Managing and motivating teams
February 2003
Teams: Human nature and human resources
Building, managing and motivating
Douglas Abrams - Parallax Capital Management
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Teams: Human nature and human resources
The team is the most important thing
Building teams
Managing and motivating teams
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The team is the most important thing
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
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Describing the team in the business plan
Organizational structure
Backgrounds, experience and expertise
Balance
Needs
Founder/CEO and management team
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What do investors look for in a team?
Completeness
Competence
Maturity
Initial team should be prepared to step aside
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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
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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
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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
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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 people
A/P Wong Poh Kam - NUS
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Management team members
CEO
VP Marketing & Sales
VP Business development
CTO/CIO
VP Production
CFO
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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
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Must be on board in time to ship first product
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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
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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")
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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
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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
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CTO - Chief Technology Officer
Responsible for technology strategy and implementation
Internal 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
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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
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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
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VP Business Development
New customers
Strategic partners
Potential investors
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Beyond the management team
Other key employees
Board of directors
Advisory board
Professional services: accountants, lawyers, etc.
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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
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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
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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
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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
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Technologist or student starting business
Get started
Complete business plan
Attract key management talent later
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Teams: Human nature and human resources
The team is the most important thing
Building teams
Managing and motivating teams
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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
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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”
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Pick outstanding talent
Will represent company to investors
Must make an excellent impression
Track records
Skills
Depth of experience in areas important to SCA
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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
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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?
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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.
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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
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Look for well-rounded employees
Extra-curricular activities
Community activities
Artistic achievement
Language skills
Sports
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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
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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
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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?
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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
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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?
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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
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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?
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Do you like the person? Are they:
Intelligent?
Enthusiastic?
Passionate?
Sincere?
Do they appear to like you?
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Admissions mistakes
Settling out of desparation
Ignoring red flags
Lawsuits and legal entanglements
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Lawsuits and legal entanglements
Investors do not like lawsuits or even the possibility of legal issues
Make sure employees get out clean
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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
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Remuneration packages
Salary
Stock options
Profit sharing and bonus schemes
Pension plans
Commissions
Cars and travel expenses
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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 startups, but should look at “Learning opportunity” and “Greater challenge/ excitement factor”
A/P Wong Poh Kam - NUS
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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
A/P Wong Poh Kam - NUS
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Teams: Human nature and human resources
The team is the most important thing
Building teams
Managing and motivating teams
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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
A/P Wong Poh Kam - NUS
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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
A/P Wong Poh Kam - NUS
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Managing people
Management theories
– Traditional hierarchical structure
– People-oriented structure
Motivating factors
Groups and teams
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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
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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
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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 peopleoriented
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Maslow’s hierarchy of needs
Self actualization
Esteem & status
Social and affection
Safety and security
Physiological
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Management structures
Hierarchical
– Authoritarian, like the military
– Vertical communication OK; horizontal poor
People-centered
– Matrix structure
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Groups
Definable membership
Group consciousness
Collective purpose and identification
Interdependence
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Developing a team
Forming
Storming
Norming
Performing
Adjourning
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Networking is critical for successful teams
Failure to network can create:
Inter-group hostility
Insularity and inward thinking
Not invented here factor
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Managerial styles
Authoritarian, autocratic
– Solve problems alone
– Dictate decisions
Consultative
– Discusses problems
– Makes decisions
Democratic, participative
– Chairperson
– Agrees problem
– Creates consensus
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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
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Performance reviews
Conducted regularly between manager and employee
Self-assessment - 3+/3-
Manager assessment
Key objectives
Development plan
Action steps
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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
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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.
A/P Wong Poh Kam - NUS
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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
A/P Wong Poh Kam - NUS
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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
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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
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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
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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
Startup 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
A/P Wong Poh Kam - NUS
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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.
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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.
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Sources and suggested reading
High-Tech Start-Up (2 nd edition) by Prof John Nesheim
Lang, J.(2002), The High Tech Entrepreneur's Handbook , Ft.com
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Contact us
Douglas Abrams
Managing Director
Parallax Capital Management
dka@parallaxcapital.com
www.parallaxcapital.com
65-6238-3492, 65-9780-5381 (hp)
390 Orchard Road, #11-01 Palais
Renaissance, Singapore 238871
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