february 2003 teams: human nature and human resources building, managing and motivating douglas...

February 2003

Teams: Human nature and human resourcesBuilding, managing and motivating

Douglas Abrams - Parallax Capital Management

2

6XXXX


Teams: Human nature and human resources

The team is the most important thing

Building teams

Managing and motivating teams

3

6XXXX



An excellent team can succeed with a less-than-perfect idea

A poor team will fail no matter how good the idea

Management team

Advisory board

Strategic partners

4

6XXXX


Describing the team in the business plan

Organizational structure

Backgrounds, experience and expertise

Balance

Needs

Founder/CEO and management team

5

6XXXX


What do investors look for in a team?

Completeness

Competence

Maturity

Initial team should be prepared to step aside

6

6XXXX


The more complete the team; the more likely the start-up will get funded

Investors don’t like to see holes in the management team

Especially marketing, sales and business development

Finding key people takes time

Slows down introduction of product

If team is not full; acknowledge and show willingness to correct and ideas for filling

7

6XXXX


Completing the Management team

Look for diversity of functional skills, backgrounds and experiences…

…to achieve complementarity of competencies and encourage creative tensions

…but maintain cohesiveness through shared vision and compatible styles/chemistry

Filling in the Key Roles: – CEO– Directors and Advisors– Functional VPs (CTO/VP Engineering, VP Marketing/ Sales, VP

Operations, VP Finance)

A/P Wong Poh Kam - NUS

8

6XXXX


The core team

Founders

Additional talent

Investors like to see that core team have worked together before

Reduces risk of team problems

Reduces time spent building a culture

9

6XXXX


The Team Building Process

The Founders

Allocation of Roles (directors, general mgt, functional mgt, core operational roles)

Bringing on board Investors & Mentors

Completing the core Management team

Strengthening the Board of Directors

Leveraging an Advisory board

Stepping aside for more capable peopleA/P Wong Poh Kam - NUS

10

6XXXX


Management team members

CEO

VP Marketing & Sales

VP Business development

CTO/CIO

VP Production

CFO

11

6XXXX


What is the best sequence to add people?

Technology leader - inventor or leader of engineering– Must have strong skills– Investors prefer a prior VP or veteran leader of teams

Experienced CEO

VP of Marketing– Should be part of creation of first product

VP of Business Development– May double as VP Sales or Marketing in early days

VP sales

VP Manufacturing or Operations– Must be on board in time to ship first product

12

6XXXX


CEO - Chief Executive Officer

Officer of the firm principally responsible for the firm's activities

Creates and communicates shared strategic vision

Defines the business

Defines corporate culture

Final decision-maker on all important issues

Coordinates direction of other executive officers

13

6XXXX


CEO - criteria for success

Primarily responsible for the overall success or failure of the idea, the business and the strategy

Effective formulation of business definition

Effective development and communication of the firm's vision

Ensures consistentcy and quality across the business plan

Competitive advantage

Makes the sale

Can share other function ("Acting CEO")

14

6XXXX


CFO - Chief Financial Officer

Responsible for handling funds, signing checks

Keeping financial records

Financing and financial planning

Criteria for success– Thorough, realistic and professional financial plan and

projections– Understanding of financial markets and company finances

15

6XXXX


CFO issues

Strong CFO/VP Finance is best for entrepreneur– Can negotiate fund-raising terms, degree of control over

spending, choice of investors, etc.

VCs may prefer weaker CFO in order to retain more control over the company

16

6XXXX


CTO - Chief Technology Officer

Responsible for technology strategy and implementationInternal and external if technology company

Criteria for success - all– Internal technology solutions are efficient and cost-effective– Product comparison matrix

Criteria for success - technology product– Design– Research and development– Product development– On schedule and under budget

17

6XXXX


COO - Chief Operating Officer

Responsible for day-to-day management and operation of the firm

Critiera for success– Firm runs smoothly, efficiently and cost-effectively– Purchasing, manufacturing or processing– Operations– Distribution– Service– Channel management

18

6XXXX


VP Sales and marketing

Responsible for the formulation and execution of the marketing plan and sales strategy

Criteria for success– Well-thought-out and effective marketing and sales strategy and

plan– Market and competitor analysis– Positioning theme– Competitive advantage– Product comparison matrix– Pricing, branding, advertising and promotion– Sales strategy and sales force

19

6XXXX


VP Business Development

New customers

Strategic partners

Potential investors

20

6XXXX


Beyond the management team

Other key employees

Board of directors

Advisory board

Professional services: accountants, lawyers, etc.

21

6XXXX


Role of directors and advisors

Represent investors and founders’ interest

Enhance credibility

Tap their experience, domain expertise, and network of contacts

“Sounding board”, coach, advice on key decisions

“Reality-check”: alternative, more detached view; avoid blind-spot

May play interim management role while looking for the suitable candidates

Oust and replace management if found ineffective

Advisors do not have the fiduciary responsibilities and power of directors A/P Wong Poh Kam - NUS

22

6XXXX


Strategic partners

Added sales channel

Industry buzz

Additional credibility

Access to expertise

Possible financing, possible exit strategy

Complementary technology

Improve branding and marketing, enhance value proposition

23

6XXXX


Consultants and contractors

Startups are short of talent

Contractors and outsourcing fill in missing skill sets at reduced cost

Enginerring contactors

Public relations

Recruiters

Acting executives

24

6XXXX


Attracting VCs without prior experience

Chances of raising funds increased if founder has prior start-up experience

Most start-ups led by people without years of experience

Be prepared to hire an outside CEO

VCs can help to find a CEO

25

6XXXX


Technologist or student starting business

Get started

Complete business plan

Attract key management talent later

26

6XXXX




Building teams


27

6XXXX


Don’t settle for average employees

Consider marginal quality of each new employee

Each new employee must be of higher quality than the current average

If marginal quality is below average quality then average quality will decline

Only if marginal quality is above average quality then average quality will continue to increase

28

6XXXX


Hire the best people you can find

Better people; less risk

A players attract more A players

Top-quality people can emerge from bankruptcies

Top managers from defunct companies

“Better to hire a leader who learned from mistakes than someone who was just lucky”

29

6XXXX


Pick outstanding talent

Will represent company to investors

Must make an excellent impression

Track records

Skills

Depth of experience in areas important to SCA

30

6XXXX


Where to find the right people

Strong ties and weak ties

Friends, colleagues and personal recommendations

Advisors and networks

Employment agencies

Headhunters for senior positions

Advertising

Job posting at schools


31

6XXXX


Recruitment

What kind of person do you want?

Who would be the ideal person for this job?

What background?

What experience?

Career goals?

Why would they want to join?

Compensation?

32

6XXXX


Finding and retaining the right people

Specific technical skills, which are the least important characteristics to look at in hiring technologists are often the most heavily weighted in hiring decisions,

Most important characteristics in technology people are: intelligence, interest in the business, teamwork, good attitude.

33

6XXXX


In reviewing resumes, look for:

Logical progression of responsibility and level

All transitions explained

Consistency and direction

Look at achievements, not just responsibilities

Domain knowledge or not

34

6XXXX


Look for well-rounded employees

Extra-curricular activities

Community activities

Artistic achievement

Language skills

Sports

35

6XXXX


Try to look beyond the resume

What are they passionate about?

What is their potential?

What makes them special?

Look for people who want to work for a start-up, small company, entrepreneurial

36

6XXXX


What qualities to look for in employee

Intelligent and good creative problem-solving skills

Highly motivated and self starting

Appropriate risk profile

Focussed

Good fit

37

6XXXX


Before the interview

Shortlisting

Preparation

Format

What questions do you want to ask?

What do you need to tell the candidate?

How should you assess the interview?

38

6XXXX


In the interview

Have more than one person conduct the interview

Standard questions– Where do you want to be five years from now?– Why do you want to work in this industry/company?– What three accomplishments are you most proud of?– Teamwork-related

Tricky– Creative problem solving– Estimation questions

39

6XXXX


Good candidates will ask their own questions

What will constitute successful performance?

What are your biggest challenges going forward?

What do you like the most about working here?

40

6XXXX


After the interview - make the decision

Right skills? Personal qualities? Good fit?

Have they done their homework?

Best compared to the rest?

Look for red flags in the CV

Passing on good candidates hurts less than hiring bad employees

Follow up with offer

41

6XXXX


What does “fit” mean?

Do you want to work with them every day for the next three years?

Will they easily fit into corporate culture?

Will adding them the average performance of the team?

42

6XXXX


Do you like the person? Are they:

Intelligent?

Enthusiastic?

Passionate?

Sincere?

Do they appear to like you?

43

6XXXX


Admissions mistakes

Settling out of desparation

Ignoring red flags

Lawsuits and legal entanglements

44

6XXXX


Lawsuits and legal entanglements

Investors do not like lawsuits or even the possibility of legal issues

Make sure employees get out clean

45

6XXXX


Make sure employees got out clean from previous employer

Take nothing with you

Take no notebooks, meeting notes, schematics, drawings, business plans, or portions thereof

Make no copies of anything, not even magazine articles with your handwritten notes in the margins

Tell your supervisor the whereabouts of any electronic information storage devices that you had access to or used

Do not write any portion of the business plan until well after you have left your employers

Do not create even the appearance of taking anything with you

After leaving your employer, have your lawyer write a letter to your former employer stating your plans to start a business and asking what specific proprietary information the employer may feel you possess

Talk to no one from or at your former employer until your lawyer gives you the all-clear

Nesheim - High Tech Startup

46

6XXXX


Remuneration packages

Salary

Stock options

Profit sharing and bonus schemes

Pension plans

Commissions

Cars and travel expenses

47

6XXXX


Packaging the Offer

Pay– Salary + Performance Bonus – Signing bonus

Generally low to conserve cash, but made up with...– Stock & stock options– Up-front stock offer– Stock options & vesting schedule/buy-back conditions

Other benefits– Generally non-existent/lower for start-ups, but should look at “Learning

opportunity” and “Greater challenge/ excitement factor”


48

6XXXX


Stock Options

% of stock reserved for non-founder employee stock options

higher for more knowledge-intensive start-ups

split between founders, key employees (CEO, VPs) and other employees

Incentive stock options vs. nonqualified stock options

Vesting & Buy-back conditions

Stock option cuts both way: above vs. under water

trend in Silicon Valley of giving stock option for not just employees, but for all kind of services, has been reversed after the Nasdaq meltdown


49

6XXXX




Building teams


50

6XXXX


Team building principles

Effective corporate governance– Separation between ownership and management, strategy and

execution– Alignment of incentives – Accountability to stakeholders

Effective management structure– Build chain of command – Strategic direction – general mgt – functional

mgt – core operations – Overlap mechanisms for cross-functional teamwork– Extend shared vision from the core to embrace the new, create

corporate culture around core values


51

6XXXX


Organizational structure for a new venture: some practical issues

Breaking the “catch-22” vicious cycle: Which comes first, the right people or the money?

If you have two “lines” of business, do you structure it as one or two companies? A holding company with two subsidiaries?

Asset-light organizational design strategy: – Outsourcing operations wherever possible– Managing external partner relationships vs. organizing internal team

members– Building trust through non-binding relationships before inviting to join

the organization


52

6XXXX


Managing people

Management theories– Traditional hierarchical structure– People-oriented structure

Motivating factors

Groups and teams

53

6XXXX


Traditional hierarchical structure

Assumption that people do not want work and have to be made to do so through coercion, control and threats

Motivation: pay and the stick

Status demarcation between management and workers

Clearly defined, task oriented roles, little job flexibility

Jobs tend to be repetitive

Most management effort spent on fixing things when they go wrong - management by exception

54

6XXXX


People-oriented structure

People naturally want to work but are prevented from doing so by the organization

Given a supportive environment, people will seek and accept responsibility and will control their own work when they understand and are committed to common objectives

Motivation is carrot or reward

Flat management structures, participative and inclusive

Little demarcation between workers and management

55

6XXXX


Differences in the structures

Hierarchical structures have poor internal communication and are slow to adapt or change

People-oriented structures have good internal communcation and adapt well to change

Most successful, knowledge-based businesses are people-oriented

56

6XXXX


Maslow’s hierarchy of needs

Physiological

Safety and security

Social and affection

Esteem & status

Self

actualization

57

6XXXX


Management structures

Hierarchical– Authoritarian, like the military– Vertical communication OK; horizontal poor

People-centered– Matrix structure

58

6XXXX


Groups

Definable membership

Group consciousness

Collective purpose and identification

Interdependence

59

6XXXX


Developing a team

Forming

Storming

Norming

Performing

Adjourning

60

6XXXX


Networking is critical for successful teams

Failure to network can create:

Inter-group hostility

Insularity and inward thinking

Not invented here factor

61

6XXXX


Managerial styles

Authoritarian, autocratic– Solve problems alone– Dictate decisions

Consultative– Discusses problems– Makes decisions

Democratic, participative– Chairperson– Agrees problem– Creates consensus

62

6XXXX


Other important management issues

Communication– Poor communication is a major cause of management failures

Meetings– Usually a waste of time– Brainstorming– Formal meetings– Board meetings

63

6XXXX


Performance reviews

Conducted regularly between manager and employee

Self-assessment - 3+/3-

Manager assessment

Key objectives

Development plan

Action steps

64

6XXXX


Problem situation interviews

State the problem

Ask the employee to explain their side and explain circumstances

Announce formally the findings, any warnings

Work on a resolution and support needed

Follow-up actions and dates

65

6XXXX


Managing Exit

Safeguard Conditions in Employment Agreement– vesting schedule, buy-back terms on stock options– non-compete agreement– non-disclosure agreement

Assignment of invention

Disclosure of invention pre- and post-employment

“Alumni”-Network Building

Exit interview closes existing relationship amicably, minimize litigation risk and cost

Turn employee into independent contractor relationships

Leveraging ex-employees for business contacts, partnerships, staff recruitment, etc.


66

6XXXX


Motivating & Retaining Employees

Visionary leadership

Stock Options and other Performance-based Reward System

Actual Growth Performance of the Company: Keeping the Vision Alive

Corporate Culture: How to make your company a “great company to work for”

“Room to Grow” for Employees: Need to Balance Internal Promotion vs. Bringing in External Expertise


67

6XXXX


Effective management

Require that they understand both the business model and the technology vision for the firm

Give them ownership of their area

Provide them with an attractive career path

Support them when things go wrong

Promotion criteria in many organizations almost guarantee that the wrong people will move to the top

68

6XXXX


Keeping people happy

Teamwork

Areas of responsibility

Integration into the business creates motivation

Mix of consultants and staff

Analyst program approach to career management

Chiefs who understand the technology: can ask the right questions and see through obsfucation

69

6XXXX


Corporate Culture: People work for start up for much more than money

Commitment model, not Control model

Share vision and beliefs

Emphasize Integrity as a counter-weight to Greed

Share fruits of success widely

Learning Organization Model: Share information, learn from mistake, encourage employee feedback

Make it Fun

Celebrate Every Little Success

Public Recognition of Efforts and Contribution (individuals, teams)A/P Wong Poh Kam - NUS

70

6XXXX


When should the Entrepreneur step aside?

Interim from the start until better person is found

Changing competency requirements as a venture grows: the skill to manage a $2 mil business is different from that of a $50 mil business, or a $500 mil. one

Start-up Excitement vs. Execution “Grind”

Planning management transition: The role of the CEO and the Board of Directors

Stepping aside: From CEO to functional, advisory or “evangelist” role

Stepping out: Serial entrepreneurship, CEO-for-rent, angel investing, venture capitalist


71

6XXXX


Exercise - Middle management muddle

Divide the class into three. One part is workers, the second are managers and last are senior managers. Senior managers can only communicate with managers, and managers can only communicate with workers. All vertical communication must be in writing, but horizontal communications, including those across teams, can be verbal.

On a table there are 144 majhong tiles, arranged into three piles of 47, with three extra tiles. Each worker team is assigned one of the tiles and tasked with creating an ordered row of 47 tiles. (the exact order we still need to determine - original idea is to have each team responsible for one of the suits (millions, bamboos or coins). No matter what the originally assigned order, we will switch this in the middle of the game.

We give the senior managers the goal - sort the tiles into ascending order. All tiles must be sorted. We give them the goal both verbally and in writing. The team that completes their row first will win, but only after all rows are completed.

Teams go in turns trading one tile for another, one tile at a time.

All communications with the CEO must go through Executive VP (you).

Although we won't tell the senior managers this until they ask, the way to claim one of the three extra tiles is to obtain an authorization memo from the CEO. Each team can only claim one extra tile.

It is not possible to complete the game, because one of the three extra tiles is blank.

The game is over when all three senior managers agree that there is no way to complete the task.

If they all agree, all the groups win.

If they don't all agree, all the groups lose.

72

6XXXX


Lessons learned from the game

Communication and teamwork in a hierarchical organization

Issues in vertical and horizontal communication

Team motivation versus group motivation

Thinking outside the box - realizing that the problem cannot be solved.

73

6XXXX


Sources and suggested reading

High-Tech Start-Up (2nd edition) by Prof John Nesheim

Lang, J.(2002), The High Tech Entrepreneur's Handbook, Ft.com

74

6XXXX


Contact us

Douglas Abrams

Managing Director

Parallax Capital Management

[email protected]

www.parallaxcapital.com

65-6238-3492, 65-9780-5381 (hp)

390 Orchard Road, #11-01 Palais Renaissance, Singapore 238871

february 2003 teams: human nature and human resources building, managing and motivating douglas...

Documents