Alignment in Business—And in Life
One of the biggest leaps of faith I made in my professional career was leaving clinical medicine, after nearly a decade of training, to pursue a career in investing and finance. After multiple rounds of interviews at the investment firm Sands Capital, I had the opportunity to meet and be interviewed by Frank Sands, Sr., the firm’s founder and CEO. Frank was a man of few words, but those words never failed to be impactful and inspire reflection.
Generally, applicants are asked why they’re interested in the firm and, broadly speaking, the overarching industry. In my naïveté, I turned the tables and asked Frank that very question: “Why do you like your industry?” I had some preconceived notion of why people went into long-term concentrated public equity investment but was unprepared for Frank’s answer.
True to his terse but trenchant nature, he answered with a single word: “Alignment."
At that moment, his answer was perplexing. He had built a $20 billion empire, and his motivation was alignment? Alignment is what he loves about his work? Possibly overstepping my bounds, I asked him to explain himself.
After a short, who-does-this-kid-think-he-is pause, Frank explained that in the investment world you’re often at odds with both your clients and the companies you invest in. Incentives can differ dramatically, and sometimes the divergence is heavily baked into the deal at the outset. For the business he built, the alignment was both natural and intentional. Clients, the firm, and portfolio companies were in lockstep with each other by achieving the same desired outcomes—they all won together. Sands made money when their clients made money, and their clients made money when their portfolio businesses made money. It was an iron link bonding the value chain together as partners.
Although I intellectually comprehended what Frank shared with me, my career has been a constant reminder of this simple, one-word lesson. Many of the most challenging situations I’ve found myself in, both professionally and in life, were a function of misaligned incentives. In business, this includes different classes of investors being remunerated differently based on their share class or scale of investment; carve-outs for management teams that allowed them to be generously remunerated for an investment even though investors got wiped out; board directors and management members who had familial ties to each other and subordinated their fiduciary duty to the company to their personal relationships; independent directors who wanted to primarily see great science come to fruition, even if the remuneration wasn't compelling; financial investors who wanted to squeeze immediate excess returns out of a business opportunity, rather than invest in long term research and development. The list goes on and on.
This is a reality in business. Some investors have shallow pockets and want to avert future financings that wipe them out; others have plenty of capital and are trying to capitalize on opportunities to aggressively deploy it in the best assets, independent of the financing needs of the business. Some board directors are the paragons of transparency, communication, and integrity; others are devious, tight-lipped, and flippant.
On the flip side, some of the best board, business, and investment dynamics that I’ve seen over the years had an optimal level of alignment between principals. The CEO had a strong sense of obligation to remunerate the investors who backed her. The investors were openly grateful to have strong management and wanted them to be appropriately compensated. The investors predominantly shared the same economics and structural rights, which naturally helped align their decision-making. The independent investors joined out of deep conviction in the business, and an understanding and agreement that the objectives of the board aligned with their own. Not only were these situations the ones most likely to lead to successful outcomes, but they were also the most enjoyable—not something that should be readily discounted.
How often do you ask yourself, “Am I aligned with the people that I collaborate with, work for, or live with?”
Probably not enough. So, give it some thought. How well aligned are you with your boss and her aspirations? Does she want to see you succeed and earn a promotion, or is she indifferent to your growth and long-term potential? How well aligned are you with your colleagues? Are they supporting your success, neutral to it, or trying to undercut you? If you’re in a serious relationship, how deeply aligned are you with your partner? It’s great to find them attractive or compelling or funny, yet are they deeply aligned with your goals in life? With your values? Will they work in parallel with you? Or against you?
In my experience, working, leading, and living with alignment is critical to positive outcomes. Yet more often than not, we avoid explicitly discussing alignment. Wouldn’t it be worth it to communicate your aspirations with the most important people in your life? Wouldn’t it be worth it to hear and understand their aspirations, and ascertain whether they comport with yours? Are you on the same page? Or are you pushing in different directions, with different goals, expectations, and intentions.
All too often in business, we analyze the tangible qualifications of individuals, rather than their motivations and intentions. We look at their degrees, their financial returns, their sales numbers, their previous number of reports, and other supposedly concrete metrics. But this is a miscalculation—one that invariably costs us later.
I was fortunate that Frank Sands Sr. and his son, Frank Sands Jr., believed in alignment. I gave it much thought when availing myself of the honor of joining their firm, and they certainly prioritized it when bringing me on board. It took me many years from conception to raising our first venture fund at Sands Capital Ventures, a franchise I co-founded with Frank Sands Jr. Our ability to withstand challenges, setbacks, and years of uncertainty was predicated on a shared and aligned vision. We knew what success looked like and what it would take to achieve it. We were aligned on the path and our shared intention to pursue that path together. This led Frank to not only contribute his own capital, but it inspired other firm partners to invest. Ultimately, we brought together a world-class group of sophisticated internal investors in a formal fund, who shared a vision and a common path to success.
Alignment truly was the essence of my experience at Sands Capital.
When I make decisions, I’m mindful to consider alignment. When things go sideways, professionally or personally, I make a conscious effort to identify where the misalignments exist, so I can take corrective action. Northpond currently holds sixty board seats, providing ample opportunity for observing people talking past each other—two different people wanting entirely different things and never prioritizing on how to best align. It’s often a case of who can jam what down the other’s throat based on contractual rights, intimidation, or force of personality. This approach usually fails and is always karmically impaired. However tenuous and contrived, I do my best to identify and foster points of alignment, to find a journey that we can take together that reinforces our shared values and objectives.
Many years later, I interviewed a candidate for a job at our firm, Northpond. As chance would have it, she turned the tables on me and asked, “Why do you like your industry?”
As you can probably guess, I didn’t hesitate in my response.