Bayer’s Bill Anderson: Turning a 168 Year-Old Tanker Like a Speedboat

Introduction

Bill Anderson: In the 30-person organization, you’d see an opportunity and you just do it. Almost every large organization has a bureaucracy problem, but a lot of times things just don’t happen because it’s—there’s just too much overhead. It’s not that the organization is healthy and then it gets a virus, it’s actually the composition of the organization is what’s creating bureaucracy. 

Brian Halligan: I’m here with Bill Anderson. You’ve never heard of him, but you’re about to understand why he’s one of the most fascinating CEOs operating today. Bill runs Bayer. It’s a company that’s been around since 1863. They invented Aspirin. This is a 160-year-old pharmaceutical and agricultural giant. When Bill joined, it had 100,000 employees spread all over the globe. By every measure, this should be the poster child for corporate bureaucracy.

Here’s what makes Bill interesting. Since taking over as CEO two years ago, he’s essentially torn down and rebuilt how the entire company operates. He’s flattened 11 layers of management, expanded some managers’ direct reports from 60 to 90, and thrown out the entire budgeting and planning process. This episode’s not just theory. This is a real-world case study of how to scale without becoming sclerotic, how to stay agile even at massive size, and frankly, how to avoid the bureaucratic death spiral that kills most growing companies. You’ll learn why bureaucracy doesn’t infect organizations, it comes from within, why the key to staying nimble as you scale is the kind of people you hire, and why the key to earning trust as a leader is admitting when you don’t know what the hell you’re doing.

Before you think, “Well, it’s easy to build the organization you want at a huge company with unlimited resources,” remember, Bill’s doing this while navigating patent cliffs, regulatory challenges and shareholders looking for him to turn the stock around. If you’re a founder going from a hundred to a thousand employees, if you’re trying to maintain startup energy as you scale, or if you’re just frustrated by the speed of your organization, this is a conversation for you. Bill’s basically created a playbook for organizational transformation I wish I’d had when we were building HubSpot.

Brian Halligan: Bill, amazing to have you, my friend. As a longtime CEO of HubSpot, and one of the things I’ve noticed these days is the rulebook for being a CEO and the best practices seems to be getting rethought. Man, you’re the perfect guest, because from inside a company that’s over 160 years old, with 100,000 employees, you seem to be rethinking how to run a company. And so thanks for coming on. Really appreciate it.

Bill Anderson: Yeah, thanks for the invitation, Brian. Glad to be here.

Brian Halligan: Tell me a little bit. What’s broken? You know, what do CEOs have wrong? What are companies doing wrong? You know, what’s the problem? Why did you have to attack this?

Bill Anderson: Many companies have their own very specific problems, but almost every large organization has a bureaucracy problem. And it’s really interesting, because this is something that I’ve been trying to get my head around for, yeah, probably at least two decades.

Brian Halligan: Okay.

Bill Anderson: And I say that because I think I became a manager first about 25 years ago. And I noticed when I was a new manager that one of the things that we managers were doing was we were trying to fight bureaucracy, we were busting bureaucracy, we were trying to take out complications, simplify, prioritize. And so that was 1999, and then fast forward to, oh, 15 years later and I noticed, wow, we’re still doing that. Only the thing I noticed is, like, we’re doing all this bureaucracy busting but things are only getting worse. You’re kind of like, “Hmm, what’s going on here?” You know, it’s kind of like imagine you had a disease and the more you tried to treat the disease, the worse it got. You kind of have to rethink your strategy. So I think that’s kind of a starting point.

Brian Halligan: I found with HubSpot, like, the bigger we got, the less we got done. Do you feel the same way? [laughs]

Bill Anderson: Yeah. Yeah. That’s—I had the same kind of thing, because I went from a 30-person enterprise to a 700-person enterprise, and then that 700-person enterprise merged with another and we became 5,000. Then I went to, like, a 10,000-person organization, then a 100,000-person organization. I noticed that yeah, the bigger you got, the worse it got. Like, for example, in the 30-person organization, you’d see an opportunity and you just do it, or you see an opportunity and you need some help, so you call a couple of your friends, and at lunch—because you’re just eating around the same table, you only got a little table in your little break room—and you just go, “Hey, what if we do this?” And before lunch is over, you’ve decided yeah, we’re gonna do this and you do it. And then, I go from a 700-person organization to a 5,000-person organization, that same activity, oh, you can’t just talk to two people. You got to talk to, like, seven people and then they got to talk to their managers, and then you got to have a follow-up meeting and, you know, maybe occasionally you actually get something done, but a lot of times things just don’t happen because there’s just too much overhead.

Brian Halligan: Okay, so talk about—Bayer is a lot of people. You joined and you’ve made massive changes. I read somewhere that you eliminated 11 layers of management. You took the rulebook from 3,000 pages to—I forget. It’s like, you really have kind of torn it down and are rebuilding it. What are some of the—what are you up to?

Bill Anderson: Maybe before I answer that, let me just complete sort of the analogy. There’s a common thought among managers that bureaucracy is kind of like a virus that infects the healthy organization or the healthy organism. And then you got to kind of take the virus out.

Brian Halligan: Yeah.

Bill Anderson: And I would argue that’s actually the wrong way to think about it. The truth is that it’s not that the organization is healthy and then it gets a virus, it’s actually the composition of the organization is what’s creating bureaucracy. You know, like, think about it. Nobody gets up in the morning and says—some manager in a big multinational company gets up in the morning and says, “Hey, I’m gonna go be a bureaucrat.” Like, nobody thinks like that. And so I mention that because it’s actually the presence of 10 or 12 layers. It’s the fact that things are organized by this kind of functional org chart instead of being organized around the customer, around the product, right? Those are the things, those layers, the need for sign-offs, the fact that people four layers removed from the product or the customer are actually decision gatekeepers. That is what is bureaucracy. So you can’t actually just take out the bureaucracy, you have to take out the parts of the system that make the bureaucracy. So what we’ve done at Bayer, when I arrived, we had 11 to 12 layers and now we have 6 to 7. Okay? Now you might think, “Well, six to seven, that’s still a lot of layers.” But if you consider …

Brian Halligan: That’s not that many for a 100,000-person org.

Bill Anderson: Yeah, exactly. It goes really fast when you’re counting them, you know?

Brian Halligan: Specifically for you, how many direct reports do you have?

Bill Anderson: I have—actually, I don’t know how many I have. Maybe 14 or something?

Brian Halligan: Okay.

Bill Anderson: Twelve?

Brian Halligan: Okay.

Bill Anderson: So what we’ve done is we’ve taken out the layers. By the way, lots of people talk about taking out layers. In fact, pretty much every reorg, someone says, “Oh, we got to take out layers.” Usually, that’s missing the point. If you have a 12-layer organization and you take out two layers—which is probably the average big corporate reorg, they’d be lucky to take out two layers—that does nothing. If the basic way things are done, decisions are made up and down the hierarchical functions, you have annual budgets where the money is divided into thousands of little cost centers and those are kind of like the money’s trapped. They’re like money traps, right? If that’s how you’re operating your business, it’s not going to get meaningfully better. You can make it—for example, yeah, it’s better to have 10 layers than 12, but the same basic problems are going to persist.

Bill Anderson: And so what we’ve done is we’ve taken out so many layers, and we’ve expanded people’s span of— we don’t call it “span of control,” we call it “span of coaching.”

Brian Halligan: Okay.

Bill Anderson: We do that not because it’s a clever name, but because we have lots of people in our organization—well, let me give you the facts first and then I’ll give you examples. So our average span of control was six and a half, which isn’t actually that bad. A lot of large companies, it might be five. We’re now at 14. And it’s still going up. We’re not done. And if you look into that, what you find is we have all kinds of people with 20 direct reports, 30 direct reports. The most I know of, we have some people with 90 direct reports.

Bill Anderson: The reason I mention that, it’s not to be obsessed with the math. Think about this. Let’s say you’re managing five people, and you’ve got your drill. Like, okay, you have annual performance plans and goals, and they’re going to review them with the manager, and you’re hiring and firing and you’re managing performance issues. All that stuff, okay? You’re managing that, and you’re doing that for five people. Now you come into work the next day and the boss says, “Hey, you know what? You’re going to manage 90 people instead of five.” You think your work’s going to change?

Brian Halligan: If you’re doing one-on-ones, your schedule’s done.

Bill Anderson: Yeah. I mean, think about it. How many one-on-ones could you do? So you’re not doing one-on-ones. You’re not doing the same job. It’s a different job. So instead of the idea that the management is directing the activity of the organization, that’s done. Command and control, forget about it. You can’t command and control an organization that’s that flat. You have to switch to a mindset that hey, the people of the organization are owning the business. They are, whether they’re engineers or agronomists or doctors or lawyers or whatever their job is, salespeople, they and their colleagues, their peers are owning the business. And the job of people in management is simply to kind of like, be greasing the skids, you know? To be figuring out, hey, where’s there a bottleneck, where are things stuck?

Bill Anderson: And so we actually have a description for that model, but that’s the idea. So that’s what we’re doing. We’re getting rid of annual budgets. Everything is on 90-day cycles, the whole organization, including the leadership team. And every 90 days, groups of people come together and say, “What are we going to do in the next 90 days? What are the most important things?” And then we spend one day every 90 days planning, so evaluating what happened the last 90 days, what are we going to do the next 90 days, can we do it with fewer people? If a couple of people from our team we don’t need anymore, they’re going to go join another team, right?

Bill Anderson: So this is happening every 90 days, 10 or 15 percent of the organization is moving to a different team. Teams are collapsing. Like, teams go away and new teams are formed. So, you know, again, you have some standing teams, like let’s say there’s some molecule you’re going to launch in five years’ time. Well, the product development team is not going away in 90 days, unless you fail in trials or something. So you have some teams that are durable teams and you have other teams that form for 90 days, 180 days, and then they go away. So that’s what we’re doing at Bayer.

Brian Halligan: Okay, so I had a lot of questions on that. You know, at some level you have priorities. Like, you’re trying to get some stuff done, you’re trying to drive some results. In your head, you have priorities. Like, how do you come up with the priorities, and how do you roll them down to what seems more like a jazz band than an orchestra?

Bill Anderson: Yeah. Yeah. Well, here’s the thing. An orchestra, there’s a score.

Brian Halligan: Mm-hmm.

Bill Anderson: Businesses don’t have a score unless you’re just doing the same thing over and over again.

Brian Halligan: They have an earnings call.

Bill Anderson: Yeah, but that’s not a score. That’s where—the earnings call is where you got to go and present your results. The investors don’t care how you got it, they want to know what you delivered. And so yeah, business is a lot more like jazz than it is like, you know, Beethoven.

Brian Halligan: I think most businesses are more like Beethoven than—and the bigger they are, the more likely they are like Beethoven than they are—a startup is more like a jazz band in my mind.

Bill Anderson: But think about that, you know. So is that good?

Brian Halligan: Not necessarily. [laughs] Definitely not necessarily. But it seems like gravity. As organizations get bigger, they look more and more like orchestras. They’re more structured, there’s more layers, the planning is longer, the budgeting is much stricter. And so you seem to have broken all that down. I spent a lot of time just, like, coaching—I basically coach startup founders and try to teach them how to be scale-up CEOs. Like, how do they make that move from startup founder to scale-up CEO without turning into an orchestra, without turning into sclerotic, slow—how do they avoid it from the get-go?

Bill Anderson: Well, they usually don’t. And if you look at the big tech companies, from what I can tell from people I know who’ve worked in them or are working in them now, as an example, most of them are big bureaucracies now, big command and control. They have all the normal corporate mechanisms.

Brian Halligan: Yeah.

Bill Anderson: And now I want to be clear about something, and this is a bit of a head-scratcher for a lot of people. You can do worse than having a hierarchical bureaucracy.

Brian Halligan: Fine.

Bill Anderson: In fact, a well-run hierarchical bureaucracy can deliver okay performance. And the way I think about it—and I use this analogy a lot—it’s kind of like there’s hierarchy hill. And hierarchy hill—think about it this way. Let’s say you’ve got two 10,000-person organizations. Each of them has the top 100 people that are basically calling the shots, and the other 9,900 people are more or less order takers. Okay? Which means they’re not that motivated. They’re not killing themselves to deliver new innovation, because it’s too hard, because if they have to work their way up through eight layers to get anything done …

Brian Halligan: It’s exhausting.

Bill Anderson: Yeah. They know, hey, that’s not really what’s being expected of me. They just expect me to comply. Now if you have two of these organizations, one of them, let’s say the CEO and the executive team are more concerned about improving their golf handicap. And the other one, the CEO and the executive team are totally into the customers, the products, the technology. They’re really into it. Well, which one of those do you think is going to perform better?

Brian Halligan: Yeah.

Bill Anderson: Right? And by the way, that latter one …

Brian Halligan: I like to call it the missionaries versus the mercenaries.

Bill Anderson: Yeah. So, like, say more. How do you describe those?

Brian Halligan: When I think of HubSpot in the early days, like, you think of the first 10 employees. Like, the reason the first 10 employees joined HubSpot is very different than the 100th to the 110th versus the 1000th to the 1010th to the—et cetera, et cetera. The value prop we espouse. And so everyone sort of joined because they loved the mission or they liked their colleagues. They didn’t play golf. They were completely focused and probably worked 100 hours a week. And just naturally—and by the way, I think this is okay and natural that you should put it off. In my mind, startups should put it off as long as possible. But there’s a natural progression where the reason someone joins a 10,000-employee company is very different than a 10-person. And you’re going to have people who are more mercenaries, who have a life, thank goodness, and have different priorities. So it changes over time. And I guess what I’m curious about you guys is like, it’s 100,000 flocking people. That’s a lot. How many do you actually have that you think are the missionary types?

Bill Anderson: Look, you know this, Brian. There’s 100 or 1,000 ways to kind of simplify the world, categorize, et cetera. I mean, I don’t really work with the missionary …

Brian Halligan: Mindset?

Bill Anderson: Missionary-mercenary model so much, because what I find is that almost everyone is capable of having kind of missionary zeal about something.

Brian Halligan: Love that.

Bill Anderson: You know, I have a brother-in-law who was a cop, and, you know, but he was really into what he did in his job. But because of the nature of being a policeman, he had a lot of free time. And in his free time where he wasn’t fighting city hall, literally, he was building amazing things. He was organizing trips for people from his church to rebuild houses that got destroyed by tornadoes. And he would organize the whole thing. So they would show up and, like, rebuild a house in two weeks with, you know, like, a team of 15.

Bill Anderson: So he was missionary in his spare time and he was an employee in his job. And the way I look at it is every Bayer person can be all in on the Bayer mission. And the question is: Are we going to create the environment that makes that normal? Or would you have to be kind of weird to actually do that because you’re always fighting city hall?

Brian Halligan: Okay. So let’s just say I’m a founder. I’m a 100-person company. It’s scaling. It’s very flat. I’ve interviewed everyone. And I’m going from 100 to 1,000. So I work with tons of CEOs in this spot. How do I avoid the ossification? How do I avoid the orchestra? How do I avoid the mercenary—whatever you want to call it.

Bill Anderson: Yeah, yeah.

Brian Halligan: What advice do you have for me as I’m on a rocket ship, I’m CEO of a rocket ship, 100 employees going to 1,000.

Bill Anderson: Don’t hire professional managers.

Brian Halligan: Huh. But my venture capitalists, the first thing they say when I raise my Series B is “You need to uplevel your team.” What do I say when they say that, Bill? Not kidding, by the way.

Bill Anderson: Look at a company like Amazon. They did not hire professional managers. They had the same people who were there when there was five people, when there was 500 and 5,000 and 50,000, you know? Because they correctly intuited that if they went and hired professional managers, they would end up with a dull, mediocre organization. And again, by the way, it’s not the manager’s fault. This is—it’s a way of organizing. But if you hire managers who’ve been trained that that is what good looks like, that’s what they’re going to implement.

Brian Halligan: Okay.

Bill Anderson: Now you may need to uplevel. Like, for example, you might have a person who’s the finance person who was capable of leading in a 10-person organization, who’s not capable of leading in a 1,000-person organization. But that doesn’t mean the answer is to hire a professional manager as your CFO. It means you got to find a better CFO who is dynamic and isn’t thinking like a bureaucrat. And you may say, “Well, where do you find those people?” Yeah, okay. It gets a little—that’s a longer conversation.

Brian Halligan: Yep. Bill, both of us are—while we’re on this, both of us are MBAs. We went to Sloan School. In Silicon Valley, it depends. It’s like people aren’t that psyched about MBAs like they used to be, if they ever were. What’s your take on that? Like, you’re interviewing somebody for, you know, one of these more entrepreneurial CFO jobs or whatever it would be. Are you allergic to MBAs? Do you like them?

Bill Anderson: Actually, I’m pretty—I love education. And I love people who are lifelong learners. I don’t spend a lot of time looking at whether or not someone has an MBA or not. In fact, the executive leadership team at Bayer is six people total, including me. And honestly, I couldn’t even tell you if anybody—I know I have an MBA. I honestly couldn’t even tell you if any of the other ones have an MBA or not. Probably a couple of them do, but I didn’t even notice. Now of course, part of that is like when you’re hiring somebody who’s—when you’re at a lower level and you’re hiring someone who’s 25, you might think about it differently than when you’re hiring people later in career.

Brian Halligan: Okay. So advice number one, got that. Avoid that. Let me just kind of go through things that CEOs ask me about. Like, you’re 100 employees, it’s pretty chaotic. You’re growing fast and, like, budgeting is chaotic, planning is chaotic. Okay, the venture capitalist says, “Let’s put an annual budgeting cycle in. Let’s meet our budgets. Let’s plan the year very carefully.” And you plan it, let’s say, in September for the next year which starts January. And then by the time July rolls around, the whole world has friggin’ changed. What advice do you have to that CEO who’s trying to scale, and is dealing with a lot of chaos right now?

Bill Anderson: Yeah. So this is classic. So the way a complex organization, a bureaucratic organization handles that situation, like, okay, we got to have financial discipline. The way they handle that is we got to pin down where every dollar is going to go in advance, you know? It’s kind of logical, but it doesn’t work. In other words, okay, if it’s November, now I got to figure out where all the money is going to go in the next 12 months kind of down to the department, the activity, et cetera. And we think when we’re doing that, that we’re actually somehow creating value, because, like, we’ve specified it. But as you said, the whole world changes.

Bill Anderson: And by the way, that’s true in startups, but it’s pretty true in big multinationals, too. And so what we do now is we call it a two-tier resource allocation approach. We call it dynamic resource flow. So tier one would be like your agreement with the venture capitalists, okay? Tier one would be, hey, we’re going to spend $2 million in the next 12 months and—or whatever it is, $20 million in the next 12 months, and we’re going to deliver at a high level. These are the big things we’re going to deliver while we’re doing that. Okay? That’s tier one, and that’s where the kind of nailing it down, because hey, we’ve committed to our investors, or we’ve committed—you know, like, so that you can’t really give on. But that’s okay, because it’s high level.

Bill Anderson: Now at tier two, you don’t do—so the normal corporate thing is you take that, let’s say it’s $20 million, and you divide it up into $100,000 here and $500,000 there, and you assign those numbers to individuals and you tell them, “You’re accountable for this, you’re accountable for this.” And then they all are incented basically to spend whatever that number is, not more, not less. Okay? But of course, that’s stupid because the world’s changing and you don’t want that money divided up that way, because by July, that doesn’t make sense anymore.

Bill Anderson: So instead of doing that, you go with your $20 million number, that’s tier one. And tier two, you’ve got a resource pool. It’s got $20 million in it. You’ve got leaders, maybe you’ve got, I don’t know, five program teams and an administrative team. And the five program teams are each working on some product they’re developing. And then you’ve got an administrative team. They’re responsible for keeping the lights on and whatever. Okay? You’re having a conversation, a regular conversation about, okay, when we took the $20 million and we roughly assigned it across those six teams, but there’s nothing special about that assignment. It’s not the basis for your end-of-year bonus. It’s not like, oh, if you spend less, you’re great. If you spend more, you’re a dog or whatever. It’s just a starting point, because we’re on January 1. This is sort of where we are right now.

Bill Anderson: So now everybody go work for 90 days. Do your best to drive your product forward, to thrill your prospects, and to treat the company’s money like it’s your own money, and then we’re going to come back after 90 days and just sort of check in. Like, oh, Team A says, “Actually, you know, we’ve hit a roadblock and we’re kind of stuck.” So you say, “Oh, Team A, you’re stuck. I’ll tell you what, you’re waiting for feedback from a regulator. It’s going to take six months. So we’re going to take all the people from Team A and put them on the other teams. And we’re going to take all the money that was in Team A and we’re going to spread that over to the other teams.”

Bill Anderson: Okay, let’s talk about Team B. “Ah, Team B, we’ve got a new opportunity. We can actually do more.” So okay, good. Let’s take some of those Team A people. And even more than that, you’re doing this in a way that it’s actually the teams that are sorting this out. It’s not like the boss is deciding all this, okay? And at the end of the year, nobody’s a hero because their allocation at the beginning of the year was $5 million and they only spent $4 million. No, no. We’ll talk about your performance at the end of the year in a peer review session.

Brian Halligan: Okay, let’s get into it. So tip number one, careful of hiring professional managers. Tip number two is there’s a different type of budgeting that’s—this is a high-level one, but it’s sort of the mid-level. It’s 90-day cycles, not yearly cycles.

Bill Anderson: It’s 90-day cycles, and it’s not the basis for performance management. See, that’s where a lot of bureaucracy gets created by each team thinking oh, it’s my job to spend this much, not more, not less. Kind of locking it in where you say, no, that’s kind of funds available, but you should try to spend less if you can and make more progress if you can, right? And we’ll talk about how you did later.

Brian Halligan: Okay. So, I’m Joe Smith. I’m a frontline manager-coach. I’m the CEO and I’m trying to design the organization. Like, how do performance reviews work? If you’re a 100-person company, you don’t want all this complexity creep in. How does the org chart work and how do performance reviews work?

Bill Anderson: And Brian, a little caveat, okay? I mean, I don’t think 100-person companies are that much of an intellectual challenge from an organization model standpoint. In general, if you’ve got a bureaucratic 100-person organization, then man, I don’t know, something’s wrong.

Brian Halligan: Fine. But by 1,000 people, it creeps in.

Bill Anderson: Yeah, 1,000 people, different story. Okay.

Brian Halligan: So you’re at 100, you want to go to 1,000. You don’t want to be sclerotic.

Bill Anderson: Yeah. Yeah. Here’s a departure. Usually, if you’re going from 100 to 1,000—and I’ve been on that journey—that is generally where you start bringing in the professional managers. It’s usually more in the, like, 500 going to a couple thousand. You can kind of get away with the really informal stuff, I don’t know, up to 300, 500, but then it starts to—big decision you have to make is: Are you going to make managers responsible for performance management? Or are you going to draw on the power of all the peers and the doers? And when you make that decision, you are sort of deciding the fate of whether this is going to continue to feel like a startup or whether it’s going to really take a major fork in the road towards a hierarchical organization.

Brian Halligan: Got it. Okay. So the performance review comes around every 90 days? 180? How often? And then who decides if I’m going to get a two percent raise or a ten percent raise?

Bill Anderson: I’ll give you a model for it. It’s not the only one, but think about it this way. We’re working our way to 1,000 people. Yeah, you’re probably going to have—you’re probably going to find that you need, I don’t know, 15, 20, maybe 30, even 40 managers. If you had 40 managers, they’d have 25 direct reports on average. Okay? So you’re somewhere in this range of, like, 25 to 50 direct reports per manager. If you’re in that range, then you’re—first off, the managers, they’re not reviewing and approving everything. You’re hiring smart people. These smart people, they worked hard to get to your company, you know? They don’t need to be told what to do and babysat. They’re going to have—they’re going to be all on teams, and every 90 days, they’re going to get feedback from their peers. Whoever they worked with the most, they’re going to get feedback. And it’s a simple feedback system. They got a one, that means great job, love working with you, great impact. Two is, wow, this person’s really off the charts. They’re clearly performing above what anybody would ever normally expect. And a zero is like, hey, not good enough. Yeah. Needs to be better. Okay? And then they’re answering two questions. One question is: What was this person’s major impact in the last 90 days? And what could they have done to be even better?

Brian Halligan: Yeah.

Bill Anderson: Two questions. Every 90 days, everyone in the organization is getting those questions answered from all their peers. And it turns out people actually care a lot more what their peers think than what their boss thinks.

Brian Halligan: Okay. How about the cashola?

Bill Anderson: Yeah. Okay.

Brian Halligan: How about the cashish?

Bill Anderson: Yeah. Here’s a learning. Here’s a learning. And I’ve heard this from a number of people who’ve been down this path, and I’ve come to believe it through my experience and the experiments that I’ve run. What you don’t do is you don’t take that rating that I just described, you get to the end of the year, and let’s say you’ve got 40 numbers, right? Because you’ve done it every 90 days and you’ve worked with, let’s say, 10 people each 90 days. So let’s say you got a—this one person’s got a 1.2 and somebody else has got a 1.3 and somebody else has got a 0.9.

Brian Halligan: Yeah.

Bill Anderson: That doesn’t become their multiplier for their bonus. Because if you do that, you sort of weaponize the peer feedback system.

Brian Halligan: Yeah, of course. Yes.

Bill Anderson: Then people, they feel like …

Brian Halligan: I’ll give you a one if you give me a one. Right. Of course.

Bill Anderson: Or, like, I can’t just rate the person as I believe I should rate them, because I’m thinking, oh, I think they really need the money or something. You know, it’s just you don’t want to do that. And by the way, people are—it’s really funny. I often do this in large groups. I’ll ask people, I say, “Who do you think has a better, more objective view of your impact: your boss or your peers?” You know? And I ask, like, “Okay, who says boss? Who says peers?” Right? It’ll be like 98 out of 100 people will say peers. Okay? Then I say, “Who do you think should do your performance evaluation: your boss or your peers?” Boss. Peers. Okay? This is—we’re working with humans. Humans are not logic machines.

Brian Halligan: No.

Bill Anderson: You know? And so we’re implementing this now at Bayer worldwide. We’re at 90,000 right now. When I started, we had a little over 100,000. We’re at 90,000. By the way, most of the positions we’ve eliminated, the vast majority were management positions. We’re implementing this peer assessment, peer feedback, okay? And we’re telling people, “Hey, everybody breathe deeply.” We have great people. We want to learn from our peers, because our peers know us better than our managers do. And if one of the major goals of the people of Bayer is to grow and to get better as a result of being a part of this team, then we owe it to each other to give each other this feedback. But we’re going to put a hard break between the peer feedback and the comp. And it doesn’t mean that it’s irrelevant. So if I’m a manager of 50 people, at the end of the year, I have what my eyeballs have witnessed over the year. I have this feedback from—you know, and I have the qualitative and the quantitative. I have all that. And I can see what teams have delivered. I have a variety of sources of information, and based on that, I got to make some decisions about …

Brian Halligan: As the manager. Okay, so the manager decides at the end of it.

Bill Anderson: Yep. Yep. Yep.

Brian Halligan: Okay, got it. Okay, titles. So, you know, a lot of Silicon Valley startups these days are like, “We’re not doing titles.” What’s your reaction?

Bill Anderson: I actually don’t even really care.

Brian Halligan: Well, do your employees care?

Bill Anderson: First off, it’s funny, we haven’t tackled this in earnest. It’s funny, it hasn’t been a big topic. It doesn’t mean that nobody cares about titles, but I think we sort of say, hey, if you need a certain title to get your job done, then, you know, like, talk to your manager about it.

Brian Halligan: [CROSSTALK] This isn’t a conventional wisdom you’re blowing up.

Bill Anderson: No. Because, you know, titles are one of those things where you can go around in circles. And at the end of the day, if your goal is to advance science and to do great things for customers, spending a lot of time talking about titles is not doing either of those things.

Brian Halligan: That’s great coming from you. You’re the CEO, you have a good title. But, like, you’re a middle manager. So I’ll tell you my experience with this. I tried to get rid of titles at HubSpot—probably around 50 employees. And I was like, “It’s ridiculous. We spend so much damn time talking about this title, it adds no value to our customers.” And I got rid of them. And then I was lobbied hard on the titles thing. And the thing that kind of got me was—I’m not gonna say—let’s say Frank Smith went home, he was going home for Thanksgiving, and he was a manager before and now he was a nothing. And he’s like, “I know I’m gonna see my Uncle Joe, and my Uncle Joe’s gonna be like, ‘Okay, did you get promoted? Are you a director now?’” And he’s like, “No, I didn’t get promoted. I’m a nothing now. And by the way, I’m a salesman. I used to be a sales manager. Now when I call on people, they don’t know where I am in the hierarchy.” And like Napoleon used to say, it’s amazing what a soldier will do for another color ribbon on their shoulder. And so, I got kind of—I got worn down on it and I brought titles back. But anyway, it doesn’t sound like this is one of your trust-busting ideas around CEOing.

Bill Anderson: Yeah, it’s not. So in other words, I’m not trying to get rid of titles. It’s just not—it’s kind of like the org chart. We’ve done this with the org chart, too. In our model—we still have an org chart. I always say we put it at the back of the room. It’s like it’s not that important. And I know you could say, “Oh yeah, but it determines pay.” Pay is important, but the org chart is not that important.

Brian Halligan: You know, I tried that, too. And I remember I had an office, and there was a whiteboard near my desk. And I drew on the whiteboard instead of an org chart, I drew this is what I think our influence chart is. And a bunch of boxes and arrows and whatever. And I asked IT, like, can you look at our email instance and see who’s got the most influence? And they took a crack at it. And anyway, the most powerful person at HubSpot at the time—this is probably 30 people—was a guy named Brad Coffey, who ironically came—he was our first intern and just knew everything. And so I wasn’t the most influential person, it was this young guy who was really capable. And I tried that for a while, and I sort of got talked out of that, too. And one of my regrets, Bill, over time is I had some ideas that were, like, counterintuitive to how you build an org, and a little bit like your ideas, and I got talked out of them over time. And I regret some of that.

Bill Anderson: Hmm. Yeah, here’s the tricky thing. And I think it just takes practice and it takes experimentation, because now—you notice I said org charts become less important. And what you just described was something where you’re trying to replace an org chart with some other kind of chart.

Brian Halligan: Yeah.

Bill Anderson: But I’m not doing that either. You see, it’s sort of like a lot of these things, they can be various methods or like titles versus no titles, you know? Like, saying there’s going to be no titles is the CEO being in control, banishing titles. Saying, “You know what? Titles just don’t matter that very much. If you want some big title, knock yourself out. But frankly, that’s just not where the organization is going to put its energy.” That’s actually not control. That’s kind of like saying, “Hmm, we’re going to trust people.” And again, be really careful here. I’m not saying that what we’re doing at Bayer is the old hire great people and turn them loose.

Brian Halligan: Yeah.

Bill Anderson: That’s a failed plan. That works if—most people who say that, they only say it because they’re not really doing it. Or if they ever try to really do it, like, literally turn everyone loose, it lasts about a day.

Brian Halligan: It’s chaos.

Bill Anderson: It’s chaos. And nobody likes chaos. People will take dictatorship over chaos any day. So, we took out a lot of stuff, but we put back a lot of stuff, too. I mean, we didn’t put it back, we put in stuff. So for example, 90 days, we have these 90-day rituals. Every 90 days, the team comes together. First thing they do is they do a retro. Look at, hey, how did things go the last 90 days? Did we achieve the three outcomes we said we were going to achieve? And if we didn’t, why not? What went wrong? So again, not spending days staring at our belly buttons but, like, spending an hour. Hey, what went wrong? Now what are the most important things for the next 90 days? By the way, are we still comfortable with our long-term vision on our team? Like, we’re still trying to launch product X with certain features by a certain time if that’s that team’s kind of longer-term vision. Is that still feeling right? Yep. Okay. Then okay, now what are we going to do the next 90 days?

Bill Anderson: This is all—and we have outcomes, not outputs, not like we’re going to sell more. That’s an output. Outcome would be we’re going to improve the performance of this part of the product by so much, or we’re going to, you know, whatever. It’s something the customer says they need. We’re going to deliver that. And so these rituals and the fact that everybody’s on 90-day cycles, this is a new or a different way of operating, but it’s not one that lacks discipline. By the way, everyone’s on the same 90-day cycle. The idea is so that if this team dissolves, there’s somewhere for the people to go, because there’s other teams forming. You see? So, it’s one of these things that a lot of times people get trapped in the idea of control versus sort of decentralization, kind of anything goes. We’re trying to put in place, think of it more like a really stiff backbone, but the arms and the legs can go—you know, go wild.

Brian Halligan: Okay, I like that. Okay. All right, so you came into Bayer over a year ago.

Bill Anderson: Two years.

Brian Halligan: Yeah, pretty quickly, you made some massive changes. And I have a couple questions on that. I guess my first question is, do you think you went too fast or too slow on that?

Bill Anderson: Hmm. I don’t know if you’re going to like this answer, but I think on the one hand we went really fast.

Brian Halligan: Seems it.

Bill Anderson: And on the other hand, I don’t think—how do I say—Bayer was facing a lot of pretty big challenges.

Brian Halligan: Yeah.

Bill Anderson: And in addition to some sort of technical challenges we faced, we had this organizational problem whereby the people of Bayer were passionate about the company’s mission, about the quality of the science, about great people, right? But everyone agreed, hey man, we can’t get anything done around here. This place is so bureaucratic. Now as I said earlier, I mean, I don’t know if Bayer was the most bureaucratic company I’ve seen, maybe not. But the fact that some of the technical challenges we faced made that bureaucracy really unacceptable. Like, people will put up with a lot of bureaucracy if sales are growing 10 percent.

Brian Halligan: Yeah.

Bill Anderson: And we were facing patent expiries and things, so people were like, “Hey, we’re bureaucratic and we’re hosed, man. We got to—like, this isn’t going to work.” So I don’t think we could have gone slower, because if we had gone slower, we were facing existential threats. So I kind of think it’s a little bit like baby bear’s porridge. I think we’ve probably gone about the right speed.

Brian Halligan: Okay. And kind of listening to you—this is going to sound weird but, like, some of your ideas sound like Tony Hsieh’s ideas, the CEO of Zappos, a while back, who had this idea of “holacracy,” and he was trying to rethink how an organization worked. And actually, I was kind of inspired by Tony back in the day. Like, you’re doing some pretty unusual stuff. Who are you—are you just kind of making it up as you go? Am I right? Who inspires you? Is Elon inspiring you? Who is it? Who is the best turnaround story that you might be following? Like, who are you looking up to?

Bill Anderson: Well, first off, let me say there have been very few turnaround stories of this kind. Most of the organizations that are running a system similar to what I’ve described, they built it from the ground up or they implemented it early on.

Brian Halligan: Yeah.

Bill Anderson: So actually, my kind of specialty is doing this in places that are already established. And I became CEO of Genentech—well, I basically landed in the role in the second half of 2016, and I found that, hey, things had gotten remarkably bureaucratic for a company that was known for innovation. The innovative spirit was still there, the culture was okay, but the mechanics were broken by the levels and by the governance processes and all this stuff, right? And at that time, I had no idea. I had zero idea what to do about it. I mean, I guarantee you I had no idea. In fact, I was almost despairing, because at that point I’d been around the organization for 10 years, and I knew that during those 10 years there had been non-stop efforts to stop bureaucracy.

Brian Halligan: Yeah. It didn’t work.

Bill Anderson: Yeah. And so that’s where I mentioned, you know, this sort of insight that, like, hey, bureaucracy is not an external thing that comes in and infects this sort of healthy body. The body is designed wrong.

Brian Halligan: It’s built bureaucratic from the ground up.

Bill Anderson: Yeah, it’s been built that way. So I spent a couple years there, and then I became the CEO of Roche Pharma, which is the parent company of Genentech. And so I had, yeah, like, six years.

Brian Halligan: To practice on.

Bill Anderson: Seven years to practice this stuff before I got to Bayer. And now—but that’s part of the answer. So it’s not like we started making this stuff up when I got to Bayer. That could never have happened. It would have been overwhelming. There were lots of inspirations. And it wasn’t just me; I mean, there was a bunch of people I was working with and I could barely take credit for anything that’s in this system. Almost all the insights came from somebody else. There was a book I read called Reinventing Organizations by a guy named Laloux. Have you seen it, Brian?

Brian Halligan: Yeah, I don’t think I’ve read it, but I remember hearing about it.

Bill Anderson: Yeah, and it talks about “teal”—and maybe you’ve heard that term. That’s a really interesting read. That was there, got me started. I learned about this organization, Buurtzorg, in the Netherlands that’s probably the most radical. Because they have 16,000 employees and two managers.

Brian Halligan: Interesting. Okay. What’s it—how do you spell that?

Bill Anderson: It’s like B-U-U-R-T-Z-O-R-G.

Brian Halligan: One of those. Okay. [laughs]

Bill Anderson: Yeah. And it basically—yeah. So the thing—and again, I’m not hung up on the statistics. It’s the shock factor. Because you go, wow, 16,000 employees and two managers. Well, if you have a performance problem, who do you think deals with that? The managers or the employees?

Brian Halligan: I think you’re going to say employees.

Bill Anderson: Right? If you got to decide about, you know, we need—our team can’t handle the workload. We need to split into two teams. Who do you think decides that, the management or the employees?

Brian Halligan: Employees.

Bill Anderson: And so on. Performance evaluation. Who do you think does that, the management or the employees?

Brian Halligan: Employees.

Bill Anderson: And the answer to everything is basically the employees. And they have, like, 30 coaches and 30—whatever you to want call it, back office, payroll and whatever. And then the other tens of thousands are all individual contributors doing their work. And so going to school on that, and then saying how in the world do you apply that to a complex integrated product development life science company where there’s so many interdependencies? Because at Buurtzorg, they have a bunch of teams that are, like, yeah, thousands, literally thousands of teams, but they’re all kind of doing the same work, because they’re providing home healthcare services. So they’re somewhat independent, right? They don’t have to coordinate across all these teams. But if you’re developing a new pharmaceutical, a new medicine, that might require 2,000 or 3,000 people to put their hands on that over a 12- or 15-year period from all different functions, right? So that’s why we don’t have two managers at Bayer.

Brian Halligan: You need a little more coordination than that.

Bill Anderson: You need more—yeah, more support and coordination.

Brian Halligan: Okay. One thing I’ve noticed about a lot of the CEOs I admire like Steve Jobs and Bill Gates and Jeff Bezos and Elon Musk and Jensen Huang—mostly tech—is they have exceptionally thick skin and they’re almost immune to criticism, like they’re alligator skin. You must have gotten a lot of criticism for your approach, particularly from all the layers that you probably pushed out. Or do you have exceptionally thick skin, or does it hit you between the eyes? And for me, I don’t. And I think one of my weaknesses as a CEO is I’m a bit of a pleaser. I wanted to be popular. And as I look back at my tenure, I kind of wish I was tougher and I could withstand criticism better. But where are you on the spectrum of alligator skin versus me?

Bill Anderson: Let me offer you an observation. Those CEOs you mentioned, they’re a bit of a type.

Brian Halligan: They are.

Bill Anderson: These are kind of innovator, product innovators. And that can be a great kind of CEO, great kind of leader. But that’s a very distinctive kind of leader. And by the way, it has certain positive features and others that are not so positive.

Brian Halligan: Definitely.

Bill Anderson: I’m not going to name names because I don’t want to get into name-calling or that kind of thing, but some of the people on your list were pretty hopeless organization managers, and they had to put people in place around them that could actually make the organization work. Because if it was up—if they were in charge of making the organization work, it would fall apart.

Brian Halligan: Yeah.

Bill Anderson: All right, so you kind of have …

Brian Halligan: One thing I noticed about all of them is they’re all lifelong learners, big time.

Bill Anderson: Yep, yep.

Brian Halligan: And they’re all a bit obsessive-compulsive. They’re obsessed. And yeah, they did bring in people, but most of them got better at it over time. Like, Steve Jobs got a lot better at it. Bill Gates got a lot better at it. They all got better at it over time. They knew if they want to achieve their dreams, they had to improve on it. So they all worked on the CEO craft. Anyway, back to you. Are you super thin-skinned?

Bill Anderson: Yeah. Okay. Okay. But I do want to make the point. You got to decide what you’re trying to be, you know? In other words, for your listeners that are trying to grow as a CEO, you got to be the person you are, too. Like, I’m a nerd, big time, you know, engineer. I love the product stuff. I love …

Brian Halligan: You’re a scientist, right?

Bill Anderson: I’m a chemical engineer.

Brian Halligan: Okay.

Bill Anderson: I have a master’s in chemical engineering, but I’ve decided that I’m not using any of those guys you mentioned as my phenotype, because a lot of those guys, they are really product visionaries. Like, that is their thing. And that’s a beautiful thing. That’s a beautiful gift. But I’m going on a different mode. I want—if we have 90,000 people at Bayer, I want to have—if in those 90,000, there’s 1,000 that could be product visionaries, I want to make sure that their product visionary is coming through. And so I’m not talking about being a professional manager, by the way. I faulted that. But anyway, you just got to have a picture for what it is you’re going to be. And then back to the thick, thin skin. I’m internally referenced, but I’m socially sensitive. So what I mean by this is, if somebody—first off, internally referenced versus externally referenced. Some people, you ask them, “Hey, how are you doing today?” They say, “Well, how are you?” You know? Like, they so reflect the people around them. And if everyone else around them is happy, they’re happy, you know? As an example. And that’s—I’m not judging that.

Brian Halligan: Is that a thing that people talk about? I’ve never heard of that. Internally referenced. Is that a …

Bill Anderson: Yeah.

Brian Halligan: Is that like a psychology term?

Bill Anderson: There’s this thing called neurolinguistic programming, and there’s, like, 100 different ways to—it’s actually pretty cool. Parametrically, you can kind of form judgments. I don’t mean negative judgments but, like, just get to understand people better. I’ll give you another example, Brian. Another one’s a time constant, you know? What’s your time constant? So some people, a long time is, you know, a century, and other people, a long time is six months or a month. You know, I’m kind of in between. I’m probably …

Brian Halligan: You’re internally referenced.

Bill Anderson: Yeah, internally referenced.

Brian Halligan: I’m a little externally referenced, which I think is a bug, not a feature.

Bill Anderson: Yeah, it can be—being externally referenced makes you a lot better at a lot of things. Like, you tend to be better with empathy. You tend to be—right? You don’t miss people’s birthdays, or you don’t say the wrong thing and offend someone as much if you’re externally referenced generally. Okay? It can be really hard on you, especially if you’re in the business of making hard decisions or changing things. So I’m internally referenced, but I actually care a lot if somebody says, “I hate you.” I got some hate mail recently. Actually, not—it was about a product. It was like a customer kind of thing. And the person really said some really mean things about me that were just—they were venting. But I wrote them back and just said, “Hey, I’m really sorry about this, but I don’t think what you said is quite fair. Let me say this.” And then they wrote me back and they were like, “Oh my goodness, I’m so sorry I wrote that. I didn’t think that someone would actually read this.” And so I do care, but my person—so maybe my ethics is that I care what people think, but my personality is that I’m pretty—yeah.

Brian Halligan: Got it. Okay. One other topic while I got you. In my world, there’s a lot of CEOs who’ve been CEO for a couple of decades. Like, I’m in this segment of the software industry, software as a service, and some of the CEOs are getting tired and they’re thinking about, you know, retiring. What advice do you have to those CEOs and to the boards of directors of those companies? If they’re hiring, should they hire internally or externally? And why? And the trend in Silicon Valley is internal—Google, Microsoft, like most of the big ones. But there are some externals that worked out. Like, Uber’s worked out pretty well. So advice for boards, internal or external, pluses and minuses.

Bill Anderson: So you have to understand, I’m like the opposite of, say, your experience, because you became CEO at a very young age and you grew with the company. And I actually—I’ve kind of done almost every level job in a company. Like, if Bayer had 12 layers when I arrived, I pretty much worked at each of those layers. And which is—it’s actually a real asset in a way. But on the other hand, it’s like you can age out, you know what I mean? Like, that doesn’t work if you turn 100 before you get to the top, then yeah, that’s not going to really work. I’ve also been exposed to these questions before about—like, for example, I’ve been the guy who was ready to be a CEO, but because nine out of ten large companies are going to hire inside, it’s almost like the supervisory board, if they’re going outside, it’s a mark of a crisis, a problem.

Brian Halligan: Something’s wrong.

Bill Anderson: Like, they didn’t do their succession planning right. And so I’ve been the guy at times sitting there thinking, “Wow, I’m really ready to do this. And I’ve got all the experience.” Because I got my first job as the CEO of a publicly-traded company at 56. There were times earlier on when I was as ready as I was when I was 56, but I just didn’t get the job. And there were times where I saw big companies hiring some internal person, even some internal person that I knew, and I thought, “Oof, they really settled there.” And so I think the best answer I can give you is you got to hire someone who’s awesome. And a lot of times what CEOs do is they have someone who’s a number two and they think that that’s the natural person. And they don’t realize that this is a person who thrived in their shadow. But whether that person really is going to stand alone and be the person who—or they think, “Oh, they’ll maintain what I built.” But there’s no maintenance mode.

Brian Halligan: Yeah, I don’t think there is either. If you’re in maintenance mode, it’s like you’re either changing or you’re dead.

Bill Anderson: Yep.

Brian Halligan: If you’re a board of directors and you’re hiring from the outside and you hire that person, what advice do you have to that CEO who’s joining?

Bill Anderson: You got to get to know the company. You got to get to know the business. And if you’re coming in from the outside, chances are something isn’t working the way it should. So don’t assume you’re there to preserve the status quo. You need to assess quickly, decide what really matters, and start moving. Even in companies that look healthy on the surface, there are usually structural or cultural issues that need attention. If you come in thinking your job is just to maintain what your predecessor built, you’re probably missing something important.

Brian Halligan: Last question. A lot of the listeners are in tech, they’re executives in tech, they’re early in their careers, they’re founders of tech companies. Advice to people who are early in the CEO journey, advice to people who want to become CEOs.

Bill Anderson: Go make it your business to talk to a lot of people. Ask experienced leaders for time to talk. Most people later in their careers are really glad to help. There are a lot of things I wish I knew at 38 that I understand at 58. Seek advice. And really trust your people. Trust the people who work for you to shape you and to train you. Many of the mistakes I made early on came from thinking I was supposed to have all the answers or be invulnerable. You can be confident and still be open and approachable. Show up and say, “Our mission matters. Our work matters. But I could really use your advice on how to be a better leader.” That’s not weakness. That builds trust.

Brian Halligan: I think that’s incredible advice. It’s disarming and incredibly useful.

Bill Anderson: Yeah.

Brian Halligan: Bill, I appreciate you. I appreciate what you’re doing at Bayer. It’s fascinating, and you’re setting a template. I hope you’re wildly successful. Thanks for coming on the show.

Bill Anderson: Thanks, Brian. Really enjoyed it.

Takeaways

Brian Halligan: Okay, I hope you guys liked that. I’ll give you my take. Bill’s trying to pull bureaucracy out of a 100,000-person organization. I’m more interested in how you prevent it from ever showing up as you go from 10 employees to 1,000.

Annual planning and budgeting can slow things down. We implemented formal planning at HubSpot around 50 employees. It helped, but if I were doing it again—especially in a fast-moving world—I’d use shorter cycles, maybe six months.

Layers slow things down. The more layers, the more bureaucracy. The director layer in particular slowed us a bit. Many of those people were fantastic, but I’d push off adding middle layers as long as possible and keep spans of coaching healthy—at least one to ten.

Mercenaries can slow things down. I was always managing the missionary-to-mercenary ratio. You’ll need mercenaries eventually, but push that shift out as long as you can.

Org charts and titles can gum things up. I tried banning both around 50 employees. I eventually brought them back. They’re exhausting, but on balance the structure helps more than it hurts.

One-on-ones can jam up a CEO’s calendar. I admire leaders like Jensen Huang who operate with large groups and public feedback. In our early days, I didn’t do traditional one-on-ones, and I sometimes regret moving to a more conventional model.

Compensation systems can also create drag. You eventually need them, but you should decouple compensation from hierarchy. Some individual contributors add more value than executives, and comp should reflect that.

Professional managers are a hot topic. You’ll need them eventually. I’d push that out until after 100 employees if possible. Build with your early team first. But at some point, you need people who’ve seen the movie before—especially for roles like CFO before going public.

Anyway, I hope you enjoyed it. If you want to keep the conversation going, ping me on X. I’m @bhalligan. Take care.