Tag Archives: Friends

What are Appropriate Social Interactions at Work? Three Thoughts

Situation: A first-time CEO is curious about the experience of others regarding social or personal interactions with employees at work. At previous companies, outside of company picnics or similar events there was little interaction between top staff and employees. Do others observe similar practices? What are appropriate guidelines for social interactions at work?

Advice from the CEOs:

  • Consider the following cases:
    • Case 1 – even though individuals may be friends outside of work, they often do not engage as “friends” at work. There is a different role structure at work.
    • Case 2 – if, based on history, a CEO and employee have had a close relationship outside of work, the CEO should not show favoritism toward this individual at work. It is important to preserve a veil of trust with the other employees; apparent favoritism will disrupt this.
    • Case 3 – a CEO may have lunch with employees, to build relationships and keep tabs on the company atmosphere, but other social activity outside of work should be handled cautiously.
  • There is a natural distance between any employee and those individuals who evaluate or review them or decide on promotions. The individuals have a power over the employee that prevents them from approaching each other as true peers.
    • Because of this natural barrier, it is inappropriate to force social or personal interactions. The best option is to make sure that the employees know that the boss cares about them, has their interests in mind, and shows an interest in them and their families.
    • It is important to take advantage of opportunities to demonstrate to employees that the CEO is interested in them.
  • The situation is different between managers and their teams. Teams function on the basis of relationships and trust. If the CEO is invited, it is appropriate to attend team or department functions. Observe and learn from these interactions with the others. Most of all, listen actively, and patiently allow the interactions to mature. Don’t force things.

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How Do You Find the Right Funding Source? Six Solutions

Situation: A company is short of cash and needs a source to fund their cash flow needs. Their needs are mapped out for the next four years and they can fund current operations for a few months. However, their bank will not extend their credit line. How do you find the right funding source?

Advice from the CEOs:

  • Try another bank. Ask friends and contacts about their banks and see if they’ll refer the company to their bank.
  • Explore renegotiating the company’s lease to ease the cash flow needs.
  • Explore renegotiating payment terms with suppliers. See what can be worked out. The bottom line – if the company goes Chapter 7 or 11, they get nothing.
  • Consider going to a larger company and working out an arrangement.
    • Ask that they allow the partners to operate as an “independent” entity retaining their titles.
    • In exchange for funding the company’s cash needs, the larger company shares in the profits.
    • Seek a temporary arrangement to allow the company can get back on its feet financially.
    • Use the friends and reputation that the company has developed over the years. The company is a good outfit and respected. Others may help if asked.
  • A similar tactic is to approach a larger company to negotiate an arrangement that will allow the company to survive. Start with a business plan.
    • Highlight the company’s reputation and the quality of its products. Use references from highly satisfied customers.
    • Highlight the company’s key strength – developing the critical path and plan for a successful project.
    • The thrust of the presentation: the partner gets a quality team and shares in the profits from projects completed. The partner provides the cash to fund the projects. Compare the risk and return on these funds compared with other investment options available to highlight the value of the proposal.
  • Other CEOs shared similar situations that have worked for them.
    • The financial realities were kept secret from staff, customers, and competitors.
    • All unnecessary expenses were cut.
    • The focus was on making money today.
    • Supplier payments were delayed as necessary to manage cash flow.
    • The process was managed creatively, sometimes with the assistance of friends, and the companies were able to prevail.
  • There is no shame in facing and dealing with this problem. Determination will pay off.

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How Do You Manage Company and Board Dynamics? Four Points

Situation: A company started as a collaboration of friends. Upon incorporation the leader became the CEO, and some of the original team became members of the Board. The CEO struggles with the responsibilities of being CEO while wishing to maintain the friendships that drive the company. How do you manage company and board dynamics?

Advice from the CEOs:

  • While the company was formed as a collaboration of friends, once it incorporated the nature of the relationships necessarily changed. While away from work the CEO may remain friends and close to the others; however, within the company there must be one CEO who is responsible to the shareholders for operating the company according to that individual’s vision. If the CEO and company are successful, all will be rewarded.
    • Shareholders are not partners – a partnership entity is inherently different from a corporate entity based on share ownership.
  • Within a corporate structure, majority control is critical.
    • While one should never trample on the rights of other shareholders, having 51% is better than having 47% ownership. Majority ownership makes it unnecessary to assemble a majority to drive the company in the direction that the CEO seeks.
    • That said, it is important to encourage the ideas and creativity of minority shareholders who are also employees. There is an art to recognizing and incorporating the ideas of others while the CEO, in the end, maintains final say.
  • The CEO’s job – and preferably within a small company as both Chairman and CEO – is to develop the CEO’s vision of the company and drive this through the organization.
  • Having a key employee report to the Board rather than to the CEO is likely a mistake. Employees do not do well long-term reporting to a committee.

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Is It Wrong to Hire Family Members? Six Considerations

Situation: A small but very profitable business was founded and has been run for two generations as a family-owned and operated business. To boost performance, the CEO hired a general manager with a good background who is not a family member. The general manager has told the CEO that he feels that there are too many family members in the business. The CEO likes hiring people she trusts, particularly friends and family that she has known for a long time. Is it wrong to hire family members?

Advice from the CEOs:

  • Don’t try to change what you’ve already done – plan for the future.
  • Acknowledge the GM’s idea. Tell him that you appreciate his suggestions. Suggest that he test hiring more non-family members to cover one of your low risk market segments. Measure the performance of this team versus the other teams within the business.
  • The challenge with family members is accountability and objectivity. The question for the family owners is whether they have the freedom to act in the interests of the company. Can they put family ties aside when someone is not serving the interests of the company?
  • The essential question for the family that owns the business is – what do you want to maximize? If it’s loyalty and longevity – keeping the family together, employed and in harmony – they can be good. If it’s profits and performance – family and friends can be difficult if emotional ties cloud business objectivity.
  • The upside to family is loyalty and trust. That said, family and extended family friends are different. The latter don’t have the same ties or sense of loyalty.
  • Can you keep employees for too long? Yes. Make sure that you evaluate all employees every year. Establish job and performance standards and make sure that all employees – family and non-family – are held to the same performance expectations.

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Do You Need To Rely on Venture Capital Funding? Three Questions

Interview with Charles Bellavia, CEO, ElectraDrive

Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?

Advice from Charles Bellavia:

  • The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
  • Can you fund the company out of your own pocket?
    • Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
    • Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
    • Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
  •  What is the minimum funding needed for the company?
    • What funding do you need just to prove your technology and generate cash?
    • Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
    • Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
  •  How do you keep project workers motivated?
    • Plan for turnover. Know who is key to the project, and where you need back-ups.
    • Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
    • Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
    • Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.

You can contact Charles Bellavia at cfb@electradrive.net

Key Words: Funding, Venture Capital, VC, Bootstrap, Self-fund, Friends, Family, Income, Salary, Founder, Life Stage, Focus, Core, Iteration, Turnover, Fun, Recognition

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