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Archive for the ‘Management’ Category

April 5 2013
by Scott Johnson

5 Habits of Great Startup CEOs

Being CEO of a startup is quite similar to being the parent of a newborn.  The neighbors see a clean cooing newborn with smiling proud parents.  But we all know what goes on inside the house.  Sleepless nights, stress, no time to attend to other relationships.  You are a slave to the new creature.  It is ultimately incredibly rewarding, but parenting is very hard work and not at all glamourous.  And just the way not everyone handles parenting well, not everyone is a good candidate to run a startup.  As a matter of fact, a great startup CEO is as rare as a 70 degree day in March in Boston.

I have compiled the qualities that great startup CEOs share – you know – the CEOs that actually get multiple B-round term sheets in down markets and get that marquis exit at an unusually high multiple.  These are the ones that consistently surprise their board on the upside, investors love to back, and that acquirers pay up to bring in-house.  If you are a founder looking for a CEO to really grow your company, here are the five personal attributes you should look for:

1) Attracts Great Talent.  This is the best indicator of success, as it really encompasses all of the other attributes.  If A+ talent flocks to work for someone, that person has got something special.  Be careful though.  An orangutan could be CEO of super fast growing startup and attract great talent.  So, make sure it is the CEO who can attract talent, not someone riding the wave at a hot company.

2) Networking God.  A good CEO shortens sales cycles with contacts, shortens hiring time with contacts, and shortens fundraising time with contacts.  A CEO who networks well can hence shorten time to exit and massively reduce dilution to founders.  Give 8% to a great CEO, prevent 20-30% or more in downstream dilution.

3) High Intelligence.  The CEO is usually not the highest IQ in the room.  But he needs to be in the conversation.  At high tech startups, a certain acumen is needed to keep the respect of the troops, and gain the respect of customers and investors.

4) Strategic Thinker.  The trick with startups is to channel all of the companies limited resources in the optimal direction.  And to quickly alter course as markets dictate so not a single moment is wasted by indecision.  This requires strategic thinking, not tactical execution.  Many line executives from larger companies struggle as CEOs of startups because they  have not had the opportunity to deviate from a strategy that was handed down to them from above.

5) Stamina, Energy and Productivity.  This gets back to my point at the top about parenting a newborn.  The CEO needs to be all-in, and one of those productive people that doesn’t waste a second of his or her day.  The CEO sets the culture at a company, and that should be one of reward for achievement, productivity, hard work, and accountability.

So, there you go.  Every founder CEO should be very honest in his or her self assessment, and then when they see someone with the above profile, move quickly to hire them.  But do your diligence.  Hiring the wrong CEO can be every bit as costly as hiring the right one can be helpful.

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martinzwilling_136Martin Zwilling Contributor

A startup begins with a great idea, but all too often, that’s where it ends. Ideas have to be implemented well to get the desired results. Good implementation requires a plan, and a good plan and good operational decisions come from good people. That’s why investors invest in entrepreneurs, rather than ideas.

People and operational excellence have to converge in every business, large or small. Microsoft found this out last year when their market capitalization, once at $560 billion in the year 2000, had fallen to $219 billion, allowing them to be passed by Apple at $222 billion, who grew from $15.6 billion during the same period. Both had access to the same technology, people, and market.

So what could have happened here? I found a good summary of the relevant keys to business operational excellence in a new book by Faisal Hoque, called “The Power of Convergence.” His focus is on repeatable practices to maximize business opportunities in large companies, but I’m convinced that these apply equally well to startups:

1.  Clearly define your value chain. Your value chain consists of customers, partners, vendors, internal systems, and your own team. Make sure you understand this chain, as well as market dynamics, to drive operational innovations and every decision. Apple has been able to innovate at an amazing pace to define and meet new market opportunities.
2.  Visualize abnormal or suboptimal performance. Recognizing and understanding deviations enables a startup or any business to take corrective action quickly. This requires executives and a team that understands the parameters, and is focused on customers, quality, and continuous improvement.
3.  Facilitate the power of your team. Startups need to empower their people to take action in the absence of orders. That doesn’t mean abdication in setting corporate policies, which provide parameters to ensure that individuals have to ability to act collectively in the company’s best interest. Steve Jobs has a committed team.
4.  Communicate effectively with the team and customers. Communication is a challenge in any organization, but it’s a particular challenge when you’re working in a startup, where customers, products, processes, and the team are new. Most founders forget that communication becomes exponentially more difficult as the business grows.
5.  Measure value flow and performance. Measuring performance may seem self-evident, but many entrepreneurs mistake this task as a point-in-time or a one-time event. In operationally excellent startups, performance measurement is an ongoing effort throughout the process chain, not just at the outcome.
6.  Define response mechanisms. Anticipating and planning for worst-case scenarios, and having a Plan-B, will enable the quick-response and pivots required to put a startup back on track. Metrics are required for ensuring the return to a known good baseline.
7.  Maximize technology architecture and standards. Continuous innovation to maintain your competitive advantage does not mean that you can ignore current architectures and standards. These must always be leveraged produce optimal intended product outcomes.
What every business needs is a convergence of business and technology elements to optimize return and competitive positioning. All too often, entrepreneurs posit a new technology or idea, without understanding that a successful business is a never-ending process of adapting and improving all the elements in a business – especially business model, processes, and people, as well as technology.

Apple, with Steve Jobs, has demonstrated a rare convergence of technology, market understanding, business process, and people. Are you focused on all the right execution principles in your startup to do the same?

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header_02The Marlinspike* CEO by Jim McHugh, Consultant, Board Member and Member of Gerbsman Partners Board of Intellectual Capital
 

An in-depth management guide
for C-Suite executives, investors and advisors.

What to expect: Pivotal proven tactics to boost business performance, sharpen strategic focus and create lasting shareholder value.
Plus: Technology Telltales -Technology recommendations for entrepreneurs
Occasional networking events
Nautical references
Humor

  March 2013

CEOs:  Do You Run Your Company Well?

Here’s the question phrased a bit differently…What key elements turn your company into:
1.  an attractive acquisition candidate
2.  a great, fun place to work!
3.  a valuable asset for all shareholders
There’s no need to create your own list of key elements because the next section of this newsletter not only has the list of key elements called The Run The Company Well List, but there are suggestions on how to use it.

The Run The Company Well List
My list has fifteen key elements that encompass the business model, planning, leadership, people, customers, products/services, finances, operations and advisors. Does (insert your company name here) have:
1.  a clear, focused, comprehensive business model
2.  a cohesive and well-tested growth strategy
3.  an outstanding leadership team that works well together
4.  a problem solving culture that is based on trust, accountability and fun
5.  a motivated, loyal, skilled workforce that is well treated and compensated fairly
6.  unique, high quality products and/or services
7.  innovative go-to-market tactics
8.  happy customers, whose needs are well understood
9.  a diversified (not concentrated) collection of profitable customers
10. a strong and defensible competitive position
11. a balance sheet that is rock solid
12. a P&L that shows consistent growth, high margins and a justifiable expense structure
13. lean processes, effective information systems, strong financial controls
14. well cared for fixed assets
15. great advisors: Board of Directors and/or CEO Peer Group plus outside professional confidants

Today I’d like to dig deeper into #3 and #15 by reviewing the OPPOSITE of having great leadership and great advisors. What if an organization has a significant, persistent problem within the organization’s leadership ranks? I call this condition being Stuck in a Ditch. Getting Stuck in a Ditch is a result of having one or more of these 6 challenges:

1.  Weak, uninspiring leadership: The CEO does not have the necessary vision, leadership or management skills to direct the company.
2.  No respect: The CEO does not command the respect of the organization.
3.  The CEOs leadership style=strange behavior: The CEO’s (or could be the dominant, controlling shareholder) behavior causes constant anxiety throughout the organization.
4.  Corporate governance is broken: There is continuous tension about the ‘lack of alignment’ and ‘who we are’.
5.  Meddling: The constant, meddling actions of the controlling, outside investors in the day-to-day affairs of the organization have a direct, negative impact on the organization’s performance.
6.  No hands on the wheel: A good governance framework does not exist. There is no active Board of Directors or Board of Advisors; if one does exist, and it is only ceremonial in nature, that is almost the same (or worse) than not having one at all.

Any combination of these six issues clearly puts a major dent into The Run the Company Well List. People are perceptive; each one of these six situations is obvious to the employees. These Ditch conditions can lead to indecision, constant bickering or fighting and prevent the organization from moving forward with conviction towards common goals.

How can you put The Run The Company Well List to use in your company?

Lists can create conversation and discussion. More important,they can initiate ACTION.

Suggestions on how to use the list:
1.  As your personal pocket guide while you prepare your company for sale
2.  A roadmap to kick off a 2013 operational improvement plan
3.  An ongoing discussion tool with your Board of Directors/Advisors
4.  The agenda for an offsite meeting with your senior leadership team
5.  A quiz for the WHOLE COMPANY: Give it to all your employees, have them answer Yes, No, or Not Sure for each item, tally the results and publish the findings.
Download The Run The Company Well List by clicking HERE

* What is a ‘marlinspike’?


*The marlinspike is a nautical implement that is used to unravel nautical lines. It is also used to sew the lines together to join them, creating greater strength, or to create useful or decorative items from nautical line.

Detangling and sorting through the complex issues in a STUCK company is similar to using the marlinspike to detangle, sort through, and weave together a much stronger and long-lasting nautical line.  Whether trying to achieve a more secure future for a boat, or a company, the marlinspike approach may be needed. Jim enjoys the sea, its wildlife, and kicking around boats and marinas.

Connect with Jim

With a name like McHugh,
I couldn’t resist sharing
some March 17 shenanigans

CEOs: Do you need an objective look at your Run The Company Well List?

Nothing beats human interaction.
Here’s Jim’s offer for March:
1 Hour of Free CEO Coaching by Jim McHugh
by phone or online video chat (Skype or Google Hangout)
No strings attached
To contact Jim, go to steve@gerbsmanpartners.com and I will forward to Jim McHugh

The Marlinspike CEO is written by Jim McHugh. Jim is an Entrepreneur, CEO Coach, Optimist, Instigator of Positive Change…and Fixer of Stuck Companies.
CEOs, family owners, investors and Directors enlist Jim to be their ‘fresh pair of eyes’ and confidant.

Jim is also a long time friend and a person of high ethics and integrity.

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Venture Capital Dispatch
An inside look from VentureWire at high-tech start-ups and their investors.

Jan 18, 2013

Alchemist Accelerator Graduates its First Class
By Deborah Gage

Helping businesses figure out how to make money has been less appealing for entrepreneurs than writing Web apps for the public, but that’s changing with Alchemist Accelerator, which was inspired by a Harvard Club of San Francisco project and is trying to instill business skills into technical entrepreneurs.

On Thursday on the Microsoft campus, backed by music from “Star Wars” and “Mission Impossible,” nine startup teams graduated from the Alchemist Accelerator, which offers a $28,000 investment, six months of training and introductions to potential customers and mentors from Stanford University faculty and Silicon Valley executives and entrepreneurs.

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First Six Months Template

The format for the First Six Months Plan is organized as a matrix with time across the top and areas along the vertical axis.  Because there will be many things you do not know initially, the timeline provides greater clarity in greater detail in the short term and is  “fuzzier” as you approach the six-month milestone.  So, for example, typical timelines would be:  First Two Weeks, Second Two Weeks, Second Month, Months 3-4, Months 5-6.  The rows consist of the key areas that will need investigation.  While this will be dependent on the specific situation, typical categories would include “Strategy”, “Financials”, “Personnel”, “Customers”, “Sales”, “Services”, and “Operations”.

First Six Months Template

In most cases, a good First Six Months Plan will result in clear visibility to your board or management, and a reputation will be established for both accomplishment and transparency. The First Six Months Plan is a living document.  As time progresses, it should serve as a tracking mechanism for milestones met or not met, using simple visual clues. For example, highlight completed items in green, incomplete items in red or yellow, deleted items crossed out.  You can even make your Six Months Plan accessible online, with click-able details for each item.

As the first six months come to an end, a smooth transition to a Rolling Twelve-Month Plan as described in the section on Transforming the Business – A Three-Step Process for Business Transformation will ensure continued progress.

Copyright © 2012 Beatriz Infante  – All rights reserved.

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Leaders who have been recruited to take over a company or organization in order to lead a transformation and turnaround must address all of the items laid out in the section on Transforming the Business – A Three-Step Process for Business Transformation, including completing a Transformational Goal, Transformational Arc, and Twelve-Month Goals. In addition, they will have to deal with a host of immediate personnel priorities.

You will have no more than two to three months to demonstrate to your management and peers that you were the right person for the job, and that you can create the positive cycle of change that leads to corporate renewal or transformation.  That doesn’t mean the transformation is complete – that may take twelve to twenty-four months or longer – but the actions you take in the first 90 days will determine the ultimate success or failure of your corporate transformation effort.  This is why the First Six Months Plan provides a proven template and timeline for all the things that need to be accomplished in that timeframe.   This chapter is a step-by-step guide to the leadership skills you will need to succeed during this demanding challenge as you implement your First Six Months Plan and beyond.

The First Six Months Plan

The First Six Months Plan provides a highly structured, urgency-based, top-down approach that has been proven to work in many situations requiring rapid turnaround and crisis response.   This methodology is appropriate to a “hit the ground running, no time to waste” approach; however, once a level of stability has been reached, the First Six Months Plan format and timeframe flows seamlessly into the 12-Month Goal format.  This drives lower level goals in a cascading fashion from the Transformational Goal, and directly ties team MBO’s to corporate goals and the desired results in the Transformational Arc.

The First Six Months Plan is a one-page summary of the most relevant actions you must accomplish in the six-month timeframe and should serve as a measure of your progress and a communication mechanism with your boss or your board.  By its very nature, the Six Months Plan will be somewhat more fluid in the latter months – there will be many unknowns and inevitably surprises.  Nevertheless, best practices in corporate turnarounds dictate a rhythm and timing to sets of actions that are universal across industries and situations.  While the actions outlined below may appear to be extremely rapid, in most circumstances the timeframes below are completely achievable, and in many cases dictated by the financial constraints of the business.

Immediate Strategic Priorities

In any new transformational or renewal role, regardless of industry or situation, there are certain invariants that must be immediately addressed.

Stabilize and Secure Sources of Cash.  In any transformation, it is of primary importance to understand how much cash runway you have available to effect the transformation, and if the company has a cash cow business, how quickly it is likely to decline.   Debt may need to be restructured, vendor contracts re-negotiated or deferred payment arrangements made.  But, if the company is in a negative cash flow situation, especially if total cash is also low, all necessary steps should be taken to reduce cash outflow and reduce overall expense burn.

Establish Trust with Customers.  Particularly in situations where there have been visible misses in terms of forecast revenue, or where there have been customer-impacting issues such as product or support problems, customers may have concerns about the future of the company, and a management change at the top may increase that concern.  Therefore strong customer outreach is essential in order to reassure and stabilize, as well as open channels of communication and receive feedback on customer needs and requirements.

Analyze Prior Financial Performance and Issues.  Having a qualified CFO as trusted partner is essential to a thorough analysis of past financial statements.   The cleanest situation will be a public company with clean financials.  However, even in this situation a thorough analysis should be undertaken.  Companies that have had revenue reporting issues and private companies must receive the highest level of scrutiny, and if a qualified CFO is not in place, contract resources must be utilized. Smaller private companies in particular will need a complete examination of past revenue recognition practices, reconciliation with contract T&C’s, verification of receivables and payables, as well as validation of bookings and commission payments.

Model Financial Plan, Downside Plan, and Worst-case Plan.  While the company likely has a current operating plan, an immediate responsibility is to examine the plan and make a business judgment about its accuracy.  Based on this risk assessment, a Downside Plan should be modeled which reflects a significantly reduced risk profile.  Finally, Worst-case plan should be developed which models situations of increased risk such as a more rapidly declining mainstream business than historical precedent would indicate, or a greater falloff in planned revenue.

Establish Forward-going Spend Levels and Take Immediate Action.  Based on the sensitivity analysis above, it will likely be necessary to take immediate cost containment actions to ensure the financial health of the business.

Examine all Functional Areas.  Since the activities cited above will be time-consuming, triage should be performed on the functional areas that appear to need the most focus.  For example, support margins may have been significantly decreasing, so the support organization may need to be examined first, or product issues may be at the forefront, in which case an analysis of the product organization may be needed.  Often the initial flash point may prove to lead to a different root cause; for example, support margins may be increasing because of decreased quality in the product.  The First Six Months Plan should encompass deep operational reviews of all functional areas, but the timing should be adjusted so as to address the most critical areas first.

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CEO: Does Your Team Have Control of the Ball?

The team watching the ball slip away…

“The only players who survive in the pros are the ones able to manage all their responsibilities.” – Tom Brady, Quarterback of the New England Patriots

Football, rugby, or any other sport organized around a finely-tuned playbook, requires players to understand roles and execute plays in both familiar or unplanned situations. Each player has defined roles and responsibilities based on his skills; that player is fully aware of his role, the roles of others and has studied the plays. A solid playbook enables a cohesive team to maintain control of the ball and win.

Does your company’s playbook have:

This all too common, weak people/process combination creates lots of broken plays. Basic things like roles, skills, processes really should be a given in any organization.

But if that’s what’s ‘supposed to be’, then why have I regularly seen many corporate fumbles, pigpiles, tangled situations and outright conflict over ‘who does what and how’?

Thinking Horizontally

Many organizations are driven (dominated?) by a particular function such as engineering, sales, production, or in the case of professional service firms, project delivery. In my consulting and coaching work, I’ve worked with strong CEOs that are able to push the business forward by being grounded in one of these personal skill sets. This functional strength can be a real asset, and in many cases, it was the driving force that launched the company and enabled it to grow.

In initial group meetings with company teams, to break the ice I often ask a variation of the question: “Who runs the company, sales, manufacturing or engineering.” After I ask the question, I wait to hear the noise from the pin dropping…:)

As a company’s overall operations increase in complexity, great execution only happens if all the business functions work together seamlessly. However, some of the same CEOs that are grounded in one strong functional skill set don’t make needed changes to their process/operational playbook as the company evolves. The CEO may ignore or trivialize the importance of looking at the overall business ‘horizontally’.

The Line of Scrimmage

Most of the confusion I’ve experienced related to process playbooks has been in organizations that have a complex sales process that involves:

  • custom or semi-custom products
  • customer orders with product/service specifications that could change from order to order
  • contracts/proposals that have unique conditions
  • high customer expectations related to quality, testing, product acceptance

Examples of a some of types of organizations that fit these order profiles are:

  • specialty boxmakers
  • magazine printers
  • specialty window, door manufacturers
  • precision machining
  • chemical formulations
  • custom industrial equipment
  • IT consulting
  • various professional service firms
  • lots of others you could name

Piling On –> Breakdowns in Key Processes = Trouble

What happens when the process playbook doesn’t exist, is getting dusty on the shelf, or needs a complete overhaul?

Piling on happens when: a) sales doesn’t get the order specs correct…there are flaws in design, scope, terms; b) estimating creates an inaccurately costed order with incorrect pricing; c) engineering designs what sales specified but not what the customer ordered; d) manufacturing builds what engineering designed; e) the product fails customer tests; f) rework is needed; g) you get the idea…

What are some of the negative impacts on the business performance when a company doesn’t have a clear playbook or deviates from the process playbook? Here’s a sample:

Solutions: How to prevent pigpiles, fumbled balls, and losing the game

Fixing process problems like those noted above is not a complicated task. It’s actually pretty simple to implement the necesssary changes, but the basics often get lost in the the day-to-day shuffle.

1) Establish process flows for unique as well as routine projects and stick to them

Breaking down the process into well-defined pieces facilitates successful execution – once processes are clearly articulated, people need to study their playook, understand their particular functions and own them.

2) Based on the particular process, define clear roles and responsibilities

I do this. You do that. (Why does this have to be hard?)
People need to do their job and be accountable for performance.
“That which is owned by all is cared for by no one”. (Unknown)

3) Establish a clear communication system horizontally across the process chain and vertically through management so that glitches are caught early

For example, if a key person in the chain will be on vacation or is ill during production, who needs to step up and carry the ball?

4) Management, through training, repetition, and even incentives, needs to reinforce the use of the process playbook

In organizations that tend to operate in a seat-of-the-pants mode, this may be the most difficult problem to solve. This is particularly true if there are employees who have difficulty sticking to their own functions. Commit to a cultural change program.

For incentives, why not reward the excellent winning ways of using the playbook? When the team(s) deliver excellent products, on time, don’t forget to recognize it.

5) Revisit processes on a regular basis

What’s working? What needs tweaking? Do we have the resources we need to keep our customers satisfied? What about the team? Changes in personnel, especially when the products involve technical expertise, might invite revisions to the playbook.

Does your company have control of the ball? If not, are you ready to ‘think horizontally’ and get your playbook in order?

Illustration by Drew Litton

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