entrepreneurship Archives

CEOs and executive leaders of innovation-stage companies often ask themselves what is the best approach to employee appreciation, productivity and retention.

We’ve all heard the stories around the lengths some venture capital-backed companies go in their efforts to service the needs of their employees.  What started as the water cooler and drip coffee pot, fast-growth companies have super-sized, continuing to up the employee pampering ante–  installing company-paid cappuccino machines and Kurig coffee makers with what appears to be an endless supply and variety of coffees and teas.  Keeping well-stocked office kitchen pantries with either favored junk food, healthy snack choices, or both.  Catering lunch, breakfast, dinner, sometimes all three meals plus a midnight snack that rivals food options found on luxe cruise liners.  Car valet services, onsite dry-cleaning pick-up/drop off, massages, yoga, concierge services, onsite daycare/nanny service, bring-your-pet-to-work options.  And on and on and on, the calories and comfort food arms race continues its grim march toward caffeine OD and adult-onset diabetes.

However, there’s a moral and dilemma CEOs often face when trying to strike the right balance of perks and austerity.

The argument for pampering:  In the new knowledge-worker driven economy, there is often precious little machinery or automation.  So every time an employee walks out the door to Starbucks, Dunkin’ Donuts, the sandwich shop, or the drycleaner, the corporate engine slows down a notch.  Therefore, the logic emerges that if you can remove all interruptions for employees, you’ll get far more in productivity out of them than junk food and pampering you put in to them.

The argument against:   It’s expensive.  It creates a sense of entitlement in employees.  It creates a false sense of prosperity in a company that may be pre-revenue and in need of several more rounds of funding before it can stand on it’s own two financial legs.

Some might say that economic recessions pound the potential for excess back to square one.   OK, so perks have slowed down a bit after each economic set-back in the last decade, starting with the Internet bubble bursting and post-Y2K malaise, the aftermath of 9/11 on the U.S. economy and, most recently, the banking sector melt-down.  However, after each setback it seems a new “floor” gets set that’s just a bit tonier than the last one.

So how do CEOs handle this arms race in employee perks you ask?

Below are a few lessons learned and secrets shared by a number of CEOs who know a bit about the word “value” in serving up employee perks-

Perks Case Study A: Intra-office “micropreneurship.” The secret of the concession license

One venture-backed CEO wanted to offer some of the perks, but not all when it came to stocking the pantry.    So, rather than facing an all-or-nothing approach, the CEO decided that a business principle was in play that could be exploited in a win-win-win fashion–  what the company had as an asset was the equivalent of a monopoly.  He reasoned that employees were a captive audience.  If the CEO offered the “vendor concession” contract to an aspiring employee who wanted to make a few bucks, the company would offer exclusive stocking/inventory rights to that employee to stock the pantry.  However, in trade, the employee had to agree to offer below-market pricing on food and beverages, and also manage the “SKU requests” that the employees would log from time to time regarding food selection and preferences.  His formula in a nutshell looked like this:

-          win for employees-as the got a below market food and beverage offering, the equivalent of a “company subsidized” pantry offering

-          win for the “intra-preneur”-who was given the food concession to run, and could make a few extra bucks running the business

-          win for the company-the company didn’t have to provide all the food gratis, nor had the headache of fielding all the requests from employees

Perks Case Study B:  Serving dinner not as an entitlement, but only to the truly meritorious

[click more button below for rest of post]

More…

One of the questions we as executive recruiters often get asked  is the trade-off between experience and aptitude.   Both sides of the equation are prone to asking it, clients and executive candidates alike.  Sometimes this teeter-totter is referred to as “domain expert versus best athlete.”

What do they mean when they ask?  There’s actually a lot of nuance in the question-when are skills and experience most important to success in the role versus pure talent and aptitude?

• •    Just because a CEO is moving from one industry to another, does s/he lose his ability to successfully lead?
• •    If a VP Sales has been successful at one stage of company growth, can s/he take that same sales toolbox and be successful in another stage company, say either emerging-stage or mature-stage?
• •    Can a VP Engineering be equally effective managing in large companies and small?
• •    Do companies look for the same types of leadership in good economic cycles as well as bad?
• •    How does an executive’s move out of their wheelhouse of skills and experience impact their compensation and/or level in a new industry and company?

These questions are only a few of the factors that impact the answer.    The following discussion is aimed at trying to lend some clarity and context to question.

Let’s take a look at the hour-glass graph below to lay down some of these factors against our “expert or athlete” question:

1)     Level of management: The first factor is where an employee sits in the organizational chart.   In general, skills and experience are most critical at the “waist” of the hour-glass graph-mid-to-upper level management, starting at manager, through director- and VP-level.  At the top and bottom of the hour-glass, aptitude often ends up as the greater emphasis in “hireability.”  This may be fairly intuitive for many.

a.     Entry-level: When you first get out of school, employers often hire for a combination of attitude and intelligence and look for those who exhibit room to grow or “headroom.”   In fact, at entry-level, skills and experience for those roles are often a liability.  Employers may feel someone is overqualified, or a “flight risk” if that employee finds another better-paying and/or higher level position at another company.

b.     CEO-level: When you achieve P&L/CEO status, employers often will place more emphasis on the track record a CEO has in leading a company versus a tenured career history in a specific industry area.  Can a CEO move from rust-belt manufacturer to biotech?  Likely not.  However, there isn’t the same granularity of fit applied at the CEO-level as at the middle-management layer.  If a CEO has been broadly successful in in a number of software companies, it often becomes less important what type of software, or what industry vertical that software was developed for.  Certainly some screening is applied to industry, with some of the below more general industry characteristics takingi precedence-

i.      Experience in selling to similar customer base, B2B vs. B2C or government

ii.      Experience raising equity capital from venture capital or private equity

iii.      Experience creating exits for investors that have generated good returns for those investors

iv.      Experience taking a company from one industry into other industries, popularly referred to as “crossing the chasm”

c.     Mid-to-upper management:   Mid and upper management are where skills and experience over mere aptitude are often most sought after by employers.  Those who are hiring at this level will often even emphasize industry skills and experience above managerial experience, giving the edge to a candidate with industry-relevant background and a lesser degree of leadership experience, assuming that management is a learned skill and can be taught or picked up on the job.  Is this right?  That’s not the focus of our discussion here.  Rather, our goal here is to describe corporate hiring  norms from our observations.

[click more button below for rest of post]

More…

Scott Kirsner recently penned an article in the Boston Globe on interviewing tips, what not to do.  Great compendium (our contributions excepted perhaps but for you to judge in the article sidebar on page 2) of what some might think intuitively as “faux pas”, but many simply may not think of at all, and are at risk of committing.

http://www.boston.com/business/articles/2010/01/10/you_have_your_foot_in_the_door_how_to_keep_it_there_1263010162/?page=1

I had Tuesday to Monday eve in mid-September in a race across the planet to take advantage of British Airways’ generous offer to fly a batch of entrepreneurs wherever they wanted to go in an effort to further each’s fast-growing businesses… at no cost.

My itinerary?  Starting from home base of Boston, then to New York’s JFK, through London, with the ultimate destination– Singapore.  Total air time one way? 18 hours.  Total air and waiting in airport time one way? 24 hours.

What earned me the opportunity?  First, membership in the Entrepreneurs’ Organization (“EO,” www.eonetwork.org, formerly known as YEO, or Young Entrepreneurs’ Organization ) a global membership organization that is nearing 10,000 members across more than a 100 chapters.  EO is one of a group of leadership organizations, including YPO, WPO, CEO, and several others.  Qualifications for EO membership include annual revenues of $1 million or more, and either founder or majority ownership status in your business.

Hailing from the Boston chapter of 100 or so EO members made up of computer software and hardware entrepreneurs, legal and staffing professional services business owners, and a host of other small business founders  including franchising, travel, consulting, real estate, and medical devices, I was made aware of the strategic partnership between British Airways and the EO organization.  The following paragraph, detailing what a face-to-face opportunity would mean to the growth and expansion of our boutique retained executive search firm, BSG Team Ventures, was what I jotted down–

We have a presence in Boston, New York, Silicon Valley, and London. These are key global innovation centers. However, there is clearly a fifth and/or sixth  location to round out our client value proposition of “on the ground coverage in the key innovation centers in the world”– and those are India and Asia. Although there is a term sometimes used that combines the two (“Chindia”), we feel that there is perhaps a need to be able to service our growth-stage clients in each. One alternative is a meaningful position in a location like Singapore, which is equidistant from both these key innovation markets.

The ability to set up a series of meetings with potential partners, and then bring pre-meeting calls and video conferences to an in-person, face-to-face setting, would be extremely meaningful in taking our business from EU-American only, to truly global, capable of better servicing the needs of our clients who continue to demand the need to themselves expand globally.

I had been to Singapore and Hong Kong in 2008 on business, and knew that another trip there would allow us to cement some developing relationships “face-to-face.”  In 2008, we completed a VP Worldwide Sales search based out of Singapore, and are now working on another General Manager search based out of Tokyo for a leading global technology innovator.  And with the recession of 2008-2009 projected to recover in west-bound fashion this time (Asia first, Europe second, and the U.S. last), China, Japan, and the rest of the Asia-Pacific corridor is important to every business, both large or small like ours.

Having won the right to cash in the BA offer, a plane load of entrepreneurs amassed down at JFK airport in New York.  BA was everything they’ve built their reputation on-service-oriented and courteous, only as the British can be-with a send off in the first-class lounge that was rich in food, spirit(s), networking with other entrepreneurs, and a few humor-filled greetings speeches by both British Airways officials and the British government.   Example of the power-networking in the BA lounge? I met up with Morgen Newman, co-founder of IdeaPaint, another Boston-based start-up that was a BA travel recipient, with a company out of Babson (my alma mater so plugging here) that has formulated a special paint that can be applied on any work surface that then functions as a “whiteboard,” completely erasable when using dry-erase markers.  IdeaPaint is a tool for entrepreneurs that simply brilliant.  Most entrepreneurs are visual thinkers, and this now allows us to scribble on every surface…. (“Beware office cleaners-these walls aren’t “dirty”…. DO NOT ERASE!”)

My itinerary and goals for the trip looked like the following: More…

There’s a lot written about the entrepreneur, entrepreneurship, and what ingredients make for success over failure in the industry of business venturing.  Much of it is pretty shallow, pop psych fodder, meant to be read in a short trip to the commode, and disposed of similarly.

Books like Malcolm Gladwell’s Outliers takes a much more thoughtful approach, one of myth-busting versus myth-making.

Another similarly thoughtful deconstruction of entrepreneurship was brought to my attention via Babson College’s new president, Len Schlesinger, and his efforts to better match entrepreneurship’s leading institution for  higher education and its curriculum with a more effective toolbox for start-up success [full disclosure, Babson is my MBA alma mater].

Dr. Saras Sarasvathy, Professor at the Darden Graduate School of Business, is the author of this piece, written back in the dark corners of the 2001 post-Bubble recession, when entrepreneurship was the worst nightmare of those smart enough to avoid its allure while clinging to safety in their day jobs.    The full piece can be found at www.effectuation.org/ftp/effectua.pdf.

As a foundation for the suppositions Sarasvathy makes in her article, she interviewed 30 founders of U.S. companies ranging in size from $200M to $6.5B across the spectrum of industries.  She also had them each tackle the same case study to see how each founder approached the problem-solving required.  Her goal was to try to determine whether there was a common denominator in the way entrepreneurs thought, and if so, could it be distilled to several core nuggets of “teaching wisdom” to help aspiring entrepreneurs.

After Sarasvathy completed her interviews, she transcribed the tapes in search of a common set of principles each entrepreneur operated from in problem-solving.  Sarasvathy strings the principles she identified together into what she terms “effectual reasoning” of the entrepreneur.  Effectual reasoning is a different approach to problem solving than what is used in large corporations, or already successful and established enterprises.  She refers to the mature company’s approach to problem solving as the inverse, or predictive, “causal reasoning” -

Causal rationality begins with a pre-determined goal and a given set of means, and seeks to identify the optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal.

However, effectual reasoning takes a very different approach, and the metaphor Sarasvathy uses paints an evocative image of the difference-

It does not begin with a specific goal.  Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with. While causal thinkers are like great generals seeking to conquer fertile lands (Genghis Khan conquering two thirds of the known world), effectual thinkers are like explorers setting out on voyages into uncharted waters (Columbus discovering the new world).

Sarasvathy identified that there is no question that creativity is the cornerstone of effectual reasoning.  Another metaphor she uses is that of cooking – a chef given a recipe, versus a chef given the ingredients.  The chef given the recipe can go out and shop for what they need, compare cost versus quality versus convenience given the time allowed to prepare the meal, and create a very “causal” approach to the preparation.  However, the chef given the ingredients must use his or her creativity and invent a dish out of a combination of what raw materials they were given, and the background and experience they have had in cooking across their career.  Sarasvathy refers to this creative chef as having three categories of means:

1.      Who they are – their traits, tastes and abilities

2.      What they know – their education, training, expertise, and experience; and

3.      Whom they know – their social and professional networks.

From these means, they start to cook up their idea, be it a product, service or invention.  More…

I was traveling on business recently and spent some time down in New Orleans.  It was the first time I’d been there after Hurricane Katrina.  My hosts were fellow entrepreneurs, also part of EO (www.eonetwork.org) and on the board of the local chapter there.  They put together a private tour of New Orleans, with a focus on the issues that led to the spectacular and tragic failure of so many systems post-Katrina.  As one of my hosts put it, it was a breakdown of three things –   vision, leadership and communication.  The more we drove around New Orleans and the more I saw of the devastation, the more I heard of how these entrepreneurs responded to it.  I got this strange feeling of metaphoric déjà vu.  And then it dawned on me.  Katrina is a parallel for the current economic crisis America finds itself in– a sudden, unpredicted disaster for which none of us were prepared.   So I asked Jude Olinger, the current EO New Orleans Chapter President and CEO of market research firm the Olinger Group, if he had any “lessons learned” that he felt might apply to any unpredictable, catastrophic disaster.  His response? Oh yeah.  In fact, Jude had sat down several months after Katrina, and tried to capture the lessons learned.  He emailed them to me after our meeting.  And what I saw was an eerie parallel in the lessons Jude learned surviving and succeeding post-Katrina to what each of us--entrepreneur, business person, head of household, individual–could also adopt as survival strategies in one of the biggest financial hurricanes ever to hit the U.S. in modern times, perhaps the globe.   As much as entrepreneurs drive the economy, and no doubt recovery, we all should think of heeding these lessons.  In reflecting on the below, I saw them universally applicable to all current innovation sectors in which we as an executive search firm have practice areas, whether cleantech / energy, medical devices, software, biotech, distance learning / education, Internet Web 2.0, mobility / wireless.  In chatting with CEOs in each of these sectors to test my assumption, they too felt these were “universal truths.”

Below is a partial list of Jude’s lessons learned, selected for those that carry strong correlation both to a natural disaster such as Katrina as well as an economic disaster.  Following it is some interesting Q&A in dialoging with him about the experience.  And to learn more about Jude Olinger’s firm, go to www.olingergroup.com.

After crisis strikes…

-         Lesson #1 - Don’t panic but act quickly.  Stay focused on the tasks that you have to accomplish to recover.  Prioritize tasks and act upon them immediately.  Time, or rather lack of time, is your enemy.  Everyone is going to want your time… so have to prioritize and think ahead.  Anticipate things that might happen and prepare for them.  If you know you have to lay people off, and it’s a reality, then do it.

-         Lesson #2 - [In knowledge worker industries] Don’t lose your greatest asset – your employees.  Be decisive.  Communicate with employees quickly and frequently.  Be a leader and let them know the plans and intentions of the company and how they fit in.  Evaluate what you can do for them immediately and provide as much assistance as possible.  Don’t lose the key people that make you successful every day

-         Lesson #3 - Communicate with your clients and vendors quickly.  Let them know that you are still in business and intend to fulfill your obligations.  There often is  client empathy and understanding for about a week.  Then clients start to look to mitigate their risk by moving business-all or at least part of it-to another provider just to reduce their risk.   Keep them from defecting.  IF they don’t hear from you, then they’ll assume that risk is real in continuing to work with your firm..

-         Lesson #4 - Locate your advisors (accountant, insurance agent, banker, attorney) quickly and leverage their knowledge/expertise in the recovery.  These relationships should become PERSONAL…  you need to know your banker’s wife, husband, and children….  For accountant/bankers, questions like:  ”Should I do a 25% paycut?” (accountant/CPA), or “Will banks offer any forebearance in the interim?”

-         Lesson #5 – Be selfish with your time - everyone will want it, and you won’t have enough of it to go around.  Tend to your personal relationships and yourself.  Crisis will test you mentally, physically, and emotionally and you will need all of your strength and energy to survive it.

-         Lesson #6 - Get the facts - not things reported as fact by the media – before making any major life or business decisions.  Lots of false rumors will abound.  Filter information carefully.  Be as close to the information as possible – the further you are away from it, the less accurate it is.

-         Lesson #7 - Don’t consume too much media.  It will discourage you and take away from your focus.  Expect lots of inaccuracies in the news – see Lesson #8.

-         Lesson #8 - CASH is KING – even more so in a crisis.  Build up cash reserves.  Manage cash flow very wisely.  Be prepared for a 3 to 6 months cash flow crunch and figure out how to survive it.

-         Lesson #9 - Don’t count on ANY government assistance (FEMA assistance, SBA loans, or other federal/state assistance).  By the time you get it, if you get it, it may already be too late.

-         Lesson #10 - Keep a positive attitude - no matter how bad your situation – or you are done.  It’s the one thing that you have total control over and is critical for you to persevere.

-         Lesson #11 - Don’t expect things to be what they were before.  They won’t be the same.  Adapt, adjust, and keep moving.  It will never be “what it was before.” And don’t expect it to be.

Times of crisis test us in ways that we can never imagine.  It’s these times that makes us stronger and more determined.  Don’t let ANYTHING, not even a catastrophe, get in the way of reaching your goals and achieving success.

In further discussing the lessons Jude took away from the Katrina experience as an entrepreneur/business owner, here are some of Jude’s sentiments some three years out from ground zero:

Q: How are you entrepreneurs in New Orleans different after than before?

A: We’re smarter.  We had a chance to start from scratch, and can be anything we wanted to be (operationally).  When you lose everything, you have an opportunity to start all over again, and you can do it better the second time you build the house versus the first.  All of us have gotten smarter about who we want as clients, focusing on more profitable clients that fit the core value proposition of the company, versus taking on all comers.

Q: Has it permanently changed, or only temporarily changed your prioritization of work, family, and personal?

A: Jude said that one word was crucial on keeping balance…. “perspective.”  It’s all about perspective, keep proper perspective, and realizing that not everything may be as bad as you might think it is.  Put all things in perspective.   Events like Katrina [or the current economic crisis] create incredible stress.  Perspective is critical to subdue this stress.

Q: And “that which doesn’t kill you makes you stronger”?

A: True.  But it’s an unfinished sentence.  The end of the sentence is “but leaves deep scars.”  Think about PTSS (Post-Traumatic Stress Syndrome… Vietnam/Iraq…) Your life is turned upside down, you spend 3 years re-building it, and you always will fear that something will happen again.  “I cry a lot more.  Am much more empathetic… in a good way.   I believe the Katrina experience has allowed me to can connect to people better than before.”

We periodically bring small groups in to our conference room to brainstorm over lunch on a new disruptive technology that has yet to find its market. As executive recruiters focused on the innovation sector, it’s an informal matchmaking that looks a lot like a focus group of sorts, or a technology version of “lunch dates.” In this case, it was a new robotics related technology out of MIT that behaves like “smart skin.” What resulted was a set of free-flowing observations that highlighted possible markets and applications ranging from clinical medical diagnostics, to medical therapeutics surrounding rehabilitation and injury prevention, to consumer applications like in-home health and even consumer gaming applications. All were great observations from a veteran group of a half-dozen venture capitalists, innovation catalysts, and serial entrepreneurs in technology, healthcare IT, medical devices, and software. One of the serendipitous outputs of the brainstorming session was how best to go to market in this economic climate with a new innovation. The opinion that was almost universally held amongst the group was the following:

• Developing a component is really difficult. Developing an end user complete solution is by far the better way to go.
• Components are often harder to visualize as displacing current technologies or sciences. In particular, VERY hard for consumers to visualize.
• Those who may be most interested in the innovation may be so interested because they stand the most to lose. Therefore, to get control of the technology might be important, but to further develop and deploy it may be exactly the opposite of what they had in mind.
• Kevin Johnson, CEO of Manifold Products, mechanical engineer and serial entrepreneur, had one of the best sports metaphors for it-

“It’s not enough to be the Harlem Globe Trotters and show off fancy ball tricks in the back court, expecting that others will notice and say, ‘Hey pass me the ball and I’ll take it to the basket.’ Instead, you have to take it all the way to the hoop yourself and demonstrate the value/viability/feasibility before anyone else will sign on….”