Situation: Early stage companies often find it difficult to raise funds from traditional sources. An experienced CEO wants to help certain new companies of which she is aware in two ways – assisting them in receiving funding, and then helping to assure that they reach key milestones. What is the best way to profitably address this ambition? How do you fund a start-up?
Advice from the CEOs:
Build relationships with a few select sets of local investors – venture capitalists, angels, and private investors – with whom you have strong credibility. For a retainer or fee, agree to bring them a number of new pre-vetted companies in the next year, and post-finding, help the companies to succeed and hit milestones. From the companies that you bring to funders, ask for equity in return for securing funding and providing guidance.
Put yourself in the shoes of the person who will pay you – what do they want and how do you deliver this for them? Develop statistics from your past successes that highlight your capabilities. Don’t be shy about your accomplishments.
What are you passionate about? If the answer is development – linking technology entrepreneurs to strategic partners and then being an accountability partner to assure that milestones are met – this will be your focus and your pitch to both funders and tech companies.
Your value is linking the entrepreneur to the funding source and being an accountability partner.
Situation: A company has a key employee who is a high performer; however the company has not developed a good accountability structure to direct this person. The CEO wants to add additional accountability to cover everyone, both current employees and new people as they are hired. The system should be fair and apply to all. How do you hold high performers accountable?
Advice from the CEOs:
High performing employees are essential assets to a company. They thrive on meeting and exceeding expectations. However they need to recognize and accept accountability for the inevitable mistakes or misjudgments that will occur.
Lay out the challenge, and ask your high performing employee, and this individual’s manager, to help design the system for monitoring accountability around results.
Within position descriptions, include not only the role and expectations within the description, but also expected progressions for development. These should be objective, measurable and based on specific skills or capabilities within the development progression. Gather input from current employees as you create position descriptions, so that they reflect the experience of employees rather than idealized generalities.
Set your expectations for new employees appropriately. Expect perhaps 60% of optimal performance early on. As new employees gain understanding of the company and their roles, coach and expect them to increase their performance over time. Provide training to assist their development.
James Fischer, in Navigating the Growth Curve, argues that expectations, for the CEO, management and employees, change as a company grows from start-up to a large firm. If a company is small, it doesn’t want the same structure or processes required to operate a 250 person company. Too much structure stifles creativity and growth if applied to small, nimble companies. Institute a level of structure appropriate to the size and stage of the company.
Situation: A company has learned that a competitor has cloned their client development approach. This approach enabled the company to gain early market share. They have since moved up-market and have enhanced their sales tactics. How should the company respond to the competitor’s tactic?
Advice from the CEOs:
Reconnect with the market contacts that got you where you are. Be sure that they are aware of your track record, the value that you provide your clients, and reinforce your current market development focus. Now that you are established, position yourself as the proven producer who consistently produces results.
Study what the competitor is doing, who their target customer is, their close rates, and what if anything they are doing to enhance their close rates. Learn from them and copy or improve on their practices where this will yield benefit.
If your sales development is based on referrals, enhance the rewards to contacts who bring you new business in your prime target markets.
Your principal concern may not be your client base, which is likely unaware of the differences in your versus your competitor’s approaches, but in the referral structure that is your primary source of new business. Focus effort and resources to shore up your relationship with your referral base.
Focus on your strengths – performance and excellence in managing client relationships.
If the competitor is focusing on down market accounts that you no longer cultivate, then expect them to succeed in this market. Become the provider of choice to up market accounts and the natural referral choice for these accounts. If the competitor stumbles, you may pick up unexpected business.
Situation: A company has been approached by an international business development specialist who wants to help them expand into Asian markets. The company would need to hire local resources to support business that was generated. Most of this would be cookie cutter as opposed to creative work. How do you work with an international business development person?
Advice from the CEOs:
Research the country markets where the specialist can help you and focus on the more developed and promising markets first.
If the specialist that has approached you has a local presence in the markets in which you are interested, lean on this person for help getting you started – office space, staff support, and so on.
One company started a subsidiary in Canada. The CEO believes that you must have a highly trusted person to own the project. Success is all about the relationship with this individual and their knowledge of both local and American culture.
Another company hired very promising business development person for a large Asian market. As the relationship progressed, they found that this individual was double dipping – working for them and their competition at the same time. Apparently this is acceptable in that culture.
Many cultures are relationship based. Local contracts are critical. Does your specialist possess these, and are they premier companies or also-rans.
Talk to individuals in your industry who have experience in the region.
Have your eyes open and recognize that this is will not be a quick process.
Situation: A company has been approached by a foreign company that is interested in their expertise. The foreign firm says that they are only interested in their own domestic market, and want the company’s help developing new products for their existing domestic clients. How do you develop products with a foreign firm?
Advice from the CEOs:
There is great variability between companies in different locales and on different continents. Before proceeding with negotiations, get references from the company and check them carefully. Research the company and its local market.
Relationship will be critical. You want to meet with their CEO. This is an important factor working with any company. Watch the commitment level of the CEO and top staff. Take an expert with you – someone knowledgeable about local mannerisms who can read the body language in meetings. Position this individual as someone who is assisting you in the negotiation.
If you proceed with negotiations toward an agreement, make your enforcement jurisdiction either the US or a neutral country with a western judicial system. For example, if the company is Chinese, make the enforcement jurisdiction either Hong Kong or Macao.
Will intellectual property be a factor? If so, get an IP attorney knowledgeable about both the market of the other company as well as your preferred enforcement jurisdiction.
Could this help you to augment or fund your own development? If so, ask for rights to produce and distribute products developed through the collaboration in the US and other markets outside of partner’s domestic market.
Situation: A professional service company is intrigued by LEAN and Six-Sigma approaches to increasing production efficiency and reducing costs. Most of the examples that they see of LEAN and Six-Sigma in action are in production or manufacturing settings. Do LEAN or Six-Sigma programs apply to processes in a professional services environment?
Advice from the CEOs:
LEAN and Six-Sigma are heads-down approaches to process improvement. In a customized solution environment, standardization of processes has less pay-off. As an alternative, consider Agile Development and similar heads-up process solutions.
Agile Development is both a philosophy and a process. Steps to introducing Agile Development to a professional services environment include:
Identifying high risk areas of individual project plans,
Double resourcing high risk areas to increase the likelihood of fast, satisfactory solution outcomes,
Looking for collaborative synergies and scenarios,
Scheduling regular team meetings to enhance collaboration,
Working opportunistically rather than systematically to increase efficiency, and
Using project post-mortems to refine systems and processes.
One professional services company which has adopted Agile Development assigns Senior Engineers as outside consultants on projects. These individuals bring a more experienced perspective, and can identify more efficient ways to find solutions and produce a more cost effective and timely result.
A company has focused on developing future leaders and managers. They do this both to increase their managerial and leadership bench strength and to boost employee retention. What has worked for you in developing managers and leaders?
Advice from the CEOs:
Trying to make a leader doesn’t work. Leadership is a trait, not a skill. Leaders can arise from anywhere within the organization. An effective CEO recognizes this and works with both the leaders and the managers, whatever their position.
The Gallup Organization found that exceptional managers and exceptional leaders are not often the same people. Usually, the best managers are people who excel at bringing out the best in their employees, but may not be either visionary or strategic thinkers. Leaders, on the other hand are those to whom others look to for guidance and direction. Good leaders know how to identify and delegate to good managers.
Identify and develop strengths within your people; don’t try to fix weaknesses.
Gallup found that talented people have identified and developed their strengths. Instead of fixing weaknesses they find ways to work around weaknesses so that they are not harmed by them.
Use informal mentoring. Assign mentors to employees, and include cross-departmental mentor assignment to extend skills development, as well as managerial and leadership development.
Ask mentors to report progress to the CEO on occasional basis.
As you develop your talent pipeline, track the number of employees added to the pipeline per year as a key company metric. As an additional metric, look at the number of individuals in your pipeline compared with the number that you believe you need to fill future needs.
Interview with Trevor Shanski, Founder, eWORDofMOUTH, Inc.
Situation: A company with a new lead generation solution is ahead of the curve for their market segment, and ready to transition from a product development focus to a full-scale business development focus. This means developing new capabilities on a limited budget. How have you made the transition from product development to business development?
Advice from Trevor Shanski:
The reality of early stage companies is that they live on scarce resources. Founders and early executives have to be able to work for lean base salaries during the learning curve. They will be individuals who have selective characteristics.
They will be able to accept conservative salaries near-term, as well as during financial bumps in the road. Their focus will be growing the company’s value and their incentive will be having a material stake in the company.
They will have limited outside demands on their time and attention so that they can work long hours.
They will appreciate the challenge of heavily performance-based compensation, with the potential to win big if they can deliver.
They will have a network of connections and relationships upon whom they can call to gain early business traction.
Characteristics for successful early stage executives include the ability to work intimately with the founding team. Early stage companies are idea and capability incubators where things change quickly. Players must be able to get the job done with little support.
It is critical to have a clearly defined set of expectations for the first few months as you bring on new executives. Early foci will include:
Immersion in understanding the product capability and possibilities.
Sitting down with a white board and openly looking at fresh thoughts for how the market should be approached. Founders frequently suffer from tunnel vision after a long period of development and need a fresh outside perspective on the market and messaging. What partnerships could accelerate market development? What knowledgeable experts should be leveraged to build awareness? What potential is out there that the founders are not seeing?
After these factors are defined, the next step is to develop an action plan and milestones to guide plan execution, plus a budget and alternatives under different resource scenarios.
Once the plan is in place, the focus will be to gain early feedback on the company’s product and capabilities, and then iterate quickly to find the right message to target significant segments of the market.
The focus of early stage companies has to be on quickly developing plans, and then executing.
Situation: A company has experienced rapid growth. This is creating stress for the staff and CEO, who finds it difficult to break away from the day to day to focus on strategy. Employees are not keeping pace with the evolving needs of the company and turnover has increased. What have you done to manage rapid growth?
Advice from the CEOs:
The first task is to improve forecasting of business growth, and the infrastructure needed to support this growth. This includes:
Regularly updating your sales and production forecasts.
Updating staff and training plans to meet growth forecasts.
Updating infrastructure and support plans.
Without these, the organization will whipsaw in response to market demands.
Take a critical look at your staff development plans and staff training.
Look at those areas that are most impacted by business growth. Determine whether you have the right managers and support in place.
Evaluate whether you have the right people and whether they have the skills to handle new demands of their positions.
Critically evaluate each now job that you take on. Assure that you have the staff and infrastructure to meet client demands.
Always assure that you deliver on your company’s integrity, reputation and core values.
In addition to addressing immediate needs, look at long-term plans strategically. Ask where you will be in 10 years. Articulate this vision in detail, and drive plans down through the organization. Make sure that everyone is on the same page, aligned with the same values, aiming at the same targets.
Also differentiate your vision from your mission:
You vision is a 10 year time frame, not one year.
Your mission is what you will be doing this year and in 5 years – the activities you will undertake to realize your longer term vision.
Fine tune your vision and mission and drive these through the organization. This will give you clarity on how you wish to do business and will help you to make hard choices as you handle rapid growth.
Situation: As they have grown, the Company has used Bay Area talent to seed new locations around the country. Leadership is now short at headquarters. What have others done to fill leadership gaps?
Advice from the CEOs:
Develop a formal Leadership Development Program.
Identify the top leadership candidates with the company – the top 10%.
Identify their individual goals and determine whether these are consistent with company values.
Clearly communicate the roles and expectations that you have for future company leaders – both the upsides and the sacrifices that you anticipate that they will have to make.
Team the leadership candidates 1/1 with mentors to guide them.
Consider an “internal” Board of Directors for developing leaders. Members are considered advisors to the true Board of Directors, understand company strategy, are coached on company values, and are involved in an advisory capacity in key company decisions.
Consider a leadership “boot camp” program to groom potential leaders and weed out those who like the idea of leadership more than the reality.
From the standpoint of a very hierarchical company, the following items are involved:
Defining the traits for key positions
Identifying candidates who appear to possess these traits
Assigning leadership roles to these individuals in executing the annual strategic plan – with senior managers mentoring leaders-in-training
Include training and development in professional development plans
Investigate employee assessment tools, for example the Myers-Briggs tools.