Why Product Investment Matters

What happens when product leaders prioritize profit over long-term value? 

In this episode, Michael Nierstedt shares lessons from more than a decade building payroll and HR technology across companies like Gusto and Paylocity. He explains why product investment drives competitive advantage, why product managers must think like sellers inside their organizations, and how real influence comes from delivering value in production.

The conversation also explores customer research, the realities of building AI-driven products, and why the next generation of product leaders must learn to delegate, coach, and empower their teams. 

Transcript

SPEAKER_00 0:00

Ultimately, investment is where you're going to drive the most value into your product. And if you just aren't spending the money, you're not going to be delivering value to the customers. And I think there's some other aspects to that too. It's not just the gross amount that you spend, but how focused you are with that spending.

SPEAKER_01 0:17

Hey product rebels. Welcome back to another episode of the podcast. Today we're joined by Michael Nested, a product leader who has spent over 15 years in one of the most complex and deeply regulated corners of FinTech, and that's payroll. Michael's a certified payroll professional who has lived and breathed the space across companies like Gusto, where he helped scale payroll and tax products from 7,000 customers to over 70,000, and Payloadine, where he led product leaders across more than 20 products and helped the platform scale to 5 million users. From there, Michael continued to specialize in payroll and HR offerings, whether serving small businesses or offering global services. Now Michael is channeling all of that deep domain expertise into a new venture in European payroll. We're so excited to learn how he thinks about product. Welcome, Michael.

SPEAKER_03 1:19

Welcome, Michael. We're so excited to have you on the show today. One thing we always start our conversations with is really just asking you, how do you define a product rebel? What does it mean to you?

SPEAKER_00 1:31

Yeah, so for me, I think there's probably a lot of standard answers like you're the voice of the customer and everything. But I think there's always a pressure in organizations to try to increase profit margins and you know, increase that margin. And if you're increasing the margin, you're always taking it from somewhere. And usually it's from the customer. And so it's a two-fold thing. How do you make the most out of what you have? But also how do you fight for those things that long-term will bring more value to the customers and bring long-term success for the company? So that's where I've been a product rebel at times in my career is trying to take that long-term stance and push for more investment and more holistic solutions to problems.

SPEAKER_01 2:13

So interesting. I love that you brought in value and you talked about investment. And that's something that we really haven't explored too much. And I know that in our previous conversations, we explored like what does that mean to really drive for investment to back up the value that you believe you can deliver. So can you tell us a story about how that kind of comes to life?

SPEAKER_00 2:34

Yeah. So I guess to get on my little soapbox for a second, what I generally see is if you're making really high profit margins, unless you have a monopoly and you have monopoly protections, what happens is you end up being very vulnerable to disruption. And so an example I can give is if a number of years ago I was at a payroll company and there was a new entrant, not that new, but they've been around for three or four years, had a real initially rough start. The company was rippling, by the way. And they had just gotten a really large amount of funding and they were heavily investing in their product. And I actually said to our CTO at the time that, hey, I'm really worried about this because we don't invest like they do from a percent of revenue standpoint, but also just in a gross spend standpoint. And I think we're gonna quickly get behind them. And the most fascinating thing is he agreed with me. He agreed with me, but he also had to navigate the dynamics of the company, some of the challenges we had delivering on our RD's spend, right? Like maybe not getting the returns that they were expecting. And so it was just a very enlightening experience for me where it's, oh, people even see at the top that this is something that could be a real vulnerability for us. And I predicted that we would no longer be a growth company within three years. And the first year I was very wrong. I looked like the dumbest human being on the planet. I think they grew like 37% that year. But the next year they grew at 15. And I was like, okay, the product lifecycle is very predictable, I think, actually. And there's a lot that happens with execution and everything, but ultimately investment is where you're going to drive the most value into your product. And if you just aren't spending the money, you're not going to be delivering value to the customers. And I think there's some other aspects to that too that we can get into. But I think it's not just the gross amount that you spend, but how focused you are with that spending.

SPEAKER_03 4:29

Yeah, I love that. And that's where I wanted you to go a little deeper on, right? Because if you are a leader in the organization, you say, look, we're five points behind our nearest competitor in overall spend per revenue. That's definitely one indicator, right? But it's tough to understand the implications of that. And it could mean, oh, we just spend better than the other guys, right? Like we're just more efficient in our spend. So how do you get through that conversation in a way that is a little bit more actionable, right? So to help people understand truly the implications of their actions.

SPEAKER_00 5:01

Well, I definitely think you need to have a real vision on what you feel you can deliver and be as like data-driven on what the outcomes will be from a market standpoint and what business you can build from it. And this gets into GM stuff a little bit that I've done in my career too. But like I think being a product manager and a GM can be very similar. But I'll be honest, I don't know how successful I've been at that, always. I think that one of the most fascinating things to me about working in the corporate world is, you know, if you buy a house, right? People look at comps and everyone understands this and goes, okay, my house is worth$600,000 because these five houses are worth between$570 and$625. You may disagree with it a little bit, but you generally understand that you're in the right range, right? You show comps to business leaders and they go, Yeah, but that's not us. They just like ignore history, they just completely ignore it. And and the most fascinating thing to me is I went back to business school fairly recently, back in 2023. And I was like, Well, I must be stupid and I don't understand what's going on. And then I went to business school at Cornell and they were saying all the stuff I did. And what's funny is all my bosses went to Ivy League schools too. And I'm like, did they forget this? Or like, I don't know why, but I have seen that generally it's not really well received when you pull out comps, which is really funny because a lot of times they go, Well, we want to be a data-driven organization. And it's like, well, good news is all our competitors have 10Ks. I can look and see what they're spending, and they go, Yeah, but that's not us. We can do it more efficiently. Those companies are stupid. That's something I hear a lot. Like the disrespect that we can sometimes give competitors is really funny to me, especially when a lot of them can even come from those companies. But yeah, that's been a real I don't know if I've been super effective in that. I've tried to just bring it out as an opportunity, but your spend tolerance is, I think, very hard to move if you're on the product side a lot of times. Even if you're a CTO, the person I was talking to, right, agreed with me of the threat and the threat happened, right? And he couldn't do anything about it really either. And granted, we maybe wouldn't have been successful in building that value, right? And building those features that allowed our company to protect ourselves against rippling. And they would have forfeited profit. So I want to see the other side of it too and see where the finance people are coming from. But you are forfeiting that you're like, okay, we're not going to play the value or growth game, we're going to play the profit game. And you're moving towards that kind of part of the mature life cycle at that point.

SPEAKER_01 7:35

It's a spicy take, indeed. So it's interesting that I mean, maybe just exploring because I think there's places where the communication, the ability to get people to see a perspective. And I'm going a little bit broader now, but just the comps, right? But so much of our jobs is to bring people along. And I really appreciate your honesty in terms of like, hey, I don't think I was very effective in terms of this RD and comps and so forth. But what has been successful for you in terms of bringing people along? Because I think as we think about, gosh, if there's this like blind spot here, what kinds of things did you try? And again, ultimately, maybe it wasn't successful, but I'm just curious because you were talking about hard numbers, you're talking about data, and that's one particular skill, but there's a range of ways that we try and align to make sure that we're all moving forward. So just curious as to how else you see this.

SPEAKER_00 8:31

Yeah, I think that the big part is you need to go in knowing that you're new in an organization and you can't be like this ultra driver of change right off the bat. Maybe you can as an executive. I even think that's risky, though. I've seen that fail. I think you have to go in and prove that you can deliver value to the organization and execute. And then maybe you can push over time. I did not push back initially when I got to that company, but later on I had to because I was brought in as a GM. And so I had to drive a zero to one product. And that was challenging because I hadn't proven myself to the organization, right? So all I could really do is provide a vision and show the opportunity. And I think it was somewhat effective, but ultimately I think the best thing you can do, especially if you're in that like mid-level and you're not in a zero-to-one organization, is just building really great products that those features, those things that basically come out on time as much as they can at the value that you predicted it would get to and get the adoption that you generally expected. And I think that's the other thing, too, that's really interesting. I've seen the only other thing is make sure you're managing expectations appropriately. I've actually seen projects that were immensely successful hurt people's careers because they overpromised. And I've heard projects that underdelivered, but they were managed properly from a communication standpoint and they were viewed as successes. And I don't think there's anything wrong with that. Like people are trying to plan around these projects, right? And these new features. And so I think it's really just being a good steward within your organization. And I've definitely had success, but I've also had setbacks with that too. That would be my biggest thing is you got to prove yourself first and then pick your battles and stand up for those changes over time, I think.

SPEAKER_03 10:23

Yeah, it's tough, right? It's tough coming in as a leader. It's tough coming in as a leader when you're seeing some big opportunities or gaps in the case that you've talked about. I like this term steward. I feel like product leaders are stewards of the development resources and spending that the company does, right? And looking at each product trade-off and decision as a what is best for the company. So I'd love to just hear a little bit more about how you approach that and what are some of the practices that you use in being a steward of development resources and in many cases operational spend because what we do also impacts the end-to-end functional organization. But I'd love to hear your approach and some of the practices that work well for you.

SPEAKER_00 11:15

Yeah, I've learned this over the years from like colleagues I think of that are very effective. Some of them came from Intuit, by the way, which I know you were at in the past. I think for me, it's really making sure that you create the relationships in the company, you really understand the problems. Whether it's if it's an internal feature talking to your customer support teams, your process-driven teams that maybe are related to that product. And then if it's a thing that's around customers, talking to customers, also talking to sales staff is really important, even though I do think sometimes, especially in payroll, that the salespeople may not necessarily know what their clients want, they have to ultimately sell it. So what's going to work for them in this space is really critical to understand. And then I think the other thing too is in terms of being knowledgeable, is really looking at the data and the usage. One of the great things about payroll is its data is very static. And so you can really understand what are people being paid, how are they saving money if they're not, they aren't. But you know, like you can see that stuff. You can see health insurance and you can see how much people are correcting their payrolls and where are they having tax errors. You can see all that stuff. And I think you form all this to create a narrative, and then you really roadshow that narrative and what your ideas are and what your solution is with your stakeholders. And I think that's the biggest thing that helps you gain trust. And then seeing those, the biggest thing though, is getting those things out in production and showing that the value is delivered is the most important thing because there will always be people, especially if you're doing like big changes, that will be concerned that this feature will work as intended. And so I think it's always most important to get it out in production and demonstrate that it's working as expected. And then when it's not, that you're listening and able to pivot and not trying to defend yourself or your feature. I think that's the other thing I've seen sometimes is people will try to defend their feature a little bit. So I think that's like how I try to steward within the organization is just through a lot of communication.

SPEAKER_01 13:19

No, I love that. And clearly you've got such a strong focus on data. And you talked about the comps, the looking at the sales data, the customer data, and so forth. What about the qualitative side? What about more of the getting to know your customers? What does that look like in the world that you live in that seems so heavily driven by value, by spend, especially again in the industry and the type of product that you have? How do you balance that with understanding your customer?

SPEAKER_00 13:45

Yeah, so this could get a little spicy for me too. I think it's really important to talk to customers. I do, but I will say I'm in a space where the primary users don't really understand what payroll is. They're great at processing it, they understand the steps generally, but they don't really understand why those steps happen. And I've done hundreds and hundreds of interviews with users of two million worker companies, like the biggest companies in the world and little tiny small businesses at Gusto. And it's pretty consistent and it's a consequence of us unfortunately not training payroll staff over the last 25 years. And we have a real lack of domain expertise in the space. But I think like what I try to do is first off, there's always new product people I have to develop and coach, right? That don't come from this industry. I think the first thing is they do need to watch a lot of people run payroll, right? And really understand what they're doing. But for me, I'm maybe not doing that as much because I've done it so much now that I know the general gist of what's happening. And I've ran hundreds of payrolls myself now. But whatever I still do it always is when new features that are in beta or in prototype, I will heavily sit down with people and see how they are interacting with this product. As good as like screen capture has gotten and keystroke tracking and all that stuff, it's not the same as just watching someone, watching their face, watching their hands, like hearing them sigh, groan. Because no one likes doing payroll for the most part. So I think wanting to see that pressure, ideally seeing them in their element, seeing their manager be four hours late, approving their timesheets, like all that stuff, I want to be there for and see how the experience fits into that whole thing. Now, I feel like after doing this for a long time, I have a good inkling of what is needed. But at the same time, I'm always surprised when I sit down and watch someone use it. So that's where I still heavily do it on the validation side. And then with basically every product manager I'm bringing in, they don't have experience in payroll at all. So for them, they have to do a lot of it. And so there's a lot of ramping and shadowing in that case.

SPEAKER_03 16:00

Yeah, that's great. And you're speaking our language, right? Our goal in life is to have every product manager in front of a customer at least once, twice, three times a week. And that's sort of their MO. So let's talk a little bit about how we establish these best practices and scale them in our teams, right? One of the biggest challenges we see over and over again, especially in SaaS, is product teams don't get a lot of access to customers, right? And it might be because sales is worried about having a product person enter into the room. We don't want to mess up the relationship, or we don't want to impact our likelihood of closing the deal. Or there's look, let's just execute on what this one client wants, and that's what your job is, right? Take the order and run. Talk to us a little bit about what you have experienced over your time because what you're working in is exactly these situations, right? You've got the big client, you've got the users that are actually doing the payroll processing. What are some of the practices that you've been able to scale in the organizations that you've been in that actually addresses these challenges that we see over and over again with SaaS? So if I'm a product leader in the audience right now and I'm struggling with this, what are some of the practices they can learn from here?

SPEAKER_00 17:16

Yeah, this is probably somewhere where I'm not going to be as helpful. I've been very lucky, I think. My first company, which is a company called Symmetry Software, we had very big clients. And so we were talking to them all the time, right? And then at Gusto, we had a whole user research team and they really valued that. And so I was lucky there. And then at Palocity, I was lucky as well because we were mid-market, so we had a lot of access to the customers there as well during and after implementation. So I've actually had a lot of access to customers, but I know that in other industries it can be a real challenge. Like I knew someone who worked on like Google Hangouts, and it was like really hard to get that type of access. And I know it can be really hard in B2C. Unfortunately for me, I just always have been able to just ask. And then they're like, yeah, sure. As long as I took the initiative, they were fine with me doing it or my colleagues to do it. Actually, what's funny is probably the place where I had the most pushback was at Gusto, because the user researchers wanted to control it, but I never minded because there was a lot of good reasons why they wanted to control it because they didn't want to pollute the findings from the research. I think it was fine in that case, but that was probably the place where it went the slowest for me.

SPEAKER_01 18:30

It's interesting, isn't it? Because it's, I think even with access, and you could argue that B2C access is even easier than B2B sometimes. And what it really, I think, strikes is no matter where you are, there's a way. And what I like about what you said is that you just ask, right? The first thing is there's an expectation that of course you will. And it's not a matter of can I, it's a matter of like, how do I? And I think that attitude, no matter where you are, I think really is prevalent. And as a leader, stepping into this saying, and I know that Heather and I and roles that we've gone into, it's like, okay, let's go, let's talk to customers. So I think that, you know, you characterize it as luck, but I also think that the attitude of of course I'm going to talk to customers is really paramount.

SPEAKER_00 19:12

And one thing to add though, is one challenge I did see is the companies that sometimes will participate will not be representative of your client base necessarily. And so that was a challenge I would have. At Gusto, we would always get like startup tech companies. And I'm like, this is great, but this is a very small portion of the small business market. And so we were always working to try to move out of that. And that was a challenge at times. And sorry, I was just thinking about that challenge. I think one other thing you mentioned is I have also seen product people be afraid to ask or afraid to talk to customers. And what I would say is product people are in sales. You're maybe not selling, but you are selling. You're selling to the organization, you're selling to your stakeholders. If you're afraid to sell to customers, then I would be worried about your ability to sell to an angry executive or someone who has real stakes on you. And so I think the only thing I could say is you should be not just comfortable, but eager to talk to your customers. You should never be afraid of it.

SPEAKER_01 20:18

Absolutely. Yes, yes, absolutely agree. It's interesting. One of the things that we're starting to ask the folks, head and I've been working with companies like medium-sized, quite large companies, on bringing AI into their world. And how do you do it? I think we've done several webinars on this. So it's gonna be no surprise if you've been following us to understand that our position is like the foundations of what we think of as really strong product management are more important than ever. And so I'm curious as to how you've introduced this. I know you're AI first right now in the company that you're working in. Tell us a little bit about your take. Like, how have you seen this? This is all fresh. It's quite new for all of us. We're curious as to how different product leaders are viewing the introduction of AI and how they're thinking about this.

SPEAKER_00 21:05

Yeah, I think there's two camps that I'm generally seeing. I'm seeing one where it's like all bad and it's like a big speculation. There's another camp where it's like everything's going to be automated and we're going to have a major exponential productivity spike and gain from AI. What's interesting is I think even over the last few weeks with this whole SaaSpocalypse thing and all this other stuff going on, that we're starting to become a little more nuanced and we're starting to see some really thoughtful takes on AI. I think that I'm helping build a native AI, you know, uh global payroll provider right now. But what I will also say is our entire success is going to be reliant on experts being in our company and building our models compliance muscle and maintaining it in perpetuity. There will always be a huge amount of talent involved. The advantage that it gives us. Us is that we can turn around and get these tax changes and policy changes into our system quicker. And this is just kind of a dark truth in my experience in payroll. Engineers don't want to be changing taxes. It's not fulfilling. It's just not boring. Like at first, it's fun, but it's the code challenge is very low. And this is like a perfect use case for AI. And so I think like it's the takeaway. I'm being fairly myopic here with my experience, but I think the takeaway is first being realistic about the fact that AI does not have context. It does not understand how to build something novel. It just knows how to build the things that have already existed. And so if you build, let's say a CRM, Salesforce is a CRM. Let's say that thing spits out a CRM in two seconds, right? Is that valuable? I guess, maybe, but Salesforce already exists. And so what are you going to do? Charge$1 per month for it per user? Is that going to be your differentiator? So, like for me, I just think like it's really determining like what are you going to bring to the table that's novel? And then how are you going to bring context to the AI model to achieve this goal that you have? And there's some really interesting writings. I saw one from someone at Andreessen Horowitz, which I can't reference right now. I can't remember who it was. And also someone I know in the payroll industry who wrote about this. I think they released them on the same day, which is very funny, but they had the exact same take. But I do think it aligns to a lot of the things I'm feeling right now. It's like, how do you use this to kind of mold into your processes and basically your value proposition and what you're offering within your product line?

SPEAKER_03 23:42

That's great. Yeah. And you're on the cutting edge of product management right now, right? A lot of product managers are still trying to learn what's different about being a product manager and an AI-driven product than in the traditional state. And so I'm hearing context is big. How do we infuse the context and expertise into the model and ensuring that we're reflecting the expertise, not just pattern completion in the LLM, right? That's the difference.

SPEAKER_00 24:08

Yeah. Yeah, totally.

SPEAKER_03 24:10

That's on the sort of developing products and how product management is working in AI-driven products. Can you talk a little bit about what tools you're using to effectively accelerate the product development lifecycle? What are the ones you're using that you like that you maybe are finding frustrating? Talk a little bit about how is AI improving the product management or the product building process for you guys? And maybe what would you recommend against?

SPEAKER_00 24:38

Yeah. So I think the number one thing is for me, because we're still very early in our company, we have to understand the rules and basically just the inner workings of every country in Europe in terms of payroll and HR and labor laws and everything. And it's such an incredible tool for doing research. And maybe this is a spicy take, particularly when Google search is so poor now, in my opinion. It's like eight sponsors, and then there's two real look clicks. And so it's really degraded a lot. And I'm so thankful that these AI companies have come in because I don't know how I would have done this without it. So just doing research, it is an incredible tool. But of course, you should always make sure the references are real and it needs a lot of hand holding. It gives me wrong stuff all the time. Unfortunately, with payroll stuff, like these are tax agency websites, they're not usually indexed very well. They're structured oddly. A lot of their stuff's in PDF forms. The model fails a lot, but if you know how to navigate around that and ask the right questions, it's immensely helpful for that. Obviously, one of our head architects, they actually are coming from a pretty large HCM or HR company. I shouldn't use so many acronyms. But I think for coding, it's extremely effective. They're using Claude Code for that. I use Claude Code a little bit. I'm using Figma AI for all my prototypes right now, and it's very effective at that. But you need to hand hold it a lot. It gets a lot of things very wrong. And that's where the context thing is so important. And so when people say, Oh, we're going to build a payroll system in one week, like this whole SaaSpocalypse thing, it's okay. Like when you get this payroll system dumped off on you, how are you going to know how it's wrong? Even a thing as simple as, hey, give me a spreadsheet that has these eight data points on it for these 20 companies, it does it in a couple minutes. And it's incredible. It saved me two hours of time. I'm super appreciative. But three of the columns were wrong. And this was just like last week. And I fixed them, and it still saved me a ton of time. I'm still super happy this product exists. But if I wasn't there, what is the CFO going to just grab that and just have wrong information? And so that's where I'm a little more like, I don't think it's going to replace as many people as it says, similar to like when Excel came in in the 70s or VisaCalc or whatever. It's going to replace some jobs, but it's going to create new jobs as well as we become faster at some of these things. One other thing I would say too, though, is technical debt is technical debt. If you have an AI model right and launch incorrect features, it's still going to be extremely expensive to replace those things. So zero to one, it's still super important to get that right. And I think I saw someone, I wish I could give them credit, but they said basically, like, as product people, we're not going to be able to keep up with code that spits out in a minute or five minutes, right? Like we actually have to have correct requirements and specs and everything. And so I just think that maybe it's not going to be as fast as everyone says. I still think it's going to be two, three X faster, but I don't think it's going to be like people are launching SaaS companies in a week. And I am very sad as someone who's going in fundraising right now. I've heard people literally give this as like anecdotes. Hey, you're going to be able to build, sell a company in 12 months. And I personally don't agree with that.

SPEAKER_01 28:09

A little skeptical on that one. No. Yeah. But there's so much that you've said that that we're so much in agreement and just the scaffolding that's needed. And I would say that our jobs, which Head and I feel very good about, like just coming in and it's additional value. It's even more important to focus on the foundations. Gosh, Michael, we've covered a lot of ground. We've talked about delivering value, we've talked about getting commitment and when that's successful, and maybe ways not to do it. Seeing PM as a sales role, which I think is so interesting. I think that's a really interesting take. As we lift up, any last words in terms of advice that you would give someone coming in at this particular moment in time, given everything we've just talked about, especially with AI, any kind of like word of wisdom?

SPEAKER_00 28:51

Yeah, I'm actually going to pinpoint this to group PMs and directors and VPs. All of us need to delegate more to our people coming in and we need to train them more and level them up more. I think that it's the biggest opportunity. And in particular, when context is going to become more of a valuable currency, we need to level up the people that come in. We need to give them opportunities to grow and be successful. And I think one of the biggest struggles people have when they go from being a really accomplished principal PM to being like a group or director level PM is they don't want to let go of the control. What you got to do is you got to figure out how do you have training wheels on the bike, but let them go on their own. And I think that's the biggest piece of advice I'd have because I've seen a lot of product leaders really burn themselves out trying to do all the jobs. And they end up actually not doing as good of a job because they don't have the time to do all of that. And they need to empower these young people to really take that next step and expand their ability to produce.

SPEAKER_03 29:56

Such great advice. Thank you, Michael. It's been a great conversation. We've learned a ton and we love to talk about product management and the challenges that you all have as leaders or that we all have. So thank you so much for your time and we wish you the best of luck in this new endeavor that you are pursuing. And we'll see you around the product community.

SPEAKER_00 30:19

Yeah, thank you so much for having me.

SPEAKER_01 30:21

Thank you, Michael. Thanks for listening to this episode of the Product Rebels Podcast.

SPEAKER_02 30:27

If you enjoyed this conversation and want to learn more from Product Rebels from companies like Netflix, Amplitude, and beyond, please follow us wherever you listen to podcasts and join us for another impactful interview in about two weeks.