OpenTable's CEO on How to Dodge Company Breakdown as You Scale

OpenTable's CEO on How to Dodge Company Breakdown as You Scale

OpenTable's leader Christa Quarles explains how startups can spot and survive their breaking points.

Here’s the scenario: Management starts to lose control over a company’s work. Teams are operating without full context or feedback loops. Product becomes highly reactive. HR’s busy and top performers are looking to jump ship. Those who stay start to complain about the lack of direction. Nearly all technology companies — from small startups to big successes — have experienced at least one of these symptoms.

Take it from OpenTable CEO Christa Quarles. Over her career, she’s become virtually clairvoyant when it comes to identifying when, how and where companies are about to break — and early enough to save the day. Without question, Quarles comes from resilient stock. She grew up with six siblings, her husband’s a former Navy Seal, and four months after joining OpenTable as its CFO, she was named interim CEO and elevated to permanent CEO two months later.

In this interview, Quarles draws from a rich career across industries to share her war stories and hard-earned wisdom about how startups can survive their breaking points. She offers three strategies to fortify companies for change, and charts four key areas to monitor for fissures during growth: headcount, revenue, users and geographic expansion. With her predictive acumen and figurative duct tape at the ready, Quarles may be your company’s Nostradamus meets MacGyver.

Three Principles To Reinforce Your Company

From the vantage point of the C-suite across four companies in six years, Quarles has become an expert at picking out the sweet and weak spots in companies as they scale. Through recognizing those patterns, she has honed her approach to leading a company during dynamic and uncertain times. Here are the three pillars of her philosophy:

Reactively lean-in.

Most startups either proactively establish process (like standing meetings, systems, protocols) to support fast growth or push until something breaks and then assess if it’s worth fixing. Instead of swinging to either end of the spectrum, Quarles champions reactively leaning-in, which requires continuous calibration.

"If you try to put in a lot of process before any pain is felt, there won’t be the urgency to do anything. And you’ll drive away your engineers, who especially hate banal processes," says Quarles. "So you have to watch for the little cracks and nudges before the big hammer hits you over the head. Post mortem why things happen. Don’t write off edge cases as one-time exceptions. They are there to teach you and should make your antennae go up."

To strike the balance, seek better context on the current situation, not preemptive ways to change it. The former is a contribution, while the latter is inevitably about control. "At Playdom, we treated our LTV [life-time value] calculations like they were gospel. Driving new users through advertising was a big part of our business and we were spending a lot of money doing it," says Quarles.

Work toward — and be affirmed by — problems.

The success and survival statistics of startups are referenced often, but, according to Quarles, more attention should be paid to how often companies temporarily break, not completely fail. When a company — or anything — breaks, there’s an interplay of counteractive forces, and related movement, tension and traction. There’s an opportunity to re-channel or redirect energy. Failures become one-directional and are characterized by stagnancy more than dynamism.

"To grow, you must break. Like a snake shedding its skin."

"Get comfortable with breakages — it’s part of the process. They’re footholds, not pitfalls," says Quarles. "Build systems around them, so that you’re prepared to identify their origin, learn from and repair them. Then, the breakages won’t seem so scary or dramatic. They’re signals that you’re ready to take on something that, up until this moment, you weren’t able to handle."

Establish a clear line between the finder and fixer.

In Quarles’ experience, it is rarely the person who spots the breakage who fixes it. "Often it is the folks who are in jobs with a horizontal purview — such as finance, HR or the CEO — who can and should spot fissures," she says. "A CEO may have to dive in (depending on the size of the company) and outline the problem for teams, but ultimately the groups where the breakage is happening should be the ones to fix it. Chances are teams won’t get it right the first time, so watch and iterate. Post-mortem the tiny breaks and try a little process to offset the problem."

Know Your Company’s Fault Lines

For startups equipped with Quarles’ three principles around company breakages, here are the four areas to keep a close eye on for cracks. Because no two companies experience growth the same way, Quarles has discovered that asking the right questions periodically is the tactic, rather than prescribing generalized solutions.

HEADCOUNT

While at Playdom, an online social network game developer, Quarles saw the company through a $760 million acquisition by Disney, but not before she helped the startup buy and integrate seven companies — at an approximate clip of one acquisition per month.

One Monday morning, Quarles took stock. It was the first day for 30 new hires. And over the preceding six months, the startup had onboarded 500 new people. This rapid growth splintered their HR processes, finance systems and engineering org chart. Quarles has learned to ask the following three questions to identify any chinks in the armor due to ballooning employee growth.

REVENUE

Having held the post of CFO at several companies, Quarles typically has the strongest command of a company’s financial health and potential in the boardroom. Compared to increased hiring or skyrocketing user growth, breakages along the financial vector often occur due to the overwhelming absence of revenue. Here are the two key questions she keeps in mind regarding revenue to weatherproof for breakages:

GEOGRAPHIC EXPANSION

Given its broad network of restaurants, OpenTable is a geographically-defined business. More restaurants mean more revenue, but also more diversity in customer behavior. If OpenTable expands with its product in a regionally agnostic way, fissures will form and start to weaken the business.

Here are the follow-up questions to ask around geographic expansion to prevent any breakages across time zones:

USERS

When the number of active users goes through the roof, it’s cause for celebration only if the growth can be corralled. Quarles has been inured to breakage by user growth due to her background in the gaming industry. The best policy is to take small steps to build the system to scale. Quarles starts by asking these questions:

The Takeaway

When Quarles asks a company when it last broke, she’s not digging for vulnerability, but searching for accounts of strength. She gets concerned when she sees a company that has been around for decades that hasn’t experienced a breakage due to hiring sprees, dried up growth strategies, market expansion or extreme user gain or churn.

"It can literally be your company’s big break. And importantly it’s a chance to entrust and embolden your people," says Quarles. "They shouldn’t see a breakage as a failure, but as an eventuality during which everyone steps up as custodians of their corner of the company. As a leader, it’s your job to ask these questions before a breakage, so that your people are not only prepared for it, but also looking forward to the new growth it’ll bring."