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February 2003. Teams: Human nature and human resources Building, managing and motivating. Douglas Abrams - Parallax Capital Management. Teams: Human nature and human resources. The team is the most important thing Building teams Managing and motivating teams.

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February 2003

Teams: Human nature and human resources

Building, managing and motivating

Douglas Abrams - Parallax Capital Management

teams human nature and human resources
Teams: Human nature and human resources
  • The team is the most important thing
  • Building teams
  • Managing and motivating teams
the team is the most important thing
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

describing the team in the business plan
Organizational structure

Backgrounds, experience and expertise

Balance

Needs

Founder/CEO and management team

Describing the team in the business plan
what do investors look for in a team
What do investors look for in a team?
  • Completeness
  • Competence
  • Maturity
  • Initial team should be prepared to step aside
the more complete the team the more likely the start up will get funded
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
completing the management team
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

the core team
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
the team building process
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

management team members
CEO

VP Marketing & Sales

VP Business development

CTO/CIO

VP Production

CFO

Management team members
what is the best sequence to add people
What is the best sequence to add people?
  • Technology leader - inventor or leader of engineering
    • Must have strong skills
    • Investors prefer a prior VP or veteran leader of teams
  • Experienced CEO
  • VP of Marketing
    • Should be part of creation of first product
  • VP of Business Development
    • May double as VP Sales or Marketing in early days
  • VP sales
  • VP Manufacturing or Operations
    • Must be on board in time to ship first product
ceo chief executive officer
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
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")

CEO - criteria for success
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

CFO - Chief Financial Officer
cfo issues
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
cto chief technology officer
Responsible for technology strategy and implementationInternal and external if technology company

Criteria for success - all

Internal technology solutions are efficient and cost-effective

Product comparison matrix

Criteria for success - technology product

Design

Research and development

Product development

On schedule and under budget

CTO - Chief Technology Officer
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

COO - Chief Operating Officer
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

VP Sales and marketing
vp business development
VP Business Development
  • New customers
  • Strategic partners
  • Potential investors
beyond the management team
Beyond the management team
  • Other key employees
  • Board of directors
  • Advisory board
  • Professional services: accountants, lawyers, etc.
role of directors and advisors
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

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

Strategic partners
consultants and contractors
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
attracting vcs without prior experience
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
technologist or student starting business
Technologist or student starting business
  • Get started
  • Complete business plan
  • Attract key management talent later
teams human nature and human resources1
Teams: Human nature and human resources
  • The team is the most important thing
  • Building teams
  • Managing and motivating teams
don t settle for average employees
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
hire the best people you can find
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”
pick outstanding talent
Pick outstanding talent
  • Will represent company to investors
  • Must make an excellent impression
  • Track records
  • Skills
  • Depth of experience in areas important to SCA
where to find the right people
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

A/P Wong Poh Kam - NUS

recruitment
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?
finding and retaining the right people
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.
in reviewing resumes look for
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
look for well rounded employees
Look for well-rounded employees
  • Extra-curricular activities
  • Community activities
  • Artistic achievement
  • Language skills
  • Sports
try to look beyond the resume
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
what qualities to look for in employee
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
before the interview
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?
in the interview
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
good candidates will ask their own questions
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?
after the interview make the decision
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
what does fit mean
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?
do you like the person are they
Do you like the person? Are they:
  • Intelligent?
  • Enthusiastic?
  • Passionate?
  • Sincere?
  • Do they appear to like you?
admissions mistakes
Admissions mistakes
  • Settling out of desparation
  • Ignoring red flags
  • Lawsuits and legal entanglements
lawsuits and legal entanglements
Lawsuits and legal entanglements
  • Investors do not like lawsuits or even the possibility of legal issues
  • Make sure employees get out clean
make sure employees got out clean from previous employer
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

remuneration packages
Remuneration packages
  • Salary
  • Stock options
  • Profit sharing and bonus schemes
  • Pension plans
  • Commissions
  • Cars and travel expenses
packaging the offer
Packaging the Offer
  • Pay
    • Salary + Performance Bonus
    • Signing bonus
  • Generally low to conserve cash, but made up with...
    • Stock & stock options
    • Up-front stock offer
    • Stock options & vesting schedule/buy-back conditions
  • Other benefits
    • Generally non-existent/lower for start-ups, but should look at “Learning opportunity” and “Greater challenge/ excitement factor”

A/P Wong Poh Kam - NUS

stock options
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

teams human nature and human resources2
Teams: Human nature and human resources
  • The team is the most important thing
  • Building teams
  • Managing and motivating teams
team building principles
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

organizational structure for a new venture some practical issues
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

managing people
Managing people
  • Management theories
    • Traditional hierarchical structure
    • People-oriented structure
  • Motivating factors
  • Groups and teams
traditional hierarchical structure
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
people oriented structure
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
differences in the structures
Differences in the structures
  • Hierarchical structures have poor internal communication and are slow to adapt or change
  • People-oriented structures have good internal communcation and adapt well to change
  • Most successful, knowledge-based businesses are people-oriented
maslow s hierarchy of needs
Maslow’s hierarchy of needs

Self

actualization

Esteem & status

Social and affection

Safety and security

Physiological

management structures
Management structures
  • Hierarchical
    • Authoritarian, like the military
    • Vertical communication OK; horizontal poor
  • People-centered
    • Matrix structure
groups
Groups
  • Definable membership
  • Group consciousness
  • Collective purpose and identification
  • Interdependence
developing a team
Developing a team
  • Forming
  • Storming
  • Norming
  • Performing
  • Adjourning
networking is critical for successful teams
Networking is critical for successful teams
  • Failure to network can create:
  • Inter-group hostility
  • Insularity and inward thinking
  • Not invented here factor
managerial styles
Managerial styles
  • Authoritarian, autocratic
    • Solve problems alone
    • Dictate decisions
  • Consultative
    • Discusses problems
    • Makes decisions
  • Democratic, participative
    • Chairperson
    • Agrees problem
    • Creates consensus
other important management issues
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
performance reviews
Performance reviews
  • Conducted regularly between manager and employee
  • Self-assessment - 3+/3-
  • Manager assessment
  • Key objectives
  • Development plan
  • Action steps
problem situation interviews
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
managing exit
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

motivating retaining employees
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

effective management
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
keeping people happy
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
corporate culture people work for start up for much more than money
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

when should the entrepreneur step aside
When should the Entrepreneur step aside?
  • Interim from the start until better person is found
  • Changing competency requirements as a venture grows: the skill to manage a $2 mil business is different from that of a $50 mil business, or a $500 mil. one
  • Start-up Excitement vs. Execution “Grind”
  • Planning management transition: The role of the CEO and the Board of Directors
  • Stepping aside: From CEO to functional, advisory or “evangelist” role
  • Stepping out: Serial entrepreneurship, CEO-for-rent, angel investing, venture capitalist

A/P Wong Poh Kam - NUS

exercise middle management muddle
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.
lessons learned from the game
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.
sources and suggested reading
Sources and suggested reading
  • High-Tech Start-Up (2nd edition) by Prof John Nesheim
  • Lang, J.(2002), The High Tech Entrepreneur's Handbook, Ft.com
contact us
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