Title: CREATING THE EXECUTIVE TEAM Who, When
1CREATING THE EXECUTIVE TEAM Who, When How
It Affects FundingSoftware Development
ForumJuly 24, 2002J. Peter Bardwick
415/385-4523 peter_at_jpbardwick.com
2The Magic Bullet For Raising Capital
- Just Two Requirements
- Build a great company
- Effectively communicate its value
3Building a Great CompanyLessons From the School
of Hard Knocks
- Nothing is more deterministic of a companys
success than the quality of its team. (Sorry,
clichés are often true) - Quality Shared Goals Raw HP Sheer
Determination - Personnel costs are the highest single expense
for most companies. - Great management is rare and usually learned
through long trial and error and conscious
focused effort. - Every hour spent on preventable employee problems
subtracts three hours from productive work and
gives you a migraine. - An executive team that recruits and manages
effectively has done at least half the work
required to make a great company.
4Company Stages
5Company StagesDrive Company Activities
6Company StagesDrive Team Requirements
7VCManagement Check List
- Communicate (aka effectively sell an honest and
consistent message to all stake-holders) - CEO has previously been a CEO or divisional
manager - Domain expertise
- Calls get returned by the most important people
in the industry (potential customers channel
partners) - Big and small company experienceideal is
previous start-ups - More interested in company success than personal
success - Clichés  passion, focus and drive
- Communicate (aka effectively sell an honest and
consistent message to all stake-holders)
8Hiring Cycle
- Recruiting
- Managing Promoting
- FiringCan be minimized with thoughtful management
9Recruiting
- Should be more formalized than is typical in
startups - Previous or current co-workers
- Network
- From potential customers/channel partners
- Never headhunters for early stage companies (in
this environment) - Written job descriptions testing
10Managing Promoting
- Should be more formalized than is typical in
start-ups. - 2x year formal performance reviews with written
feedback and goals. - More honest feedback than is typical in corporate
America. - Many incentives/disincentives are more effective
than . - High growth companies naturally create new
opportunities for achievers. - Some quantitative evidence that employee training
produces positive shareholder returns. (ASTD)
11Problem Employees Firing
- Should be more formalized than is typical in
start-ups. - Very thorough performance documentation. Not
cookie cutterspecific goals objectives.
(Important management toolnot just CYA). - Straightforward feedback gives people the chance
to improve. - Rapidly growing companies create new slots
appropriate to peoples skillsbut successfully
moving people down requires that this be part
of the corporate culture. - How do you know when to let someone go?
12Minimizing HR LiabilitiesCA Litigious and
Employee Friendly
- Suits often driven by people treated badly on the
way out. - Employee option agreements generate breech of
contract suits. - Covenants not-to-compete are not enforceable in
CA (except for company sales) and can lead to
liability for Unfair Business Practices. - Non-solicitation of employees customers can be
valid but specific language is important. - Very through performance documentation.
Performance evaluations are exhibits 1, 2 3 in
HR suits. - Average cost of defense is 100k.
- Employee Practices Liability Insurance (EPI) of
questionable value.
13Pros Cons of Outsourcing
- Recommended where high quality is critical but
not a full-time need HR, PR/IR, accounting, web
design - Not recommend for sales or CEO (interim CEO is
OK). - Should be task oriented and specific, raising
capital, building infrastructure, strategy,
book-keeping, etc. - Costs are highly variable and may include equity
and/or success fees. Good starting place is an
appropriate annual salary divided by the time to
be spent. - Best source is word of mouth, best source of
diligence as well. - Downsides, quality control and commitment are
common issues but probably overblown.
14Other Issues for Start-Ups
- CEO succession
- Hiring friends is a great idea if you dont want
to manage well or have any friends left - Managing a gap in the team
- Taking a team from a larger corporation
- Can you raise capital if working full time for
someone else? - Do options still work as an employee incentive?
15Suggested Reading
- People Skills, Robert Bolton (Straightforward
text on communications) - Letters to Shareholders Annual Reports, Warren
Buffet (A genius who has been studying management
for 50 years). - Good to Great, Jim Collins (Discussion of
management qualities that create great
companies). - The Practice of Management, Peter Drucker (Or
almost anything by Drucker, disciplined thinking
about management). - Theodore Rex, Edmund Morris (Disciplined and
Inspired). - The Human Equation, Jeffrey Pfeffer (Broad
discussion of what makes effective management). - Topgrading, Bradford Smart (Could be 100 pages
shorter but makes the point about hiring/managing
effectively).