SPEAKER

Eddie Kim - Co-Founder & CTO at Gusto

Edward Kim is the co-founder and the CTO of Gusto where he oversees all engineering and software development. Prior to Gusto, Edward was the CEO and co-founder of Picwing, a Y Combinator startup and photo-printing platform.

“But as you continue to scale and you grow... that thing that you optimized for starts to become a disservice to you and the company. Because what happens is this fear of failure, if you take it too far, it starts to change a lot of things about the business.”

<cite>- Eddie Kim</cite>

Before Picwing, Edward worked as a senior project engineer at Volkswagen Group of America Electronics Research Lab, where he led research and development for cloud-based navigation and speech recognition systems for Volkswagen and Audi. Edward is also the developer of several award-winning Android apps that have generated more than $1 million in revenue. Edward holds bachelor’s and master’s degrees in electrical engineering from Stanford University.

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Show Notes

• What it means to “remove fear of failure” as you scale (2:25)
• Signs that indicate your company is optimized around a fear of failure (6:19)
• How to know when “healthy management” actually means your company has a fear of failure and is holding you back (10:54)
• Other forms “fear of failure” can take in your organization (14:20)
• MTTR over MTBF - Why you should prioritize recovering from failure over avoiding failure (17:40)
• “Rage-fixing” & Eddie’s breakthrough moment confronting fear of failure at Gusto (23:43)
• “Kicking the flipchart” & Eddie’s breakthrough moment #2 (27:52)
• How to maximize unplanned or unintended crucial conversations (33:54)
• How to decide when you need to abandon the agenda and “kick the flipchart” (37:37)
• How psychological safety can make your team more resilient to fear of failure (40:17)
• Takeaways (44:07)

Transcript

What does it mean to "remove fear from failure"

Patrick Gallagher: Eddie. Welcome.

Eddie Kim: Thanks for having me.

Patrick Gallagher: We're excited to have you here. In preparation for this conversation, you know, we were reflecting on the experience of scaling a company and how it's, it's really like a thrilling proposition but it can also be unsettling.

And that one of the emotions that people can experience while growing a company. Growing a team, growing business is fear.

Fear is kind of a natural experience, but it can also be a block to success. So our conversation is about how to remove fear from failure as you scale.

And so to begin, what do you mean by removing fear from failure as you scale? And why is this an important thing to consider as an engineering leader?

Eddie Kim: Yeah, totally. I think this is a great topic. Something that I've thought a lot about recently. I think it's helpful to first understand where the fear of failure comes from. And it comes from actually a very good thing, which is you've actually built something in your company that's going really, really well. And customers are using it. You're getting a lot of traction, whatever metric that's most important to you. If it's going in the direction that you want you start to realize that this thing is kind of taking off on its own.

And your job now goes from trying to get something to work to just trying to make sure you don't screw it up. And there's many reasons when things are going really well, especially when they're going really well, really fast... that you can screw things up. And so you... all of a sudden your orientation, the way you think, what you optimize for just changes to be around how do I make sure I don't have failure? How do I make sure I don't screw this up?

And so I know for Gusto, in my personal experience, there was definitely this period where we realized we had a lot of traction of what we were building and we were starting to get a lot of customers. And we had this very important task of calculating payroll for all of our, at that time, tens of thousands of customers every week or every two weeks or whatever their pay period is.

And that thing cannot mess up, right? Because if you can't pay people on time, you can't do the main thing that people have hired you to do. And once you screw up and you kind of violate that trust that the customers have in you . It's really hard to come back from that.

So, we're super, super hyper focused on making sure that we're calculating payroll correctly and that we're paying all of the employees on time. And that's just one example, but there are many other things as a company is growing where really just optimize around not failing.

And that's, that's a good thing because once you start taking off, you know, it's like inertia, right. Things that are at rest they tend to stay at rest and things that are already moving, they tend to stay in motion as well. And so everything just goes to just not failing.

And all this stuff is so new to you that you make tons of failures and you learn from them and you really try to like put in processes. You invest in making sure that those failures don't happen again in the future.

But as you continue to scale and you grow ... that thing that you optimized for starts to become a disservice to you and the company. Because what happens is this fear of failure. If you take it too far, it starts to change a lot of things about the business. how fast you're able to execute . your big swings start turning into smaller swings, and they start turning into little bunts. If I extend that baseball analogy.

And a lot of things start setting in where you look around the company and you see everyone's working really, really hard. They're doing their job. But you just feel like you've lost something. You've lost the thing that made the company special. And you all of a sudden become that 800 pound gorilla that you made fun of when you were much smaller.

I think many companies, when they get, past this hyper scaling phase, they find themselves in this situation.

Signs that indicate your company is optimized around a fear of failure

Patrick Gallagher: That's interesting because I think you're talking about, one of the core parts when you get to a certain point is optimizing for not failing is a, is a good thing. But then you have to make a conscious decision to realize that they may not be serving you anymore as an organization.

So how do you know when, what you've optimized for has gone too far? What was the experience at Gusto where you were like, optimizing for this is no longer working for us we have to do something different?

Eddie Kim: Yeah. So oftentimes what happens when you are growing really fast is you start putting in a more rigorous planning process, right? And a lot of companies end up using the OKR process.

One thing that I noticed is that... we would set our OKR is every quarter, just like many other companies do. And at the end of the quarter, just like many other companies, we do a review of those OKRs and we're essentially grading. And we actually put like a red, yellow, green, Like highlight on the OKR 's. Green if they were hit. Yellow, if it was like kind of a slight miss and then red, if it was like completely off.

One thing that we started noticing is that once those OKR's we're locked in at the beginning of the quarter, people would really optimize for hitting those OKRs. They didn't want to report back at the end of the quarter A OKR sheet full of red.

And sometimes we realized that what we had set at the beginning of the quarter was actually not the right thing for us to be working on. And yet everybody's still optimized to hit these OKRs.

There was actually a strong resistance to change your OKR's midway, even though you ask, you know, everyone in the company, nine out of 10 people, they say, "yeah, actually we should be doing B not A, which is what we thought we should be doing at the beginning of the quarter."

But people just, for whatever reason, they just have a strong hesitation and aversion to saying, "we're not gonna hit these OKRs we're going to go work on this instead." Right.

And that's kind of, I think a form of fear of failure where people, you know, they optimize for predictability. that's really what that's about. Right? You're trying to say. We value at the beginning of the quarter if you do what you said you're going to do, right.

that's like a company that's really oriented around. We don't want to mess up. We want everything to be predictable and people will just kind of do whatever is on that sheet of that slider or sheet or however, whatever form your OKRs take. And there's like a resistance to work on, you know, what is the actually truly impactful thing that you're working on in the company.

The other thing that I noticed was memos. We started getting into like the memo format. Every time you wanted to propose a project or make a change or reorg or whatever ... people would write these eight to 10 page memo format that everyone would read.

Patrick Gallagher: It's almost a manifesto at that point 8 to 10 pages.

Eddie Kim: Yeah. It's a manifesto, yeah! And they were always written in such a polished, thoughtful way. And before they're written like the author would go around, do like a listening tour of all the different teams and talk to a bunch of people. And essentially compose a memo that satisfied enough people that it would be relatively non-controversial. It was hard to, you know, have a strong opponent of the memo.

But also what, that ended up doing is... it does kind of like water down what the objective originally was. Sometimes it gets lost. And I found myself reading these memos and really just wanting to ask the question, "Okay, what is, the actual, like, you know, one sentence thing that you're proposing here? Cause it's not super clear to me in this huge manifesto."

So it's this other thing of like being so, so polished on your communication that sometimes one, it takes a lot longer to communicate things. And two, the communication doesn't come through as clearly.

When we started putting more rigor into our promotion cases in the engineering team. Or the performance evaluation. Sometimes, we would get these like five to eight page performance reviews.

And when you have a five to eight page performance review, and you have to read through that for every single person in your team a lot of it does get distilled out and you kind of lose the, you know, what are the top three impactful things that this person did that, you know, makes you think that deserve a promotion to the next level?

That in some ways gets lost in these like long memo formats.

And I think those are some examples, like the polish of communication, the emphasis around hitting OKRs, the predictability... over the impact of, the work that you do in the company. Those can be sometimes some concrete signs that you have a company now that's optimizing around fear of failure.

How do you know when healthy management practices aren't working as intended and are actually indicative of a fear of failure?

Patrick Gallagher: That's so interesting because if you think about it, like, OKRs, memo writing, really comprehensive performance reviews are also sort of healthy practices, but it sounds like at some point there's a turn.

Eddie Kim: Yeah.

Patrick Gallagher: I'm like trying to figure out like, well, how do you know that then those things now are more indicative of a fear of failure and holding your organization back? How do you know when those are no longer serving you?

Eddie Kim: I remember when we first introduced OKRs, it was like a catalyst for the company. All of a sudden, we had a much better way of connecting the work that was going on in different organizations. And we were able to just coordinate a lot better. it just felt like this new thing that we had introduced was really accelerating the company or fixing some of the problems that we were facing.

And then as we grew. And a lot of new people joined. They came into an OKR process. They didn't necessarily, you know, live through the transition of no planning to quarterly OKR planning. It just feels like , this process that you go through. And nobody really, I think understands the value it brings after a while.

So I think sometimes you can get so caught up in the way things are done or the processes that are already in place that you kind of lose sight of why was there in the first place?

And you notice that you start having a lot more conversations instead of it being, " Wow! This thing that we introduce is so... it fix so many problems for us!"

The conversation starts changing to be more around the deficiencies of the process.

And I remember just having a lot of conversations around like, "Hey why did we work on this thing that we said at the beginning of the quarter, when it's like, kind of no longer relevant anymore?"

And it just became like a struggle, like no one could really answer that question. And again, you felt a lot of resistance... People just got really focused on following the process itself without really understanding like why that process is there. So I think if the conversation maybe shifts to what are all the deficiencies and how do we minimize these deficiencies? It might be a sign that it's time to switch it up a little bit.

And OKRs are really good and we still do them at Gusto. It's just a different way of thinking about it right. At the end of the quarter, we're emphasizing a lot more of what is the impact that you and the team actually had? We don't even really care that much about how accurate were you at, hitting your KR's that you had said at the beginning of the quarter. The conversation becomes much more about, just tell us the impact. What's the quantifiable impact that you've had throughout the quarter, whether or not it's on the OKR's, or not?

And that was like another, like, Moment where we were just like, "Oh man, this is so much better than, than the way things were before!"

And so sometimes you just get that feeling of these breakthroughs and these accelerations that you have in the company. And that's a good sign that the process that you have in place is working. And then when you, when you're, you know, dragging your feet on, like, why are we doing this? And like, how do we minimize, how burdensome this is? Then, it may be a sign that you've kind of outgrown those things.

Patrick Gallagher: Absolutely.

I'm like getting ready to jump out of my chair because I want to dive in to the "How." So, like, how do you make the switch? What was the ah-ha moment like for you?

But before we get into that, I wanted to ask one more question, just to sort of paint the picture of the breadth in which this can exist in a company.

And so we've talked a little bit about some of the ways that fear of failure manifests and then some of the trade-offs that that can make in some of the like surprising problems where like you're actually doing these healthy organizational practices, but the spirit of them or the intent behind what they're supposed to do It's no longer a central focus of it.

Eddie Kim: Right.

What other forms does "fear of failure" take in an organization?

Patrick Gallagher: What other forms does this sort of fear of failure or this optimizing for predictability look in an organization? Or how has it looked in Gusto?

Eddie Kim: I think another thing that starts to set in is... so the org becomes a lot bigger and there's a general move from people who are doing multiple things as generalists to you hire like more specialists.

So for example, like Gusto might've started with a risk team, right. And they're risk generalists. But then as you grow, you start to specialize in credit risk and then fraud risk, like one team kind of becomes two teams of different specialists. And they basically optimize for different things. Right.

A lot of our risk at Gusto is around payments risk, risk of moving money around. And so actually that team started as a overall payments team. Right? So we had a team that was responsible for money movement at Gusto. And within that payments team as generalists, they had to be responsible, not just for making sure money movess from point A to point B, but also making sure that we're not losing money. So, there's no fraud going on. And then also when we send money to someone else that we know that we're going to get that money... like when we send money to an employee, then we're going to get the money from the employer. So that that's the credit risk aspect of it.

But then as you grow as a company scales you start to specialize, right? So that payments team becomes like a payment infrastructure team and then a payments risk team. And then you have one team that's optimized around, in Gustos as use case - how do we get money from point A to point B faster? And then you have another team that's optimized around - how do I minimize the risk of losing money when you send money from point A to point B?

So then what happens is you have a team... two different teams that are now optimizing for different things. And they start to really focus on preventing what defines this as failure for their company.

So for example the risk team, they just don't want to lose money. So they'll really optimize around putting things in place either in the product or in our approval process, so that we lower our total dollar loss rate for money movement. But then you have another team that's optimized around how do I get money moving faster? And, they're optimized on not losing customers because we moved money too slowly.

And so now what happens is you have these two teams that are kind of optimizing for their own separate things. When really the right call for the business is, to look at holistically, what's the right balance of being aggressive enough, where we can, move money faster for more and more customers so we can grow faster. And balancing that with not losing like a ton of money from just, you know letting people move money before Gusto knows that we're gonna get paid back for it.

And so as you grow, you have teams that really start to that kind of lose the bigger picture of why you're trying to do this and what's the best call for the company. And then you start to have teams that they're two different pieces of it that are sometimes opposed to each other.

And then you you'll see like, sometimes that, you'll get stuck on certain decisions, right? A decision can't be made because the leads of these two teams are kind of looking at each other and they don't have a way to have someone make a call on how to move forward.

And so I think that's another sign of a fear of failure setting in, because different teams are just optimizing for different failure modes that are sometimes against each other. And you lose sight of like, we're all in here to make the company successful, to serve our customers and grow as fast as we can. That gets lost as an organization scales.

MTTR over MTBR - Why you should prioritize recovering from failure over avoiding failure

Patrick Gallagher: I think you've really, you really simply stated an incredible example of like that almost over-optimization of two different functions pulling apart in different directions.

That exists in so many different ways, whether that's within engineering orgs, but also within the different stakeholders interfacing with engineering. Whether that's you know, product design sales or marketing.

and Fred Kofman spoke at our Summit last year. It was one of the talks where my job was dropped the whole time, because he's just absolutely brilliant. And is a PhD in economics taught at MIT's business school. And one of the things he talked about was if you optimize for the subsystem - so for like the independent functions - then that problem happens where everybody is sort of carving out their own niche and like defending that priority.

Eddie Kim: Right.

Patrick Gallagher: But then if you try to optimize for the whole system, then you inherently, the trade off is you have to then sub optimize those functions because they have to then... everybody's existing to support the bigger picture. it's the dilemma of leadership because you have to make all of those trade-offs of optimization for which function, you know, is going to be effective or have priority there.

And I think you uncovered a really like a really clear example of, of that challenge that you face as a leader every time.

Eddie Kim: Right. I think the solution to this is, it's just very cultural. You can't really go back to a world where we say, "Okay, we're getting rid of the risk team. We're getting rid of payments infrastructure team. We're going to combine them into a single team and put, you know MBA person in charge of it to make the calls."

You can't really go back to that because You need a specialist, right? At that scale. And I think the solution is you just kind of have to culturally change through a variety of mechanisms and tell people that it's okay to fail. It's okay to... obviously there's a range of failures, but there are certain things where we want to be more tolerant of them. And the most important thing instead is to 1) recover very quickly from those failures and 2) make sure you're, learning. And you do something to minimize the impact of those failures in the future.

And if you give people the permission to do that, then the thinking really changes, right? They go back to that ownership mindset that you had when you were much smaller. And the way people behave is kind of like that, one team aspect, when you have that combined payments team, even though, you know, they're now split into smaller specialist teams.

So it's really, to me, it's about changing the culture. We say in our engineering world, we're prioritizing MTTR over MTBR. So MTTR is "mean time to recovery," which is like the average time that you can recover from those failures. We want to optimize around that over mean time, between failure. We are optimizing less, like the time between when you have failure events. We care much more about recovering from them. And in fact, we celebrate when people fail and are able to recover quickly.

This happened, and it's very, very concrete in the engineering world because you have things like outages, right? The site goes down, A bad commit goes out, and nobody can use your product anymore. And you can just, you know, within five minutes, get that back online, revert the commit, deploy again. That's a huge win that we'll celebrate Gusto. And just, you know, setting that culture is so, so important to make people not kind of get over that, out of that myopic view, that starts to set in. And really think about, "okay, what is the best thing the business?"

Jellyfish - "Why is the job so hard?"

Patrick: We're taking a quick break for a special feature with our friends and sponsor jellyfish.

In this episode, Andrew Lau, Jellyfish's CEO, shares why being an engineering leader can be such a hard job and what Jellyfish wants to do about it.

Andrew Lau: We spent a lot of time thinking about what's the kind of problems we want to tackle. What's the problems we want to solve? And all three of us actually grew our careers running big engineering teams and big product teams.

And we frankly just had a discussion being like "that job was hard..." Right? For us, the mission has really came out of our own experiences, which is "how do we make that job easier? How do we make folks more successful in that space?" Because it frankly is just a tough job because there's so many pressures coming both from the business side and from the teams. And not a lot of answers often.

We kind of unpacked "Well why is the job so hard?" We said the job was hard because frankly the business doesn't understand what engineering does and how it actually does it. And there's almost no data to actually understand yourself what's actually happening on the team.

And so we really quickly drew an analogy back to... when we started my career in late 90's... there was a time before Salesforce, right? And we all take it as a given now that every sales leader knows... you know actually, every EMPLOYEE knows about CAC and LTV and every metric you can think about sales. We know how many phone calls it takes to make happen.

And over that 20 year span, we saw this happen in every department. We saw this happen in sales, marketing, finance, HR... Every one of them actually got that visibility, that data that helps them make smart and strategic decisions.

Now, the year is 2021... software is the backbone of every company. And strangely it's the ONLY department that DOESN'T have that visibility. That visibility and insight is the one thing that's actually scarce when it comes to executive team decisions.

So our ambition here was how do we actually change this? How do we actually make engineering leaders successful? How do we actually allow them the seat at the table to change the strategic conversation?

We HAVE to do better than, traffic lights and emojis, right? To actually communicate how engineering actually works. And so for us, that became a very simple mission, which was how do we connect engineering and business.

Patrick: That was a special segment with our friends and sponsor Jellyfish.

We're big fans of how they empower engineering leaders to align engineering work with business priorities and enable better strategic decisions.

To learn more about Jellyfish and how they can help you check them out at Jellyfish.co/elc

You can find their link in the show notes. That's Jellyfish.co/elc!

"Rage-fixing" & Eddie's breakthrough moment confronting fear of failure at Gusto

Patrick Gallagher: Can you repeat the acronyms again?

Eddie Kim: Yeah! Yeah! "MTTR" - mean time to recovery over "MTBF" - mean time between failures.

Patrick Gallagher: That's great. So I think sharing those is a great transition because I think what I would love to dig into now is like the tactical, how, of how you made this pivot to change the organization from like a structural and operational level.

What was the "Ah-hah!" Moment for you as the CTO at Gusto, where you realized we need to make a pivot in our approach? And then what did you do as a result?

Eddie Kim: There were two aha moments for me. One was I remember this day very, very well. We had an engineering all hands meeting. And as usual, I was leading that meeting and I usually like to end my all hands meetings by just sharing a few thoughts that are top of mind.

And Typically, every month I spend a lot of time writing it down preparing... again, it goes to the polish that I put into these presentations. And for whatever reason, I didn't have that much time the night before. I think it just had too much work or something else going on. And I came in like pretty unprepared.

Actually I know exactly why now. I was actually working late in the office that night. And I remember as I left the office there was a team of engineers that were still working in the office, working on something. And so that kinda like stuck with me. Until the next uh, morning where I had this all hands presentations.

And I was kind of winging it and basically said, because all this, thing around like fear of failure and you know, having turned into this 800 pound gorilla that we always made fun of when we were a smaller ... was top of mind for me.

I don't remember exactly what I said, but I can tell you how it landed. It landed very negatively with most of the engineering team. The way it landed was that, because I also mentioned the, the team that was there late at night. And like said, "look at those people, that team that they're great!"

And the way it landed was that, "what you value is us staying in the office late at night..."

And then I said another thing around, like I used the word "rage-fixing". I wanted people to "rage fix" things. Which was kinda my way of... my intent there was trying to say, you know, get out of the myopic view. And if you see something even outside of the scope of your team ...what I really meant is something like, if you're passionate about something. Turn it into action. Don't let the boundaries of your team, hold you back. we're all owners here.

But it didn't land that way. .. "Rage-fixing" was definitely not the right word choice. And it came off as like, " just go, don't get permission from anyone else, like anti teamwork, just go in and, do whatever you want if you think it's right."

Obviously it was not a, not a good all hands. Definitely a very low moment. And I got lots of feedback, lots of conversation afterwards.

The interesting thing was that it did give me an opportunity to actually share what I really meant. I got people so mad that they want to talk much more about it. And so I had a chance to really first of all, apologize for like how, what I had shared landed incorrectly. But then also share, what's really been top of mind and what's really been bothering me. Other people would say, you know what, that's kind of what I've been thinking about too. Like, I'm so glad we're talking about this. So that in itself was like a kind of a metta way was a great example of how polish can sometimes get in the way of uncovering these sorts of things.

I definitely regret the way that I had shared things in that all hands meetings. But at the same time the silver lining there was because I was so unpolished, that it really did trigger a conversation across the entire engineering team of this thing that was top of mind that may not have been triggered or have like evoked such a strong emotional reaction had I been super polished and well-rounded and said it in a way that didn't really, you know, "agitate things" too much.

Now I'm not saying you should be just annoying and agitate things all the time. But I think there's a, and this that kind of learning of you don't want to be like, so polished that everything you say becomes so diluted . And you want to find a way to get the best of both worlds there. Like be direct, but then also, you know, you want to create an inclusive environment and one where people have a lot of psychological safety.

But that was one learning that from my own failure of that all hands, from my own lack of polish, I think actually came some really great breakthroughs there.

"Kicking the flipchart" and Eddie's breakthrough moment #2:

The second one was actually after that, I decided to have an offsite with my engineering leadership team. We decided to go to Denver, which is where one of Gusto's office is and we had an offsite there.

And true to form, I had planned out this two day offsite, down to 15 minute increments. We were going to kick it off with some opening remarks. We were going to brainstorm some topics. We would break out into smaller groups and people would brainstorm within those smaller groups. And then like 45 minutes later, we would come back together and share our votes and go on a board. And, everything was like super, super structured.

Patrick Gallagher: That sounds like a well facilitated offsite if I, you know...

Eddie Kim: very. Yes. Yeah. Agenda planned out. Everyone knows when to eat. Food arrives on time. It was like, perfect.

And interestingly, I actually... It wasn't me that gave the opening remarks but I had one of our engineering leaders share who had just joined some opening remarks. "But that initial, like block of time, which is actually meant to be only five minutes. Someone asked a question, we discussed it. It turned into 30 minutes discussion. And that 30 minutes turned into a couple of hours.

And all of a sudden my schedule, my perfect schedule of, how this offsite was going to run was just thrown out the window. But the conversations that we're having, the questions that were being asked were actually, fairly good. So I just thought," let's just let this run a little bit longer."

And there were moments where, you know ... Again, people sometimes said the wrong things. They rubbed people off the wrong way, but the thing that I really love about Gusto's culture is like strong sense of humility, strong sense of empathy. So, anytime someone... this is a term we use now, "stepped in it", like you just stepped in it. And you said something that you didn't mean to say you know? Retract it. Apologize . Clarify, and then move on with that, right? that was something that, happened, in this like several hour long opening remark.

And ultimately this, opening remarks, it turned into a discussion that happened the entire day. And nothing after the opening remarks, we didn't follow any of that stuff. But it was a really good conversation around this exact topic. Which is what I had the offsite originally for was, was around how do we increase our velocity as a engineering team at Gusto?

And at the end of the offsite, as I typically do, I'll ask for feedback on how do you all think that this offsite went. That is the one thing on the agenda that by the way we actually did do at the end, I asked people for feedback.

And honestly, I was expecting the worst. Because it was kind of a, it was disorganized. and people flew out there. They, took time away from their family. And I just thought, you know, in some ways I just wasted everyone's time. And what I heard was actually very much the opposite. People said for the first time, in a long time, I felt like we had really engaging, meaningful conversations about the right things.

And in fact, there was one person on the team that was still relatively new to Gusto and was actually, not sure if they had made the right choice in joining the team. And he shared that after this conversation "I'm like super engaged, I really understand where we're at and we need to do now. I'm much more excited than I ever was to be at this company."

And so it even had the effect of re-engaging people a little bit more.

So this is another example of how the polish, the structure, the fear of failure that I went in with, I think being okay with a little bit of going over time, letting people speak a little bit more directly about what's on their mind, versus what you have on the agenda. Things like that can actually lead to fairly big breakthroughs that you may not really expect.

If I measure it in terms of impact, it was probably one of the most impactful off-sites that I've ever had in my history of leading the Gusto engineering team.

So yeah, I think those are kind of two, almost meta examples, I guess? That you know, the polish, structure, the fear of failure can really hold you back. And if you're willing to be okay with the messiness and "step in it" a little bit more, but always try to recover as quickly as possible that meantime to recovery. You can get some really, really huge breakthroughs there. Like the same sort of breakthroughs that you would have all the time when you were a much smaller company.

Jerry Li: I can totally resonate the conference... we were working on a really tight schedule and there are a lot of risks o f can we deliver it from the engineering team. And actually by resisting that fear... there are issues... part of the craziness but eventually it come to a really good outcome.

But it's just really hard to make that earlier decision to take on that risk and resisting that fear. And that's, I think that eventually what innovation is about you just say, you got to try it . Be ready to fail.

Eddie Kim: Totally. Yeah. And I think often times the type of failure you have in your mind is much bigger than, than the failure that actually happens.

I think many high-performers are just perfectionists and they'll overweight the failures . When really it's not that bad. And so yeah, if you get a little comfortable with it...

Now, obviously there are, are limits to it. For example, like I mentioned, calculating payroll, paying people on time. There are areas of Gusto and areas of probably any company where you can't, you can't tolerate failure and you have to like really know where those exist in the company. But there is a tendency to take where that exists in the company... and then like that sets the bar for all other parts of the company.

And you don't want to do that because there are lots of places in the company where you can actually tolerate a wide range of, failure and, and it's actually better for the company because you can make decisions quicker, you could, move faster.

And, and also just from a, human psychology perspective, the engagement and the motivation that comes from fixing something wrong, I think is much higher than like, kind of getting somebody perfect and putting it out. So I think there's also kind of a human psychology aspect of this that manifests in just engagement and speed too.

Patrick Gallagher: Those were two absolutely awesome stories. I was wondering if we could deconstruct them a little bit... in those moments when you maybe have an unplanned or like the interpretation of what you said was wrong... How do you maximize that to then make it okay for people to have a more challenging conversation or to bring up things that are more critical to how the organization operates?

What are some of the principles at play there?

How to maximize unplanned or unintended crucial conversations

Eddie Kim: I think the most important thing is that fast recovery, right? and oftentimes these, you can't really plan failure, they just happen in unplanned ways, but when they do happen I think it really is all about trying to recover from it as quickly as possible.

So if you said something that you didn't mean to say, it's really just having the humility to say, "I apologize for that. That's not what I meant. And I could see how that my intent didn't match impact ." And then using that as a platform to have the actual conversation that you wanted to have. And when you can model that to others, then I think others start doing that as well. Right.

The real failure mode of this is when you mess up and you don't acknowledge that you messed up. People just dig into it more and more. Right. And they get themselves into deeper and deeper holes. And then that's like when actually failure becomes a real bad bad thing.

Once I realized this, I, I can't like not see it anymore. Customers. Right? Like you, screw up something for a customer. Right. And you fix it as quickly as possible. You provide them incredible service afterwards. And a lot of times those customers will actually be even more of an advocate for you than if you had not, you know, screwed up in the first place.

We see this all the time at Gusto, like oftentimes if a customer experience person at Gusto is talking to a customer, not always, but it means that the customer is usually stuck on something or frustrated about something, because Gusto is really designed to be self-service as possible. Not always a hundred percent true, but generally, it means that, you know, there's a frustrating experience there.

But then because we have such a strong service-minded customer experience team you ask the customer through a C-SAT survey or NPS survey, what they think about Gusto. And you'll see that it's actually higher than that of the customer that, you know, doesn't have any kind of. Interaction or any kind of like failure mode with your business. So you see it in like the customer interaction as well, that sometimes, fast recovery from a failure can really be a good thing.

Now, I'm not saying like, just make all these failures and recover from it obviously... That's, that's a bad thing. But it does open up these really interesting opportunities that make the company stronger and better.

Jerry Li: That probably means that what matters more than what actually happened is the intention because and what happened in often meeting, that was not your intention, sure there was a misunderstanding and you explain everything, Let people know what your intention was. then that come across really well.

And it's the same thing applies to example you had was the customer service conversation. People are focusing more on the intention versus the actual thing that it can happen, which leads to fear. I think that can be a useful perspective to have.

Eddie Kim: Yeah, totally. And that's the kind of the nice thing about humanity. I think everyone one knows that everyone screws up and nobody's perfect. And people can understand how someone else could mess up and make a failure. And if you're just upfront about it and can recover quickly from it, people are very, very understanding. And I think that's, kind of a beautiful thing that we have.

Jerry Li: Yeah. And that makes the organization more resilient to misunderstandings or failures like that. And over time it's just results a more effectively running team.

Eddie Kim: Right? Exactly.

Patrick Gallagher: of the things we've talked about so far, Eddie, you know, you talked about defining the acceptable and unacceptable failures. And then now we've talked about like a couple of different ways that like meantime to recovery and meantime between failures, what that looks like.

I think the mental model of meantime to recovery as the thing to focus on... It becomes so powerful once you've given people the boundary of " here's our unacceptable failures, here's, what's acceptable, but what's important is how quickly you recover to get there."

What you were talking about, the example with the engineering teams, that, that now impacts the products that you're building and the different things that you're doing within your teams.

Eddie Kim: Yeah, totally.

How to decide when you need to abandon the agenda and "kick the flip chart"

Patrick Gallagher: You brought up psychological safety. So I want to talk about that in a second, but this one really resonated with me when you're talking about the, like, "we need to throw the agenda out the window moment."

I used to work with college students and we used to call this the "kick the flip chart" moment, because sometimes like your message is no longer resonating with your audience. So you have to have that moment where you have to completely abandoned ship or abandoned the plan. And...

Eddie Kim: mhmm

Patrick Gallagher: ...the kick, the flip chart moment comes from, you know, a guy who actually kicked the flip chart down in front of a bunch of college students. And so it became iconic. (Eddie laughs) But you know, this was a real kick the flip chart moment for you, where like, "You know what we have this perfect agenda and we have to throw it out the window."

Do you have any considerations for somebody who is leading a team meeting or leading an offsite for their team... how to make that decision of when you need to abandon the agenda and like lean in or dive in to that conversation ? How do you make that decision as a leader?

Eddie Kim: That's a really good question. I'm thinking about the offsite that I was talking about. In that case, it wasn't a like specific moment where I was like, "we're throwing out this agenda." It was more of "let's just see where this goes for another 10 minutes and then I'll probably call time and then 10 minutes past, let's just, this is going well. let's see how it goes." It sometimes happens a little bit more incrementally and I think you make these course corrections along the way.

I think it's a great visual, "kick the flip chart!" I just don't know if it happens. Like, you know, (Patrick laughs) Ah! Like "We're, we're pivoting!" Like, I mean, yeah, that does happen sometimes. And I think those are super, you know, bold decisions and I think there's definitely a time and place for it. But I think in reality, if I'm really like, looking at it from a pragmatic lens, I think you tend to be much more incremental about it and course-correct as you go along.

And then at some point when you're, I guess when you're course correcting enough, you're realizing, okay, now I feel really good about this direction and we can like totally commit to this. And then kind of a big decision is made.

I'm thinking about like, big strategy decisions. You don't just wake up one day and say, this direction that we're heading as a company, isn't the right direction. And so we're going to pivot, right.

That makes a nice story on Tech Crunch and the Big Pivot and, definitely that that's how it is written about. But in reality, like behind that there are months and probably years of like trying to say, "okay, is this working or not? We think it is. But let's try this other thing. This thing has a little bit of, promise to it. Let's invest a little bit more..."

And then at some point hits some kind of like tipping point where we're, I guess you do kick the flip chart and you're like, okay, we've made enough decisions along the way that give us confidence over the past 12 months that this new decision or direction is the right way. And so we're going to make that call . But you, you have to take some time, I think, to build that confidence.

Patrick Gallagher: Great. Thank you.

How psychological safety can make your team more resilient to fear of failure

I was hoping we could talk a little bit about psychological safety. Cause you mentioned that being a big part for having these really authentic and important conversations with your team.

Cause I think about like when you remove fear from the equation and you create that sense of psychological safety, it has a huge impact then on the output of the team. So can you speak a little bit more about like what psychological safety is and how you cultivate that or create that in your team or organization?

Eddie Kim: Yeah, I think my view of what true psychological safety has actually evolved quite a bit over time. When I would lead a group maybe I'm sharing like the plan for the quarter or you know, what are our top priorities and it's packaged so well, and so thought out that, you know, at the end of meetings, as I always do ask for feedback on like, "What do you think about this?"

And everyone around the room. You know, will nod their head in agreement. And I feel really good about that. And that I thought was, psychological safety when everyone in the room is kind of agreeing with each other, honestly.

And over time, what I realized is I think the true, like deepest sense of psychological safety is when people feel comfortable disagreeing with you and speaking respectfully how their thoughts or what the data that they see, leads them to a different decision. Or if they feel comfortable saying "the thing that you said here, didn't make me feel like this is an inclusive environment." They feel comfortable vocalizing that and challenging you... I think that, and people have like that level of feeling of safety with each other. That to me is like the deepest sense of that. Of true psychological safety.

I feel like if you've created an environment where, people can yeah, just speak up. Especially upwards and do it in the open. Again, it has to always be in a respectful way. I think that that's, an amazing environment that you've created there.

And so now I, I sometimes feel like if I find myself speaking, the whole meeting and everyone is like nodding their head in agreement. Nobody's really, you know Chiming back... which by the way is actually a lot harder to know when you're in a zoom environment, because people like mute themselves. Right? So oftentimes you will say something and you don't get the same reaction . At the same time, you don't want to have everyone unmute either.

So this is actually I'm going on a tangent now, but it has led to some interesting, the technology has led to some interesting dynamics in terms of the feedback loops that you get. but when basically everyone is kind of like nodding their head, nobody unmutes and basically, I'm... and I find myself like 95% of the time in that meeting. I'm the one that I'm the only one that spoke. I get a little worried actually that like, "okay, is this group, have I done something to not create a true psychological safety? What are people thinking that they're not actually telling me?"

But then when I have uh, you know, when there's a good discussion, engagement, and challenging and resolution . then I feel really good about that. I feel like that was a really good meeting where everyone had a good sense of psychological safety. And generally the outcomes that come out of that sort of meeting, I think are much better than the ones where, I find myself or some, one person finds themselves speaking the whole time.

Patrick Gallagher: Absolutely. What are people thinking that they're not actually telling me? And then that being the access point to a high quality high output meeting?

Eddie Kim: Yeah, Yeah. And I think one concrete thing to look for, like, are you speaking 95% of the time? Are people you know, just not in their head in agreement? OR are they actually, asking even just, clarification questions so they can really understand you? Or are they pushing back on this? Are they kind of trying to point stuff out you may have missed? Or are they saying, "have you thought about this?" Then I feel like that I've done pretty good job of creating a psychologically safe environment.

Patrick Gallagher: Absolutely. Jerry, Do you have any final comments or questions for Eddie?

Jerry Li: Not really. I think you guys had a really fascinating conversation. I learned a lot actually instead of interviewing.

Eddie Kim: Thank you. This was a lot of fun. And yeah, I really enjoyed talking to you all too as I always do.