same. Find the right move. Horowitz respects reality. Campbell was right about the odds, and Horowitz says so with thanks. His game is narrower and harder than it first sounds. The odds are their statistician's business. The move is yours. Listen to how he describes finding one. How about staking your company public with $2 million in trailing revenue and 340 employees with a plan to do 75 million in revenue the next year? I made that move. I made it in 2001, widely regarded as the worst time ever for a technology company to go public. I made it with six weeks of cash left. There is always a move. So what does this mean for you in 2026? Building a deep tech company from nothing is one of the hardest things a person can attempt. And right now, everyone around you insists it has a method. There are more incubators, accelerators, playbooks, systems, and founder curricula than at any point in history. There is an entire industry on social media selling the recipe to you. There are management books promising the system. And now there is a machine that will generate a confident answer to any question you type into it in seconds, with no idea whether it is right. None of it can tell you what to do. The advice is often good, your situation is still unique by construction. You are attempting a first in conditions that have never held before with a team that came together for this one company. You're the first person in the territory and you draw the map while you walk it. Look at the example everyone knows. Elon Musk built SpaceX to make humanity multiplanetary to put a self-sustaining city on Mars. He was the first to attempt it and he started from a blank page. A few thousand people stand ready to tell him how to do it. So the practical instruction is this: use the advice. Ask the people who have been close to something similar. Use the tools. Then understand what is left at the end of it. The decision, however, is yours alone. And the confidence of everyone advising you is not evidence. Since 2006, I have done this work and the pattern has never once broken. I started with Nobriva, the antibiotics company spun out of the Sandor Research Institute in Vienna in January that year with a 42 million Euro Series A led by Namuro Phase 4 Ventures, alongside the Welcome Trust, the Novartis Venture Fund, HBM Partners, and Global Life Science Ventures. About as good a starting hand as exists in European life science. Truck development was a blank page to me. What I brought was an understanding of how a bot behaves, half of it learned in student fraternities, half across six years in public market merchers and acquisitions, where I prepared the bot material and now and then as a young man presented it. That was my entire preparation. And my job was to build the company structures for an initial public offering in 2008. Then the financial crisis in 2008 happened. A company with no revenue, public funding debt, debt on the balance sheet, negative equity, and losses had no route to a public listing. A global financial crisis closed whatever route was left. So we did not do it. But the hard things did not stop. I went on to be the chief financial officer of three companies at the same time when capital was scarce and finance had little standing in biopharma. People with doctorates told me more than once that what I had spent years learning, they picked up over a weekend. Is there a formula for that? No. You breathe, you smile through it, and you trust that you are learning to handle situations you cannot yet name. Then came years of running deep the companies between funding rounds, companies weeks from bankruptcy, key people walking out and no plan. Every new mandate, every board seat, every executive role has been unmapped territory. The internet returns other people's situations. Social media returns other people's confidence. Artificial intelligence will hallucinate you something that sounds like an answer. But in the end, you are alone staring into the abyss, and you decide. Many of those decisions will be wrong. You make them anyway, and you correct in the open. Horowitz uses the same word. You have dropped into the abyss and you may never get out of it. He is right. That is the hard thing about being at the helm of a deep tech company. Better to hear it from someone who has been there than to buy a recipe from someone who has not. You already know the thing you are most afraid of. Say it out loud this week to the people who can solve it. Horowitz's own advice is to get the maximum number of brains onto the problem, even when the problem is existential. You are holding something alone tonight that three other people in your company have the skill to break open. Here are my three questions for your next board meeting. The first one: What is the hardest problem in this company right now that only you understand the full shape of? And why have you not put it in front of anyone? The second one. The last time there were no good moves, did you narrow to one and commit, or did you keep collecting opinions? And number three, who in this room has the standing to tell you the company is lying? There is no formula. There is only the next move and the nerve to make it. Which brings us to the first thing that breaks when the struggle starts. That roof and that is next. And here is the second lesson. CEOs should tell it like it is. The last lesson ended in the abyss. And this one is about what walks you toward the edge. Your own optimism does the walking. Horowitz gives this chapter a title that reads Like an order because it is one. Chief executive officers should tell it like it is. His claim is that shielding your team from bad news feels like leadership and works like sabotage. He gives three reasons for it. All of them mechanical, none of them about being nice. And he opens with a confession. My single biggest personal improvement as CEO occurred on the day when I stopped being too positive. He explains where the positivity came from, and every founder listening will recognize it. As a young CEO, I felt the pressure. The pressure of employees depending on me. The pressure of not really knowing what I was doing. The pressure of being responsible for tens of millions of dollars of other people's money. Then he names the error underneath it. And this is the part most leaders get backwards. As the highest ranking person in the company, I thought that I would be best able. Able to handle the bad news. The opposite was true. Nobody took bad news harder than I did. Engineers easily brushed off things that kept me awake all night. Read that again. He was protecting himself and calling it protection of the team. So he gives three reasons to stop. Take them one at a time because each one of it is a different machine. The first is trust. And he defines it as bandwidth. In any human interaction, the required amount of communication is inversely proportional to the level of trust. Sounds complicated, but it is in principle simple. Follow that into a company of 200 people. If they trust you, you barely have to explain anything. If they do not, no quantity of explaining will move them. Horowitz spells out the consequence. As a company grows, communication becomes its biggest challenge. If the employees fundamentally trust the CEO, then communication will be vastly more efficient than if they don't. Having things as they are is a critical part of building distrust. A CEO's ability to build distrust over time is often the difference between companies that execute well and companies that are chaotic. Honesty is not a moral position in this book. It is an efficiency. The second reason is arithmetic. It is a total waste to have lots of big brains, but not let them work on your biggest problems. A brain, no matter how big, cannot solve a problem it does not know about. A CEO who holds the worst problem alone has made himself the only person working on the hardest thing in the company. Every other brain he hired is busy with something smaller. The third reason turns culture into plumbing. A good culture is like the old RIP routing protocol. Bad news travels fast and good news travels slow. RIP is an old networking protocol, and the property Horowitz wants from it is simple. Failures move through the network faster than successes. That is the design goal for your company. He states it directly. A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved. And then he comes with an instruction. Build a culture that rewards, not punishes people for getting problems into the open where they can be solved. He also goes after one specific piece of management for Clore by name. Most leaders have said it. Beware of management maxims that stop information from flowing freely in your company. For example, consider the old management standard. What if the employee cannot solve an important problem alone? And then the sentence that closes the chapter. If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is. Horowitz changed his mind in a small moment that embarrassed him and he prints it anyway. That is what makes the chapter credible. He had met a senior executive at AT ⁇ T not long before. In the book, he calls the man Fred, which he tells you is not the real name. Sometime later he mentions Fred to his brother-in-law, who worked for the same company as the telephone lineman, one of the men who climbed the poles. He says, Yeah, I know Fred. He comes by about once a quarter to blow a little sunshine up my ass. Horowitz writes, At that moment, I knew that I'd been screwing up my company by being too positive. The correction came from a man who climbs poles for a living. He described what an executive visit felt like from the bottom of the ladder, and the chief executive of a different company recognized himself in it. The pressure Horowitz describes has grown thief since 2014. Open any feed today and you will find an enormous amount of advice about empathy at work. Much of it is good, but some of it has gone somewhere strange. A comfortable lie now outranks an uncomfortable truth. Naming a person's behavior for what it is reads as an act of aggression. This is not new. In 1936, Dale Carnegie published How to Win Friends and Influence People, and the first principle in the book is do not criticize, condemn, or complain. His book ranks among the most successful pieces of advice about human relations ever written, and 90 years later, it has hardened into a norm. Carnegie deserves better than the reputation, and I checked the text before saying so. He attacked flattery directly and threw the line himself. Appreciation and flattery differ in that one is sincere and the other insincere. One comes from the heart out, the other from the teeth out. The misreading belongs to his readers. It is real all the same. And a deep company breaks that norm on contact. You run a company at the edge of science. The things you are building has no precedent, and the ground under it has no map. The job looks like this: you are walking the roof edge of a hundred-story building blindfolded. One wrong step, and the company goes over. Now choose your team. The first team watches you drift toward the edge and tells you how well you are walking. The second team shouts at you to turn around that you are two steps from the drop and then afterwards in the debrief tells you exactly how you got that close. Every sane leader picks the second team. And yet, most companies produce the first team anyway, because flattery is comfortable and the truth is expensive in the moment. And that is the real argument against it. Flattery costs time and it removes urgency, and you have neither. Two companies run the other way at scale, and they are worth a minute each. James Nuang runs NVIDIA with dozens of direct reports, not the five or six a textbook prescribes, and no individual meetings with any of them. At Stanford in 2024, he said, I don't do one-on-ones with any of them. His reason is about information rather than about time. In the way our company was designed for agility, for information to flow as quickly as possible, for people to be empowered by what they are able to do, not what they know. He gives criticism the same way. In his words, I do it right there. I give you feedback in front of everybody. And his justification is the best sentence any modern chief executive has produced on this. Feedback is learning. For what reason are you the only person who should learn this? He adds that learning from another person's mistake beats learning from your own. So an embarrassment kept private wastes the whole company's time. Now, let's get to Europe and an old industrial company that everyone reads as the opposite of a Silicon Valley experiment. Roland Busch joined Siemens in 1994 as a physicist researching fuel cells, offshore wind, and superconducting transmission lines. He became CEO in 2021. Since then, the stock has more than doubled and Siemens has become the largest company in Germany and the third largest in Europe by market value. What he did was he has removed the recurring meeting with his direct reports. His words, because I value efficiency, I don't have recurring meetings with my direct reports. I tell them, you come to me whenever you need me. It could be five times a week or once a month. I don't need to entertain people and they do not need to entertain me. Bush frames that as efficiency and not as honesty, and I will not put words in his mouth. But the effect on the plumbing match is wonks. Information moves when it exists, not when the calendar permits it. In both companies, a problem travels the moment someone notices it. So how does a chief executive build a company that tells the truth? Start with yourself. Say the real thing first before anyone else has to. Stop protecting people from bad news because the protection is for you. And then watch what happens to the person who brings you the first bad thing with no answer attached. Your whole company is watching that too. They will calibrate on it for years. So, this week, here is one move. Retire one sentence from your company. Don't bring me a problem without a solution. Say it in a room so people hear the rule change. Then put one sentence in its place. Bring me the problem the day you see it and bring whatever you have. Here are my three questions for your next board meeting. The first one How many days pass between a bad number appearing in this company and the board hearing about it? Number two. Who was the last person to bring you a problem they had no answer for and what happened to them afterwards? And the third one, where are you being positive right now? Because you cannot face saying the real thing. Trust is bandwidth. Everything else is throughput. And telling the truth turns out to be the easy half of this. The hard half arrives on the day you have to act on it, which is where we go next. Lesson number three. Lay people off yourself. After Juliet Bacar bought Obswear, Ben Horowitz went to see Dacleon of Sequoia Capital, who wanted to hear how a company the market had written off ended at $1.6 billion without ever recapitalizing. Horowitz walked him through the near bankruptcies, the 35 cent share price, the years of bad press and the free separate layoffs that cost 400 people their jobs. Leon had one question, and it was about the layoffs. In more than 20 years of venture capital, he had never seen a company survive consecutive layoffs and still reach a billion dollars. He had bet against the outcome every time, and he told Horowitz why. The layoffs always broke the culture. This one held. This chapter rests on a single claim. A layoff is not about the people leaving. It is about the people who stay and how they read what you did to their colleagues. Here is the procedure. Most of this chapter is craft, and the first rule is the one companies break most often. As Horowitz writes, managers must lay off their own people. They cannot pass the task to HR or to a more sadistic peer. You cannot hire an outsourcing firm like the one in the movie Up in the Air. Every manager must lay off his own people. Why it has to be the manager? Because people won't remember every day they worked for your company, but they will surely remember the day you laid them off. They will remember every last detail about that day, and the details will matter greatly. And the same argument from the receiving end, which is the one that gets under your skin. If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself. Horowitz credits the central insight to Bill Campbell again, the board member from the first lesson. The message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues. He is also specific about what the message must be. It puts the failure on the company. The message must be the company failed, and in order to move forward, we will have to lose some excellent people. Because of what the layoff does to the deal every leader makes. Trust me. That's what the CEO says every day to her employees. Trust me, this will be a good company, trust me. This will be good for your career, trust me, this will be good for your life. A layoff breaks that trust. In order to rebuild trust, you have to come clean. Here are the six steps of Horovitz. Get your head right. Do not delay. Be clear in your own mind about why train your managers. Address the whole company before the individual conversations happen and then be visible. He's talking about laying off 50% or more of the entire company. The last one is where most leaders fail, and Horowitz states it plainly. You will probably feel like going to a bar and drinking a fifth of the Kia. Do not do this. Be present. Be visible. Be engaging. People want to see you. They want to see whether you care. The manager script is free lines. Explain in two sentences what happened and that this is a company for you rather than a personal one. Be clear that the decision includes them and that it is final. Arrive having settled every detail of the severance and the support. Freelance rehearsed, that is the whole craft. What makes Horowitz credible on this is that he tells you about the one he bulged. At loudcloud slash obsquare, we badly mismanaged this dynamic with our first round of layoffs, but sharply corrected things on the next two. And he shows you the evidence, which he had no reason to print. During that first layoff, somebody forwarded him an email thread. One of his better employees had written, Ben is either lying or stupid, or both. Horowitz's response in the book. I remember reading that and thinking, definitely stupid. He has two more attempts. Most companies get one, do it badly, and pay for it for years. The chapter now splits, and this distinction matters more than anything else in it. Horowitz writes two separate procedures because a layoff and a firing are two different acts, and companies blur them all the time. A layoff is a company fare. The role goes and the person leaves with every skill they walked in with. The honest reason is that the company changed direction or ran short of money. Firing an executive for performance is a different act, and Horowitz reframes it in a way worth adopting on any board. The wrong way to view an executive firing is as an executive failure. The correct way to view an executive firing is as an interview and integration process system failure. Then he puts the bill where it belongs. Yes, the reason that you have to fire your head of marketing is not because he sucks. It's because you suck. On a board, that reframe changes the question. If a company has replaced three heads of sales in four years, examine the role definition and the integration. Default lives there and both belong to the board. His three keys for that conversation. Be clear on the reasons, use decisive language, I have decided rather than I think, and settle the severance before you open your mouth. And Bill Campbell again with the line that governs the whole thing. Then you cannot let him keep his job, but you absolutely can let him keep his self-respect. Horowitz fixes the order of telling the company. You tell your direct reports first, because the decision hits them hardest. Then you tell the rest of your staff, who will spend the week answering questions about it, then everyone else, all on the same day and inside a couple of hours. Here is what I have watched for 35 years in business. People read two things about a company, who you hire and how, who you let go and how. Across a working life of 35 years, 20 of them in and around life science deep the companies between Series A and IPO, I have watched the second one go wrong almost everywhere. Most companies make it up as they go. They stage a show trial and everyone in the building watches it. It starts weeks before the person has any idea. Quiet conversations. The leaders making sure everyone understands the reasons, everyone, except the one person concerned. Once the coalition is large enough, they attack in the open. And unspoken hope runs underneath the whole thing. The pressure breaks the person, they lash out or quit themselves, and the reason to remove them arrives already made. If the person holds, the leaders keep pushing until they give way. In conversations with friends and with the executives I coach, I have heard many versions of this. One I keep coming back to. A line manager told the person in plain words that either they resign or he destroys their life, and that every time anybody called him for a reference, he would tell them the most appalling story he could invent. Hearing enough of these from both sides changes how you read them. Being with the person on the receiving end teaches you what it costs. Being with the person delivering it teaches you something less comfortable. Look closely at the manager making the fret, and you find something more ordinary than a monster. He made a decision weeks ago and cannot bring himself to say it out loud, and his company gave him no training and no process for the conversation. So he outsources the job to pressure and he waits and he hopes the other person resigns before he has to speak the sentence himself. What looks like cruelty from the outside is usually cowardice with a calendar. I have collected enough variations on that to fill an entire episode. Ask what they have in common. They teach. Every person still employed is watching, and what they learn is what happens to them when their turn arrives. After you have seen two of these, you can map your own ending in detail. So what do those people do next? Do they give you everything they have or do they start looking quietly? So they are gone before you make your move. Which is Campbell's line again from the top of this chapter. The message is for the people who are actually staying. The alternative comes from Reed Hastings, whose book I reviewed on this show. Netflix separates the two acts and does both with dignity. Tell the person the same day. In plain words. Hastings calls this sunshining, and his argument is that explaining in full why the company lets somebody go stops the gossip and raises trust among everyone who remains. Be generous with the money. The Netflix line from the culture memo is famous. Adequate performance gets a generous severance package. In practice, that runs from around four months of salary for an individual contributor to around nine months for a vice president. And then do the last thing, the one almost every company skips. Write them a real letter of recommendation and hand them to head hunters yourself. There was a day when this person was your best hire. The strategy moved, the talent they had that day is still theirs. The two books diverge on one point, and the difference matters. For a layoff, the company changed direction, and your skills are not what it needs now, is both true and dignified. For a performance firing, it is a euphemism, and Horowitz and Hastings both tell you to say the real thing. Use the strategic reason where it is honest, use it anywhere else, and it becomes a hiding place that everybody can see. The reason this goes wrong in the first place is older than any company. Removing someone from the group cuts against something tribal in us, and people who feel that discomfort look for ways to make the other person deserve it. That is where the bad mouthing comes from. Call it what it is: a leader buying relief from his own guilt with another person's reputation. Which means the fix is structural and it is the one thing I ask of every leader I coach. Make it a standard process. Written down and train your managers in it the way you train them in anything else that is hard and rare and high stakes. Then, when the day comes, they execute instead of improvising. The process makes the decision bearable, which is the job the invented villain used to do. Here is a move this week. Free lines. That is the whole assignment this week, and you write them yourself. Free lines in your own words that the manager will read out on the worst day of somebody's career. You write it not HR. Then rehearse it with every manager who will one day need it. A company that improvises this conversation has decided to find out how badly it goes. Here are my three questions for your next board meeting. The first one. And the third, what do the people who stayed after your last hard decision now believe about how this company treats people? Every company will face this day. The only open question is whether yours meets it with a trained procedure or an improvisation, and everyone who stays will know which one they watched. The craft of the act is one problem. Reading the situation in front of you, whether this is a war or a peace, is a different one. Horowitz has the best framework I know for that, and it is the next lesson. Those are the first three lessons, and they belong together. The struggle, which has no formula and no way around it. Telling the truth, which turns out to be an operating decision rather than a moral one. And the day you have to act on that truth, execute it so the people who stay can respect what they watched. All three describe the same hours. The plan has failed, the room is looking at you, and you are the only person who can move. The second half of this review goes somewhere else. It is about the job itself and the way it changes underneath you while you are busy doing it. Horowitz test for whether your company is at war or at peace and while running the wrong one kills companies that deserved to live. The two halves of a chief executive's job and the half where founders reliably come apart. Why the impressive executive you hire out of the large company so often produces nothing for six months and a rule about raising money that changes what a rejection means. That is but two, and it is waiting for you now. If the first half earned your time, follow the show and the second half will find you.