A Word (or two) to the First-Time CEO

CEO signThe challenges facing first-time CEOs are numerous and are rarely discussed – it’s not a job that most folks train for. We have shared several posts with practical pointers on the topic in this blog before. Below is another take from an experienced practitioner.

 

Note from Paul: The post below was authored and submitted by Jill Ram.

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First time CEO? Take heed. How you behave, the image you project, the values by which you govern yourself, they’re all part of the recipe for success – or failure.

My father is a wise man. He once shared an expression with me that has remained at the forefront of my thoughts with every company I join: A fish always rots from the head. In other words, whatever a company’s successes, failures, or dysfunctions, they stem from the top. Show me a CEO and I’ll tell you exactly how a company is run and how its culture reflects it.

The CEO can single-handedly define the culture of a company. How he behaves, reacts, composes himself – even in the seemingly least noticeable of moments, the passing comments he makes, the way in which he interacts with employees, the level of empowerment he bestows on his people, the importance placed on accountability, performance, efficiency, and communication, all of it defines him. Since it’s inevitable that the CEO’s conduct permeates every crevice of the organization entrusted to him, in effect he or she defines the culture of that company.

The industry may dictate the pace at which a company runs, but the culture is the CEO’s domain. And while the economic climate may affect financial success, which may in turn impact the spirit and motivation of employees (especially when difficult and unpopular decisions have to be made), it is the actions of the CEO in those moments that are most impactful. And CEO behaviour does not have any less of an impact simply because a company is profitable. Profitability may allow a CEO and his employees to breathe easier, but it does not decouple the relationship between the CEO’s behaviour and that company’s culture.

Let’s look at how that CEO, maybe you, stepped into the role:

1. A vice-president at a large company does not a CEO at a small company make – necessarily.

I don’t know who conjured up the idea that a lower position in a large company automatically qualifies you to handle a more senior position at a smaller one. Responsibilities aren’t diminished at a smaller company. In fact, they are sometimes broader. So you were a VP before. You had P&L responsibility, you had a staff of over 100, you reported into a senior VP or an executive VP, or even the CEO. But were you ever directly responsible for shareholder value? How about the bottom line of the entire business or defining the company culture? Remember that reporting into a Board of Directors or a long line of investors is a much more daunting responsibility than you’ve likely ever had. All eyes are on you, including those of employees. It’s now up to you to both concoct the Kool-Aid and get them to drink it. Make sure to choose the flavour carefully.

2. You were already working for the company and were promoted to CEO:

I know – you’re still the same person you were yesterday, the day before you became CEO. How could it be that different? But it is. Because the reality is, while you may be the same person, you are now occupying a completely different role. And what employees see is a CEO, not you. What you say in the halls will get repeated everywhere. What you shared with some employees before, you’ll want to think twice about before sharing today. In as much as you trust those employees, you may now want to shelter them from the whole truth. You may have been the VP of Sales or the CFO yesterday, but today, you are the CEO. Remember it every day before you step foot in the office. Your responsibility to the company is greater now than it ever has been.

3. You’re a founder:

Ok, so you created a company from scratch. It’s your baby. You know what’s best. Perhaps. While you weren’t parachuted into the role, much of what is written above applies to you. You may have handpicked many of your employees and know them really well, but remember to draw the line at being their friend. Perhaps you try to foster the illusion of being their friend? If you can master that distinction, more power to you. But never forget that you have a responsibility to lead them. And shelter them.

The greatest advice you can heed as a founder, for as difficult as it may be, is to remove emotions from the decisions you make. Not realistic? Then temper them as much as possible and find that one person on whom you can rely to keep you in check. Oh, and know when to recognize that your company is now a real company and not the fledgling start-up you launched a few of years ago. Your leadership tactics will need to change.

If you accept the challenge of becoming a CEO, no matter how you assumed the role, remember to surround yourself with the best of the best, not yes men who will make you feel like a king. Kingdoms sometimes topple. Or get overthrown.

Know your strengths and weaknesses. Don’t try to run all aspects of the business; that’s what you have a management team for – assuming you built the right team. The right team will be comprised of competent people who will have the courage to tell you the things you don’t want to hear – in the moments you least want to hear them. Lose the ego and learn to appreciate – and act on – their input. Without them, you will never really know what’s going on at the core of your company, because everyone else will be too afraid to give it to you straight. People tell you what they think you want to hear. And if you think you can distinguish between the two, think again.

Knowing whom to trust, knowing when to make difficult decisions, learning to make those decisions void of your emotional attachment to an idea or individual, how you treat your assets, and the image you portray, are all critical to your long-term success and to the company’s. The culture you create, deliberately or otherwise, will have an immense impact on your company’s ability to attract, retain, and harness employees.

Yes, it’s lonely at the top. Make sure you are ready for the spotlight.

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Jill Ram is a Strategic Business & Human Resources Advisor with over 20 years of experience leading human resources for a variety of technology organizations in both start-up and mature phases.

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Forming the Founders Team – Agony and Ecstasy

partnerships_main_imageYears ago my very first startup had a Founders Team consisting of myself and three other colleagues who were fellow engineers with entrepreneurial ambitions. It failed miserably after 6 months of operation. One of the key reasons was that the founders were all very much alike: technical, with little business experience and big on personal ambitions. Several more startups later, here are a few key lessons learnt from forming founders teams:

  • Build your founders team on the basis of complementary skills resisting that certain comfort of having partners who are very much alike; above all make sure that everyone understands and is happy with his/her role –no stepping on each other toes or in-fighting.
  • Go slow with the selection of co-founders; realize you may need certain expertise, reserve the slot on the team, but don’t jump at the first candidate because you are in a hurry.
  • Seek a commonality of values and supporting personality traits rather than pure mastery of skills; you will likely be going through many conflict-ridden situations and spending, on occasion, more time together than in your marriage – make sure you get along!
  • Trustworthy, loyal, helpful, kind” – if you can get all of this and have fun together in spite of all the tribulations, you have found gold – hang on to it!

NOTE from Paul: The guest post below well illustrative of my points is written by Bob Hebert.

I have been in business partnerships, on and off, for over 30 years. I was thinking about this sobering fact and the challenges of partnerships as I read Paul Allen’s biography, Idea Man, in which he accuses former partners Bill Gates and Steve Ballmer of conspiring to dilute his equity in the embryotic Microsoft. His lament is not dissimilar to the issue at the core of the movie The Social Network where Mark Zuckerberg is charged with reducing his partner’s equity in the company Facebook without involving him in the decision.

Workplace partnerships are forged in times of unbridled optimism and stress tested every single day thereafter. These tests are born of success, failure, personalities, egos, jealousies, greed, market forces, competition and time. And in each instance perceptions of fairness are the scales on which the partnership relationship is weighed.  Does the equitability on which the partnership was founded endure, or do creeping imbalances, real or perceived, corrode the relationship?

Designer Coco Chanel was quite content to give 70% of her tiny fragrance business to her more experienced partner, cosmetics mogul Pierre Wertheimer. However as the Chanel fragrance became an iconic global brand, bitterness over the ‘unfairness’ of their respective equity positions destroyed the partnership and led to years of courtroom acrimony. Similarly, the value which Mark Zuckerberg’s assigned to his administrative and financial partner waned as the business grew and altogether more valuable counsel clamored for his affection. In the annals of successful businessmen, the list of those with at least one partnership they outgrew or which betrayed them is long and illustrious.

Intuitively, one would think that partnerships work best in Gilbert and Sullivan-like scenarios (though theirs broke up) where one partner’s lyrics marry magically with the other’s melodies. The early partnership of Joe Shuster and Jerry Siegel is another form of this where one wove the tales of the Man of Steel while the other’s drawings brought the comic-book character to life. As one person wrote “In such instances we have two masters who are playing a concerto. Neither is subordinate to the other; each gives what is original, but the two, while neither predominates, are in perfect correspondence”.

Such partnerships are common in business where one partner may be the technical or market visionary while the other focuses on execution (at Intel for example, it was said that “Andy Grove was the visionary but Craig Barrett made it happen”). Each partner is master of their domain with limited overlap of sphere and expertise and together the halves become a successful whole. Even these partnerships can be tricky however as the outward facing partner often receives the fame and glory (Think Giorgio Armani and Sergio Galeotti for example. That’s right, Sergio who?) and thus the personality and ego of the less visible partner must be able to cope with the disproportionate sunlight that falls on the other.

Of course for every intuitive rule of fit, exceptions mock the notion of any rule. There are countless examples of successful partnerships that shouldn’t work and others that should have but didn’t. In the end, partnerships resist facile or prescriptive characterizations and even the best ones take tremendous work. Perhaps my barber said it best last week when commenting on the retirement of his business partner with whom he worked side by side, six days per week for 28 years in the same small strip mall. A man of few words, he described their longevity and success as a ‘miracle’.

About the Author

Robert Hebert is the founder and Managing Partner of StoneWood Group Inc., a leading executive search firm in Canada. Since 1981, he has helped firms across a wide range of sectors address their senior recruiting, assessment and leadership development requirements. His post appeared originally on his site.

To Hang In or to Let Go? When to KILL your Startup

Horse dead

“When the horse is dead – dismount” is succinct practical advice sometimes attributed to the famous cavalry general Lord Mountbatten. No matter what its origin, the essence of it is clear: stop agonizing and procrastinating when something ends; the only thing left to do is to get off the horse and move on with your life.

The fact is, not every startup works out; in reality most of them fail. It is a fact of life supported by a mountain of stats data. And yet, it is extremely hard for most people to disentangle themselves from what usually was a significant personal emotional investment. The biggest hurdle to overcome here is what’s known as sunk cost fallacy. It usually goes like this: “We have invested so much (money – if you are financial investor, or life – if you are a founder), we worked so hard, we achieved so much, etc, etc that we cannot possibly let go.”

“If we could only get more funding or bring in better talent, we would succeed!” NO, you would NOT if you missed the market opportunity (assuming there ever was one), the customers are not buying, your team is burnt out and your investors look ready to kill you. Under these circumstances no amount of whip cracking will help; just get off the dead horse and move on to pursue better prospects in your life.

I have been recently involved with a startup whose story perfectly illustrates my points. The founders developed a business plan addressing an emerging market problem which, although initially nascent, appeared to be destined to become a major issue (and therefore a market opportunity) in about a year or so. Theirs was a chance to pioneer a new industry and get all the glory of it.

They managed to raise some modest angel funding that allowed them to toil for about a year initially, investing their sweat equity and some cash of their own to develop a product prototype. At this point they attracted a $2M seed investment from a Toronto-based VC fund.

The experienced founders executed well, built a strong development team and launched the first product before the year was over. Good product reviews arrived and a couple of early-adopter customer purchases materialized. The CEO was walking tall, receiving inquiries from top tier VCs such as Kleiner Perkins, Sequoia, NEA, etc. A substantial funding round appeared to be a sure thing. However, during the second year of operation sales were slow as the market was taking its time to develop. Consequently, venture capitalists were in no hurry to jump in and adopted a wait-and-see attitude.

With the high burn and dwindling funding prospects, the seed investors started to worry. I remember going to Board meetings and hearing remarks like: “We may have to do a reset”, “The only thing a VC can do is replace the CEO”, and such. Sure enough, the founder-CEO was asked to find her replacement and the expensive $60K headhunter-led search started.

When a company is still in the startup mode, searching for a winning business model, as opposed to being in the execution mode, replacing the CEO is rarely a good idea – unless, of course, the existing CEO is clearly incompetent. There is a major difference between a non-linear skillset of a founding CEO with his vision, passion, and commitment, and a hired-CEO with his usually linear execution skills. Such a change is a major and costly disruption in the life of a young startup. If nothing else, it takes about a full one-year business cycle for the new CEO to fully understand the realities of his business. In addition, with the departure of its CEO the company loses an enormous amount of the painfully accumulated company specific business experience.

With the new face put on the company, the VCs provided additional cash support by twisting some arms in financial circles to close a new investment round of $3.5M. With these resources in hand, the team embarked on the second-life journey. However, in spite of the new face, talents, cash and the energy, the market readiness has not changed. Fast-forward through a few heroic-effort but modest sales, high burn, etc and 3 years later the company is again running out of money.

At this point, everyone is exhausted and out of ideas for what to do next. The horse is dead but it is so hard to admit it! The sunk cost fallacy is raising its ugly head: we invested so much, right? It is so hard to admit a mistake and let go. Thus, the company is put in a dormant state: most employees laid off, the hired CEO stays part-time while pursuing other income opportunities, the original investors write it off mentally but still keep it on the books, the most recently sucked-in investor has no clue what to do so lets the ship drift, barely keeping the lights on for appearances just in case…

But wait, that’s still not the end of this story. After a year of this malaise, the original founder-CEO gets approached to see if he could step back in and see what could be done with the company. Another restructuring follows with $0.5M new funding to see what could be done. More heroic sales efforts come with some modest results but the market still isn’t there. Finally, all the key members of the crew quit to pursue better prospects in their lives but the controlling investor hires yet another expensive sweet talking miracle-maker who promises resurrection and the recovery of that sunken cost…

Technology startups are not mature proven-viability companies that could be “management engineered” and played with. They are essentially experiments in market or technology. Their founding premises and hypotheses need to be quickly tested and verified before large amounts of money are deployed. If the business model fails repeatedly, abandon ship no matter what the sunken cost is.

Innovate, Adapt, or Die

Innovation“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you lead them, and how much you get it.

This quotation from S. Jobs was floating through my mind as I perused the enjoyable read of the recently published “Adventures in Innovation: Inside the Rise and Fall of Nortel” by John Tyson. The book is a fascinating personal account by one of the key R&D executives who has been there for most of the ride since 1966 until 2001, almost the end. There are many facets to his story but at the heart of it is one of universal interest to anyone in the high-tech community: the eternal tension between creativity and innovation on one hand, and the need to maximize revenue and profits.

It does not matter whether you are a start-up or a billion dollar company. All for-profit organizations powered by innovation experience this built-in tension. There is nothing wrong with it, quite the opposite. Its existence is healthy and helps to right the ship as it sails through turbulent waters of the forever changing business seas – as long as it is constructive, kept in balance and supported by the trust and mutual respect of the members of the crew.

This tension, between, as Tyson calls it, “pinstriped executives driving sales and white-coated lab engineers pursuing ideas for products a decade away”, is not difficult to maintain in balance as long as both camps talk to each other and the top leadership listens. But it is easy to stop listening as sales grow through the roof, the stock price is exploding and you are in the midst of a wild binge of acquisitions and hiring waves.

Putting R&D spending under the control of the operating businesses focused on immediate products and profits carries a huge risk that research will become just another cost, rather than an investment in the future. In the battle between the operating, money-making arm of the organization and the R&D operation, the scales are tipped towards the former. At the end it will win this unless there is a strong structural protective cocoon around R&D and the enlightened top leadership which does not waiver. Arguably, Nortel collapsed because the conversation stopped  between the two camps.

In one of his recalled stories, Tyson asks Scrivener, Nortel’s CEO at the time, about managing business strategy and tactics. It is instructive, that as CEO he owned the strategy and the vision, and considered the operating and marketing plans to be tactical. Consequently he advised aspiring executives to learn to manage the strategy and delegate the tactics. Even more memorable, when asked for his planning horizon, he answered: “10 years.”

Now, this is truly mind-boggling stuff in today’s business environment when very few business leaders have the guts to think that way without quickly giving up to the pressures of short-term expediency. In terms of planning with 10 years horizons, well…, possibly, just possibly the Politburo of China might be able to afford it 🙂 And yet, one feels this inner itch, a tiny voice whispering that he was right and that’s the way to do it…

When a CEO loses it and falls prey to the short-term expediency rather than viewing R&D as long-term investment, that delicate tension balance will break-down and the internal fighting will start over marketing as an expense versus an investment. This leads to a waste of a lot of money, resources, and time. Ultimately, the collapse will be in sight.

Under these circumstances, there is only one more potential saviour: the enlightened, competent Board of Directors which takes seriously its fundamental responsibility to proactively set the strategic direction of the company. However, if the Board allows itself to become too remote from the corporate culture, shielded by executives who consider the directors a necessary evil, it will turn itself into ineffective caretakers as in Nortel’s case towards the end when “Board members were little more than well-meaning, part-time sophisticated  contractors who were well compensated to meet the minimal legal requirements.”

There are many valuable lessons from Nortel’s story – the biggest tragedy in Canadian high-tech – which are worth pondering to help other tech organizations, Blackberry and re-modeled NRC come to mind, avoid snatching defeat from the jaws of victory. After all, “Those who do not learn from history are doomed to repeat it.”

Start-up CEOs Attributes – Hard Lessons

If you were an experienced hang-glider pilot could you fly a Jumbo Jet? Of course, not. Surprisingly though, some folks hesitate when asked: would the reverse be true? Actually, in my younger days I was a glider (motor-less aircraft) sports pilot. It took a lot of professional training and practice to master that skill. Later on, after many years of being away from this sport, I went to a local flying club for refresher flights with an instructor. While spending a day at the airfield I bumped into another trainee, a former F-15 fighter pilot. I was awed: “Gee, it must be a piece of cake for you to fly gliders!” I said. Only it wasn’t. “Hardly anything from flying fighter jets is applicable, I have to un-learn a lot and develop entirely different skills – it really feels awkward.” 

NOTE from Paul: The guest post below is written by Bob Hebert and originally appeared on his site.

I spent time recently with a prominent venture capitalist who has reflected a fair bit on the talent issue in the start-up game.Our discussion focused to the importance of certain attributes for start-up CEOs and how easy it is to misjudge their importance. To this VC, start-ups are like clay of varying grades which, in the hands of talented artisans, sometimes become art of considerable value. The creative process by which that art emerges however is a blend of inspirational, improvisational, experimental and professional activities. The finished product often bears little resemblance to what was envisioned at the outset. The irony of the start-up game is that detailed blueprints get funded while decidedly non-linear alchemy is often where the money is at.

The art of managing start-ups is the ability to feign being in total control while figuring out the company’s technological and market sweet spot (in real-time). This requires the ability to manage stakeholder expectations, implement scalable processes, manage people etc while trying to stay alive on the marketplace autobahn. These are decidedly different skills which organizations nonetheless seek to find in one CEO.

Because execution skills are more linear and easier to evaluate in candidates than the entrepreneurial je ne sais quoi, and because start-ups and their investors are often overly optimistic about the compelling logic of the blueprints they have funded, there is a tendency to skew selection decisions towards execution and scaling skills at the expense of the more entrepreneurial skills required to position the company to be scaled.

The VC spoke of the painful experience of hiring one person who had an impeccable track record of building the Canadian subsidiaries of large US or international tech firms. Because the person had launched these subsidiaries from scratch, she considered herself a ‘start-up’ person. And because several of these firms had become runaway successes, she had the swagger of someone who attributed at least some of that success to herself.

However, as the VC came to realize, this person had never taken raw technology and built a company from it. She had never really contemplated or adapted business models, searched for markets for a new technology or developed ‘go-to-market’ strategies in no-name start-ups. Instead, this person had always been handed technologies with large referenceable accounts in hand, well developed positioning statements, messaging and collateral. Her job was always tactical and full-steam ahead execution. This was a totally different game.

The VC talked of how he has learned that CEOs must be akin to entrepreneurial scientists. They must develop hypotheses, experiment, validate via feedback, adjust, shift and go forward, fast. With so many potential paths before them, they benefit by an entrepreneurial nose that will draw them to where the real opportunity is, and they must move fast while adjusting just as quickly. While company building, execution and scaling are important, without these other abilities the CEO will pick a path and die of starvation on it.

About the Author

Robert Hebert is the founder and Managing Partner of StoneWood Group Inc., a leading executive search firm in Canada. Since 1981, he has helped firms across a wide range of sectors address their senior recruiting, assessment and leadership development requirements.

Why Founders Fail: The Product CEO Paradox

Paul’s Comment: There is no True or False answer to this philosophical question: “Are founding CEOs better to bet on than hired-CEOs?” It all depends on the individual and the context often riddled with conflicts and politics. But the important point is to be aware of those choices, analyze the context with circumspection and while making a decision treat the people involved fair with respect and dignity. The article by Ben Horowitz provides rare insights into the pros and cons of these issues.

How to Survive a Startup – Tips for New Team Members

It is hard to find more emotionally charged environments than at a newly forming startup. The excitement, passion, exuberance, uncertainty and fear create quite a potent mix. All of this makes the interpersonal team dynamics even more delicate than normal. Having been on both sides of this equation – as a founder and as a hired CEO – I can attest to difficulties in dealing with these challenges, especially since ego-related issues tend to be seen through one-way mirror. To help you deal with these, here is a post providing practical tips on what to expect and what to do to survive the experience.

NOTE from Paul: The guest post below is written by Jill S. Ram and originally appeared on her site. It is re-blogged here by permission.

If you’re an executive and you’re thinking of joining a startup, know what stage of a startup to join. If the company is in its first year or so, don’t expect to make significant changes. If you join after the company is somewhat established and mistakes have been made and learned from, you’ll likely be more successful from the outset. If the founder has stepped aside, well, by then, the company is likely not considered a startup anymore. It won’t be functioning like a big company yet, and it won’t have all the structure in place that it needs, but it will be run with more practicality and with less emotion. Timing is everything so choose it well.

Let’s focus on early-stage startups.

If you join in the early stage, remember this: Be wary of being the first in the role or in taking over the founder’s area of expertise. Some founders have a technology background, some marketing, some sales, some finance. Whatever his “baby” is, you will be under much more scrutiny if you are hired as his “replacement”. If you’re the first executive in the given role, make sure you understand what the founder thinks he expects of you, and forget about what you know you can and should accomplish – for now.

Reminder two: The founder is always right (especially true if you have been hired to take over the area of the business that he normally runs). Don’t argue endlessly. I’m not saying your ideas are wrong; I’m just saying that many of them won’t be adopted until the founder sees what you see. You may think you have been hired for your experience, your crystal ball, if you will, but it doesn’t matter what you see in that ball. You may know, emphatically, that some of the decisions being made are the wrong ones, but my advice to you is to go with it. The only way to survive is to get on the bus. Standing in front of it trying to get it to go left or right will only get you run over. It will be hard to watch the bus veer off course. Really hard. But you have to let it go there and end up in the wrong place. I know, you think you were hired to prevent that from happening. You were; just not the first time.

Hopefully, the bus will only be one stop short of where you thought it should be headed. Maybe it will end up in a completely wrong neighbourhood. But it has to go there for the founder to realize it was the wrong direction. He needs his own “aha” moment. That’s when it will click for him. And that’s where you come in. That’s when he’ll start trusting your crystal ball and you’ll be allowed to put one finger on the steering wheel.

There are endless analogies to better understand this concept. Here’s a simple one. Your friend’s wedding is about to take place and you know he’s choosing the wrong person. But he doesn’t see it yet. There’s nothing you can do to get him to see it, especially if he doesn’t want to. And why would he? It’s been working for him. Do you abandon the friendship? Of course not. You support his decisions and stand by him as he embarks on his journey. And when he has his “aha” moment and realizes what you’ve known all along, that’s your cue to step in. Not to say “I told you so”, but to help get him back on track.

Same thing with a true startup. Be there for them. Don’t sit there helplessly and wait for the accident to happen. Support the decisions that they think are right. Remember, it’s those exact decisions that got them this far. Your challenge is getting them to see that it’s not the thing that’s going to get them to tomorrow. But that doesn’t mean coming in with an axe and chopping out the rotting wood. Remember that it’s not completely rotten yet and it’s still acting as the foundation.

The question is whether or not you are able to support the founder’s decisions without compromising yourself in the process. If following his path leads you to doubt yourself or be continually discouraged, maybe it’s too early in the game for you. After all, you need to feel like you have some worth; that something you are doing is making a difference. Only you can decide how much patience you have.

With a true startup, you will find yourself going through these stages:

  1. Exuberance and passion – at the excitement of being a part of something so dynamic and exciting
  2. Frustration – at the things that aren’t done efficiently or correctly
  3. Excitement – at the idea of how much opportunity there is to help change these things
  4. Discouragement – at how those opportunities are being overlooked and how your skill set is being completely underutilized. What are you doing there?

This is when you have a decision to make. Here’s how to make it:

Ask yourself these questions: Have you seen any change since you started? Has anything new been adopted or is the founder stuck on doing everything the same old way? Is the company hiring the right people? People who are going to bring something new to the table. Were they hired to challenge the status quo or embrace it? Of all the decisions that are being made, do you agree with at least some of them? Are your values fundamentally the same as or directly opposed to the founder’s? Do you respect the founder? If you answered yes to most of these (where there were options provided, the “yes” would be to the first part of the question), you may want to stick it out, as you might be asked to use your crystal ball in the near future.

Remember that founders are concerned with one thing at the outset: the top line. So are their investors. Chances are, you will be asked to do things that, although they increase the top line, they may impact the bottom line (and the culture) negatively. This will be evident to you; not so evident to the founder who’s fixated on revenue. The investors will see your crystal ball as valuable, but only once they get their claws in the business – once they really start focusing on profitability. That will come soon enough.

The best advice is the following:

  1. Forget everything you learned working for a bigger company – for now. It won’t come in handy for quite some time.
  2. Study your environment. Don’t come in thinking you know it all. What worked at your last company might not work in your new one. Anyone can make observations and identify what’s missing. But you weren’t hired as a consultant. You were hired to help take the company to the next level, by implementing the right things at the right time. Heeding that latter part will be the difference between success and failure.
  3. Don’t knock what the company was built on. You will alienate yourself and be the cause of your own failure.
  4. Do what is asked of you, even if you don’t support it 100%. It may be a flawed course of action, but it’s likely not going to destroy the company. It hasn’t thus far.
  5. Get things done. Don’t take too much time doing it the “right” way. If you can get it done the right way without it taking longer than it would take to do it the flawed way, fine. But if doing it the right way means inertia, you will quickly cripple the company. If you accomplish nothing, you are useless to the company. The trick is to find a way to remove the rotten wood and simultaneously replace it with cement, all the while achieving the founder’s goals and the ones you were ultimately hired to achieve, even if unbeknownst to the founder. Balance is key.
  6. Pick your battles. Fight a good fight but know when to waive the white flag. The sooner you are able to gauge if something will be well-received or not, the better off you will be.
  7. Be agile. Be able to change directions on a dime.
  8. Listen. Really listen.
  9. Have patience.
  10. And last but not least, do your daily affirmations. You’ll need to remind yourself that you’re good. No one else will.
About the Author
Jill Ram is a Montreal-based Senior Tech Sector executive who specializes in cultural development and change management.

Venture Money In, Entrepreneur Out

The delicate relationships between founders and venture capitalists are rarely openly discussed and even less frequently have carefully laid down rules that protect both sides sensitive interests. Since nothing ever goes smooth in early-stage company, the reality of the situation calls to put in place measures which would allow to deal with unavoidable conflicts in a civilized manner while protecting interests of both parties. The article below illustrates these realities.

NOTE from Paul: The guest post below is written by Bob Hebert and originally appeared on his site. It is re-blogged here by permission.

A recent edition of Profit Magazine is headlined “Lessons from Canada’s Best Employers”. It features a collection of “highly successful” entrepreneurs regaling on how to create “loyal, turbo-charged teams” and great businesses.

Inconveniently, at least one of the featured entrepreneurs was removed from the helm of his business before the magazine hit the newsstands. A man of undeniable vision, this entrepreneur had proven adept at attracting and energizing a team of bright, young employees in the pursuit of that vision. He possessed the same evangelical abilities with customers who signed up in droves for his product offering. But as the business grew, the supremely confident entrepreneur proved less adroit in evolving the hands-on, micromanaging leadership style that served him well when the firm was small. This in turn had a negative impact on his ability to attract, manage and retain an executive team capable of scaling the business. Though strong revenue growth temporarily cloaked the costs of this churn, maturation clouds were on the horizon. Given enough time the young entrepreneur may well have sorted out the leadership requirements of a growing, more complex business. But time became a scarce resource the moment the entrepreneur pursued big-time U.S. venture capital to fuel the next stage of his firm’s growth.

While in the business of risking capital, venture capitalists take every step possible to de-risk their investment decisions. Each success and failure is analyzed and processed into lessons learned, best practices and playbooks for future investments. Proven leadership is valued over its alternative, and young, promising entrepreneurs are rarely more than a few missteps from replacement. This is especially true in Silicon Valley where a class of serial CEOs and executive teams provide a bench of standby replacement talent. With the costs of trial and error learning thus needlessly high, it took but a few execution errors for the Canadian entrepreneur to find himself unceremoniously dumped at the helm of his own company. It took less than 4 months for the entrepreneur’s new ‘partners’ to become his executioners.

Learning is an iterative process, a cycle of action, reaction, reflection, adjusted action and so forth.  Self-awareness lubricates the cycle either increasing or reducing the time for individual learning. Hubris is a decided inhibitor. Entrepreneurs who own their businesses outright have the benefit of time to learn from the trials and tribulations of growing a business. But for those who secure professional investors or go public, their time becomes enmeshed with others money and a compression effect takes place. Their trials must now be almost error free. For our young Canadian entrepreneur, an award winning company and glowing magazine articles could not protect him from these realities. The good news, if it can be called that, is that he now has time to reflect on the meaning of hubris, humility, personal development and resilience.

About the Author

Robert Hebert is the founder and Managing Partner of StoneWood Group Inc., a leading executive search firm in Canada. Since 1981, he has helped firms across a wide range of sectors address their senior recruiting, assessment and leadership development requirements.

Startup Math for Techies

“Build a better mousetrap, and the world will beat a path to your door” is a saying derived from Ralph Waldo Emerson. Apparently many take this metaphor quite literally, with more than 4,400 patents issued by the US Patent Office for new mousetraps, with thousands of more unsuccessful applicants, making mousetraps the “most frequently invented device in U.S. history”.  However, you don’t want to be one of these inventors.

The assumption that technical wizardry is sufficient to build a successful business is a common psychological flaw among aspiring tech entrepreneurs. Thus to help you see the light through the fog, let me give you a brief tutorial using the language favoured by engineers – mathematical equations.

T ≠ B

Technology IS NOT a Business

Innovative technology is just a starting point and the skills and talent required for R&D do not always translate into product development know-how.

T+P  ≠ B

Technology and Product IS NOT a Business

Productization skills are essential in the new tech business. But even having an innovative product without a good market for it will not result in sales.

T+P+M  ≠ B

Technology and Product and Market IS NOT a Business

Arriving at a good market fit with an innovative product that customers are buying is an excellent place to be. But this by itself still does not make for a successful profitable business.

T+P+M+E  = B

Technology and Product and Market and Execution IS a Business

Like well-oiled machinery that performs reliably day in and out at a reasonable cost, making something useful for which there is a demand and what could be sold profitably – a well-run successful business pulls all these elements together in a harmonious whole, managed by an experienced team with complementary skills and talents.

So, there you have it! And if you are hungry for more complex math, here is another equation to ponder 🙂

VisionIntoAction Equation

Challenge: Please let me know in the Comments section below how you interpret this “equation”. I am happy to fund a dinner for further discussion with an author of the most interesting comment!

On the Virtues of Controlling Your Ego

Oh, the pleasures of having your ego tickled! Who is immune to that? I bet even the pope upon election cannot suppress an inner smile from having all those impressive titles bestowed upon himself. However, the trouble with startup founders is that it is so easy to ingratiate yourself with a grandiose feel-good title which often leads to unforeseen difficulties in the future.

I have been recently working with a tech startup founded by a brilliant engineer with a strong research background and interests, who adopted himself a couple of co-founders:  another engineer and a sales guy. For several years they were pursuing a bootstrapped advanced engineering design services business with its usual ups and downs, but were recently ready to turn it into a product-focused venture. As I started to work with the company a number of issues popped up related to the deceptively innocent sins from the early days of company setup.

The use of self-awarded job titles in an early-stage company could be a problem if the real qualifications do not correspond to the scale of the job title. It all starts quite innocently. The newly formed company needs formal management, so the main founder becomes the President & CEO,  a technical expert becomes VP of Engineering and the sales guy naturally becomes the VP of Sales & Marketing. This might be fine if the startup is moving at the speed of Hyperloop and the calibre of folks involved is adequate to the task – but this is rare with early-stage companies.

In this particular case, the individuals involved were all very talented but simply did not have the management or business experience to occupy these positions as the company started to grow. The problems manifested themselves at several levels:

·        Fundraising – the quality of the management team is key in any investment decision, and in this case was not passing scrutiny, but just becoming a major hurdle in raising the sought $2M round

·        Customer relationships – as the company typically had large organizations as its customers, the imbalance  of titles in the intense customer interactions was creating awkward situations when our “VPs” were often dealing either with junior corporate managers or with true senior executives; not good in either case!

·        Internal operations – with the business growth came the increase in staff hiring, HR issues, etc. and it became clear that being a brilliant engineer does not necessarily translate into a “titled” manager

·        Shareholders – having individuals as subordinates, while at the same time being major shareholders, creates tricky problems which could easily de-stabilize the company; reasonable measures and safeguards need to be put in place to protect against catastrophe

It took me, as an appointed company Chairman, quite a while and a lot of tip-toeing and gentle maneuvering to rectify this situation. We ended up re-classifying job titles as CTO, Director of Sales, and, a face-saving, Chief Designer. This created room to bring in more experienced talent to help steer the company. It goes without saying that nobody likes to feel “degraded” and it was not easy on all the fragile egos involved. It all worked out for the better but could have been avoided if only we learned to control our egos!

Take-aways from this post:

·        Members of the Founders team should go easy on the job titles and avoid loftiness incommensurate with experience

·        As a controlling Founder, be careful with the use of fancy titles, in lieu of adequate compensation, as a bait to attract talent  – it could be difficult to undo it

·        Expect and plan to bring along experienced new hires while having org chart room and job titles available

·        Don’t confuse shareholders role with the employment function; build safe guarding measures to protect from interference

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