This executive search is for a private equity-backed, revenue-generating, 7-year-old high-growth company that represents the next generation in healthcare innovation—PatientsLikeMe brings together patients in e-communities who create insights on their diseases and treatments by sharing information that improve their conditions.  At the same time, these insights bring value to large pharma and biotech companies, influencing the way they develop and deploy drugs.  With more than 100,000 registered consumer patients, PatientsLikeMe re-balances the healthcare system, ultimately returning power to the patient.

BSG Team Ventures is  retained to identify the VP of Client Services.

Reporting directly to the CEO, the Vice President of Client Services will play a senior leadership role within the management team, overseeing all client project scoping, management and delivery.

MORE COMPANY DETAIL:

The roots of the company are anchored in one of three brothers who developed ALS, a neuromuscular disease that ultimately proves fatal.  Ben and Jamie wanted to do all they could to help their brother Stephen, and—leveraging their prior career experience and entrepreneurial leanings—decided to try to help their brother gain insights from other patients with ALS in order to improve the understanding of how the disease progresses and what might be done to ease and improve one’s condition.  And so was born PatientsLikeMe, a health data-sharing platform.  The Heywood family’s fight to save Stephen has been chronicled in the book His Brother’s Keeper as well as the documentary “So Much So Fast.”  For more, preview an interesting short video piece on their story athttp://www.patientslikeme.com/about.

THE ROLE

This position will be responsible for the overall success of all commercial client engagements including those with pharma, payers, providers, and other related healthcare NGOs.

In addition, as the key liaison between PatientsLikeMe and the business customer,  the VP of Client Services will be responsible for driving key account relationship development, deepening the understanding of the customer’s needs with an eye to expanding PatientsLikeMe’s strategic role in providing data and analytics to further the customer’s knowledge of patients, conditions, outcomes, and insights.

Below is a bubble diagram outlining  key career & functional attributes critical to success for this role:

Specific responsibilities:

Qualifications & Experience

Skills & Personal Characteristics

]]> http://www.bostonsearchgroup.com/blog/vp-client-services-engagement-management-for-online-consumer-community-changing-the-face-of-healthcare/feed/ 0 http://www.bostonsearchgroup.com/blog/is-charisma-a-must-have-ingredient-for-successful-leaders/ http://www.bostonsearchgroup.com/blog/is-charisma-a-must-have-ingredient-for-successful-leaders/#comments Wed, 30 Nov 2011 22:26:14 +0000 Clark Waterfall http://www.bostonsearchgroup.com/blog/?p=2018

[This is part 1 of a 3 part series on the evolution of leadership theory—the history, most recent thinking on the topic, and what to look for when trying to identify it, including a look at charisma, executive presence and their contributing roles to successful leadership]

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As retained executive search consultants, we are constantly interviewing and assessing executive talent for our clients.  After interviewing these candidates, our clients often reference key characteristics they found (or didn’t) in an executive that are not found in their resumes—charisma, executive presence, or other purported leadership behaviors that are generally thought to be important to success.

But clients continue to ask questions about these traits that sit in the invisible spectrum.  Is charisma an essential ingredient to leadership? If so, for all sizes and types of companies?  Are there other types of leadership where charisma isn’t present and are they successful and in what types of circumstances? What about management versus leadership?  How do we define the differences, and when is a manager better suited than a leader?  And what’s up with “executive presence”? Is that just another term for leadership, or is it different? How? Are these differences important?

All great questions.   And—although we won’t be able to answer them all here in appropriate depth and breadth—we’re going to try to lift the curtain a bit.

With the book and now movie, “Moneyball,” the question of what to look for and what to measure in picking leaders for organizations should be rethought.  In “Moneyball,” the fulcrum of the book is based on a different way of measuring the potential and future performance of pro baseball players.  In the book, the Oakland A’s general manager turned upside down what had been considered the gold standard for sports talent assessment by baseball scouts in favor of a much less obvious and intuitive set of statistics.   Pro baseball would never be the same.

So, adapting this concept, it’s worth reviewing some popular (mis)perceptions of what makes a leader.

First principles—What does an organization need: Leaders or Managers?

Leaders/leadership by its own definition indicates the following situational characteristics—

Where one is now is not where one should be.  Rather

1) One should “follow” someone or something to another place, in theory a “better place”

2) This “better place” is both NOT self-evident (convincing is required), AND

3) It requires effort to get there, and is not frictionless, calorie-free, or zero-cost.

Managers, on the other hand, are most often those who create efficient operating systems once the “better place” has been reached.

Charisma as an essential ingredient to successful leadership—True or False?

The world “charisma” comes from the Greek word for “gift.”  Charisma is better thought of as a skill that enhances leadership effectiveness by dint of a superior ability to influence others to change their initial positions, perspectives, or opinions.

I was first offered a deeper insight into the concept of charisma in leadership by the teachings of Rakesh Khurana, a professor at Harvard Business School.  Dr. Khurana has done extensive research and writing on the topic, from articles in Harvard Business Review (“Curse of the Superstar CEO”, HBR 2002, http://hbr.org/2002/09/the-curse-of-the-superstar-ceo/ar/1) to complete books on the topic (Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs http://www.amazon.com/Searching-Corporate-Savior-Irrational-Charismatic/dp/0691074372).  More popular business authors like Jim Collins, author of Good to Great, wrote about “Level 5 Leadership” and addressed charisma in relation to this “top leadership level.”  Collins has been quoted as saying, “Being charismatic and wrong is a bad combination,” and “I’d go so far as to say that [The Level 5 leaders Collins chronicled in the good-to-great success case studies in his book] were uncharismatic for the most part.”  (http://www.amazon.com/Good-Great-Companies-Leap-Others/dp/0066620996/ref=pd_sxp_grid_pt_0_0)

Regardless of good or bad use of charisma, there is still a great deal of additional research and writing on the topic.  Clearly we associate the effects of charisma with enhanced motivation, inspiration and intellectual stimulation it engenders in the listener.  But can it be taught?  One branch of research surrounds this argument.   If you read the works of Professor Robert House at University of Pennsylvania’s Wharton School, he deconstructs “how” charisma works.  From House’s work, one could infer that charismatic behavior may be both “born in,” but also taught with enough study and practice (http://knowledge.wharton.upenn.edu/papers/674.pdf).

The Dangers of Charisma

What are the pitfalls of charisma in the corporate context?

• Charismatic executives tend to suppress individual thinking and leadership development in subordinate teams.  Leaders with charisma can create a culture of “followers,” rather than young, budding leaders and the next generation of a company’s executive team.  Narcissistic tendencies don’t allow others to flourish instead creating dominant monolithic thinking, “I don’t even argue with him anymore because I always lose.”

• This in turn leads to challenges for succession planning.  Often charismatic leaders leave a vacuum of next generation leaders, having created instead a strong set of followers.

• Life of the party isn’t always “engine of achievement.”  Charisma can be used to achieve personal goals as the primary objective, at the expense of organizational goals.  There is no question it is always best to have alignment of personal and organizational goals so that by achieving one, the other is also achieved.  However, this mandates that the charismatic leader be programmed to strive for a “win-win,” vs. a “win-lose.”   In fancy organizational behaviorist language, this ends up being the difference between those leaders who have “higher activity inhibition” and those who have lower levels.  If a leader has lower activity inhibition, they tend to seek win-lose outcomes with the “win” side being the individual over the organization.

What can the charismatic leader do to counteract negative repercussions?

The charismatic leader needs to ensure that they either surrounds themselves with others who have strong self-confidence and ideation, or that the charismatic leader makes a great deal of effort to cultivate an environment open to sharing other opinions, perspectives, and ideas rather than defaulting to “the charismatic boss.”

As referenced earlier, charisma is really more situationally valuable.  Typically, charisma is most valuable when change is the goal.  Innovation, revolution, new paradigm adoptions are the best projects for the charismatic toolbox.

Some popular examples of positively and negatively directed charisma include the following:

Good = Sir Ernest Shackleton, and the failed Antarctica expedition he saved | John F. Kennedy | Martin Luther King

Bad = Hitler |Jim Jones and the 909 deaths in the Jonestown massacre in 1978 where Jones as dogmatic cult leader got all his followers to commit mass suicide

A few additional interesting links to resources on charisma and leadership

http://money.cnn.com/magazines/fortune/fortune_archive/1996/01/15/207161/index.htm [lighter reading]

http://www.aom.pace.edu/amj/february2001/waldman.pdf [heavier reading]

Each quarter we survey growth stage CEOs who are running innovation driven companies.  This quarter,  we had more than 60 CEOs responding.  CEOs were running companies in broadly defined technology (software, hardware, semiconductor, telecom), Internet (e-commerce, media, social, entertainment), medical devices, biotech, and cleantech / renewable energy sectors.

A note on methodology.  We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies).    All responses were anonymous due to the web-based survey technology employed. The majority of respondents were in the United States, with the highest concentration on the East and West coasts (New York, Boston, and San Francisco/Silicon Valley areas).

For prior survey results from Q2 2010, titled “Impact of Economy and Renewed Growth”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%e2%80%93-impact-of-economy-renewed-growth/ .

ECONOMIC CLIMATE

The first set of questions was around the economic conditions in which each CEO felt s/he was operating.    One question we continue to ask and re-ask over the last six quarters or so targets the turbulence in the macro- economic climate.  It is interesting to compare CEO responses to the same question, “Do you anticipate a double dip in the near term future?”

* In Q3 2009, more than half  (54%) of CEOs polled were expecting a double dip, and planning accordingly

* In our Q2 2010 survey,  again 50% felt a second economic correction was likely, the biggest percentage of those CEOs believing it would be in either Q3 2010 or sometime in 2011.  The other half  of CEOs felt the specter of recession was behind them

* Currently in Q4 CEOs were consistent with prior quarters with a bit more than 50% indicating they didn’t feel a double dip was likely, and the other half of the CEOs saying either a 50/50 probability or greater (16% feeling more likely than not)

So less than 1 in 5 CEOs feel another economic dip is likely.  No CEOs selected the ” greater than 75%” probability.

It’s interesting to do a meta graph of the changing CEO sentiment on this question.  Surprisingly, the graph would be sloping downward, but not as much as many would hope.  The high point was certainly back in Q3 2009, but even throughout 2010, as many CEOs were fearful of a negative correction as those who felt it was behind us.  No doubt this “lack of confidence” index doesn’t inspire the CEO with a swashbuckling, damn-the-torpedoes-full-speed-ahead attitude toward growing their companies.  Rather, it makes CEOs think in short-term windows, perhaps 3 months at a time, with little appetite to make medium or long-term bets.

Those CEOs who felt another downturn was likey referenced several factors that might tip the scales negative–  gridlock in Congress due to midterm elections and likelihood that Democrats lose congressional majority, a belief that a bad Q4 holiday retail shopping was likely, and the persistent overhang of ongoing commercial and residential loan defaults.

As for when another economic dip might occur if it were to occur, the vast majority of CEOs pointed to Q1, 2011, with Q4 of this year and Q2 2011 tying for second at 18% each.

STRATEGY

Almost 50% of CEOs polled said that they had either made a shift in strategy in 2010, or were planning to in the near future.  Granted, growth-stage companies are prone to shifting strategy until they land upon the best formula for significant and sustainable growth.  However ~50% is a big number, and clearly a chunk of those companies have been driven to rethink their strategies because of the challenging economic climate, the concern over the future, and the possibility that 2010 might represent “the new normal” where with no economic “rising tide” no help generated to float all company boats as in periods of economic expansion in the past (1997-2000, 2005-2008, etc).

CASH FLOW

The majority of CEO survey respondents (49%) indicated that they were still planning on burning cash over the next 2 quarters.  24% indicated they would be profitable.  CEO comments regarding this question indicated an overwhelming drive toward cash flow break even.  That was the big push and focus for their companies in 2010, and if they hadn’t achieved it yet, they were gunning to by end of the first quarter of 2011.  CEOs also commented that they were trying to run their companies at break even, with any extra EBIT being reinvested back into the company for additional growth.

COST REDUCTION PLANS

When asked what were the top 3 areas CEOs were targeting for cost reduction, the following table summarizes their responses, representing a combination of spend reduction and staff reduction in non-core areas.  There was a preference by CEOs to favor non-staff cuts over cutting headcount if at all possible, but many acknowledged that in order to make meaningful cuts, staff had  to be considered in the equation.

CEO responses when asked about increasesin spend were logical.  The top three in order were sales, marketing, and R&D.  Many of the comments about this question noted the fact that outside of directly growing revenues, additional spend was hard to build in when many CEOs are driving toward a minimum cash-neutral mandate and economic uncertainties are driving CEOs to think conservatively rather than expansively.

[Click on "more" below for remaining 8 slides and narrative from Q4 2010 CEO survey]

RAISING CAPITAL

The largest segment of CEO survey respondents (40%) listed themselves as having raised capital in the last 12 months, and also planning on raising additional equity in the coming 12.  For those who indicated “other,” most of these CEOs had raised capital quite a while ago (2 or more years ago), were at cash flow positive, and some who were looking at liquidity event in the next few quarters, subject to market conditions.

OUTSOURCING & OFFSHORING

A quarter of CEOs surveyed responded that they were unlikely to ever use/need outsourcing or offshore resources to grow their businesses.

However, almost 70% of CEOs were using some combination of outsourced resources, whether domestic or offshore, full-time or project-based.  Those CEOs using domestic resources were the largest segment at 22%, while those with full-time offshore resources tallied at about 14%.  Nearly one in four CEOs had used contract (non-full-time) outsourced resources in the last 12 months.  A number of CEOs highlighted the fact that although they were users of offshore staff in some capacity, it was difficult to “get right,” and often the experience was less than positive early on in the relationship and took a great deal of work before CEOs could declare it truly accretive.

In answer to where global outsourced/offshore resources were being most utilized, manufacturing, product development, and customer service were the three biggest areas.  One in 5 CEOS (20%)  had already established an international sales presence located abroad.

GROWTH-COMPANY CLIMATE

Do CEOs feel it will be harder to grow companies in the future than in the recent past?  This is a question that many entrepreneurs who look to undertake a new venture (and venture capitalists looking to invest in them) are often quick to ask.

CEO responses were much more evenly distributed than one might think– slightly greater than a third of CEOs indicate “about the same” difficulty, a bit less than a third feel “somewhat more difficult,” and 27% indicating that they thought it would likely be “easier in the next 5 vs. the last 5 years.”  Many of the comments of CEOs responding “easier” pointed to the fact that advances in technology have allowed entrepreneurs to stand up companies for less cash and a lot faster than in years past.   Those CEOs who said it would be harder all pointed to the capital markets, and the medium-term challenges in both raising capital, and achieving liquidity.

DEBT LENDER APPETITE

CEOs were closely split on the question of whether debt has been harder, easier, or about the same to procure in the last few quarters.  37% indicated about the same,  33% responded that it feels worse, and 27% conceded that it appeared easier to get debt now than in the trailing 6 months or so.  However, CEOs commented that even if debt lending had stayed the same or improved slightly in the last six months, over the last year or two lenders have tightened up a great deal, and the lending climate today compared to 2008 is substantially worse.

FEDERAL POLICY IMPACTS

More than three-quarters of CEOs surveyed indicated that there was no impact on their companies due to  changes in federal policy, be it pending capital gains changes, mandatory healthcare, or potential tax increases.  Of those CEOs who did register an impact, the majority (10%) indicated that they would be offsetting any negative impact via headcount reduction.

CEO comments focused on the negative impact of rising healthcare costs as the biggest contributor to any decisions they were considering that were directly attributable to federal policy changes.

EQUITY INVESTOR APPETITE

CEO respondents reported that they saw equity investors as having become more bearish in their investing, with almost 37% holding that opinion.  In contrast, more than 25% of CEOs felt investors appear more willing to put money to work in the next two quarters than in recent past.  CEOs commented that investors don’t want to put money into B rounds, and the investing profile “is a barbell– 259,000 angels poured $17.6 billion into more than 57,000 startups last year, and there are a number of very well funded late-stage private equity firms looking to put $20-$40 million to work per opportunity. But almost nothing in between.”  Other comments indicated that even though investors may be more interested in putting their money to work, those same investors are squeezing valuations harder than ever and their expectations for return are increasingly difficult to meet as an operating CEO.

PRIMARY SURVEY INDUSTRY SECTORS

Of the 50+ CEOs who responded, 25% were running software companies, 16% cleantech, 15$ biotech, 10% interactive media/Internet, and 4% medical devices.  Much of the other 32% of CEO respondents were in the services sector across various industry sectors.

Location of the Companies Surveyed

The majority of responding CEOs were from the New England region (66%), 10% of CEOs’ companies were located in the Rocky Mountain region, with smaller numbers in Northern California (2%), Canada (4%) and the UK( 2%).

OK, admit it.  As CEO of a growth stage technology company, when it comes to your sales team, they all have “happy ears.”  Joyce Durst, former CEO of Infraworks, an enterprise security software company in Austin, TX, used the phrase in describing the eternal sales optimism she and her VP Sales have to counterbalance every week during their Monday morning sales pipeline meetings with their sales team.  You know, this is the optimism that insists that the prospect call that just took place the week before is not only a “sure thing,” but is also a particularly big sized deal, and will surely close before the end of the quarter, with room to spare.   Unfortunately, “happy ears” are the occupational hazard of a good sales person.  These are the ones that as often as not has to take a partially completed beta product, dress it up, sell it into a market where no other solution like it has ever existed, persuade someone that the solution is a “must have,” and then also persuade the other buying influencers within the customer that doing business with an underfunded start-up with perhaps less than 12 months of cash in the bank is a capital idea.

Working with growth-stage CEOs as executive recruiters, we’re often helping to hire sales VPs that will be able to build and manage a company’s sales pipeline.  Certainly hiring the right VP Sales is an important first step in sales pipeline management.  However, once you’ve gotten the right person in the seat, we asked a dozen or so early-stage technology CEOs what other tools, processes, and mistakes they’ve used or made that have led to their “best practices” for effective sales pipeline management.

TOOLS (technology)

Regardless of which tools were the favorites of each CEO, there was agreement that data hygiene was critical

Chuck Dornbush, CEO of Athenium Software, put it succinctly, saying, “Make sure the data is well organized, and frequently reviewed.”  Another location-based services CEO added, “no matter what CRM tool you use, as CEO you need to make sure every sales person is using it, and using it the same way.” Vinit Nijhawan, former CEO of Taral Networks, emphasized that sales people hate to use a system at all; you’re lucky to get them to enter the data once, and you’ll never get them to double enter for forecasting purposes.  So you need to use the same system for lead tracking and reporting/forecasting.”

PROCESS BEST PRACTICES

Meetings 1x-week—sales people defend their new pipeline additions

One of the above CEOs stated simply– “Know the basics, and do the basics.”  In more detail, he and several others sketched the basics out.   Have a weekly sales meeting.  For sales people to have a prospect “make the pipeline report,” they need to defend their putting the prospect into the pipeline, akin to a team interrogation.

7 categories involved in qualifying additions to the pipeline

Many of the CEOs talked about the minimum information requirements for a prospect to be added to the pipeline report.  Although some CEOs had four steps, and others had up to 40, the core must-haves most often included the following 7:

1. Budget—– Is there an earmarked budget set-aside for this category of expenditure?

2. Need –Is there a compelling need driving the prospect to make this purchase?

3. Time urgency—–Is there something that creates a sense of time-bound decisioning, or is this an important-but-non-urgent agenda item?

4. Internal champion—–Is there an individual inside the prospect who’s willing to go the extra mile and spend the political capital required to “fight the good fight” internally within their own organization?

5. Decision making power–—Who holds the real “power” to make the decision?  Can a clear decision-making organization path be mapped?

6. Clear ROI—–How is the prospective customer going to measure “success” for this product or solution?

7. Trust– Both in the relationship between the individual sales person and the individual representing the prospective customer company, and the prospect’s relationship with you as a company with whom to do business… do they trust your products, your company, and your sales people?

Tim Butler, former CEO at SiteScape and now CEO of growing RFID company Tego, said that as a reminder for his sales force, they have adopted a pneumonic, BUTANE–—budget, urgency, timing, authority, need & event.

Stages of the sales pipeline

Joyce Durst has her sales team and VP Sales apply a ranking/scoring system for each sales prospect.  If the customer is 50 points or less, they remain on the prospects list only, and don’t move onto pipeline report; if more than that, 50-70, they’re pipelined for NEXT quarter; if 70-90, they’re qualified as “committed;” If 90-100, the prospect is considered “ready to close.”

Athenium CEO Chuck Dornbush finds that it’s critical to “set entry/exit rules litmus tests for each stage.”  One CEO established the rule that “you couldn’t allow a prospect into the pipeline until at least their forth stage–qualified, demonstrated, formal price quote, and funds allocated. “

Other critical ingredients

Categorize every lead as “hot, warm, cold”

In addition to assigning probabilities as a percentage, try using some sort of ranking system.  Tim Butler uses another version– possible, likely, & probable

Add non-sales peers to pipeline meetings…

One of the CEOs stated  that it was very valuable to bring non-sales functions into sales pipeline meetings.  He added that personal accountability generated by sales people committing to forecasts in front of non-sales peers in a weekly/monthly meeting environment can do a lot to reduce the “fudge factor.”

Get the customer prospect to serve as proxy VP Sales for you…

Former Pantero CEO Pano Anthos who now is CEO of Hangout added a trick of the pipeline trade he’s found very useful– —“The customer needs to sign OFF on moving from one step to another.  Have the CUSTOMER via email play a proxy VP Sales role for you.”  Do this by having your sales person ask for a confirmation by email that the prospect has indeed passed from one stage of the sales pipeline to the next, whether confirming the ROI value proposition, or the budget allocation, or any of the other stages listed earlier.

If no date for next prospect action step, off it goes…

“Every prospect has to have an action item by date, or qualify it as ‘dead,’” another CEO offered up.

Kill the bad deals early…

Many CEOs listed this as critical to effective sales pipeline management.  Slow prospects should be turned over to the inside sales team.  Prospects that are particularly non-committal should get put in direct mail “tickler” mode.   “Stop spending the time on them, trying to actively manage them to close,” Marc Tremblay states, and adds that, “if feasible, you want to focus your sales team more on hunting than farming if you can.  You can get tied into prospects who may take two years to close… “  They may close, but “I always get my man” isn’t the most efficient proverb for sales.

Expect the unexpected…

When ending the quarter and/or the year there will be sales people who will say, “we’ll absolutely close these deals….” Even when all indications say they’re done, assume that some percentage will fall out, no matter HOW good they look.  Jim Lawton,  a veteran VP Marketing at a number of venture-backed growth-stage software companies who has seen a lot of sales pipeline management approaches states the reasons can include someone at the prospect company “getting sick, leaving the position, dog ate my homework… expect just about anything.”

“3x coverage” to mitigate the unexpected …

Continuing, Jim Lawton added, “If I’m trying to hit 3 million in quarterly sales, I want to have 9 million in the pipe.  Living on luck is tough, and you might hit a quarter or two with a thin pipe where you muscle the prospects and get a blue bird or two, but you’ll never make this repeatable.”

Consider having TWO sales pipelines

No, this isn’t two separate sets of books, nor is this a tool meant to be used deceitfully.  However, one of the CEOs offered up the fact that—–early on at least–there was a pipeline they kept internal, and one the executive team shared with investors that better illustrated the potential traction of their products.  The internal pipeline was more conservative.  As they grew the business, there was a natural convergence of the two into one.  Controversial, yes.  However, in order to manage burn-rates, and make sure you live to fight another day, it’s a survival tactic that no doubt many CEOs use, whether they admit to it or not.

Other Considerations

When to begin trying to do sales forecasting

Once you’re at what’s often referred to by venture capitalists as the “scaling stage,” most CEOs list their pipeline out and begin assigning probabilities.  However, Vinit Nijhawan cautioned that, “You rarely ever hit the forecast you set up.  After you get your 3 or 4 customers, you feel there is a market for your product, but actually what you’ve done is gotten the really early adopters.  And CEOs then start to scale too early, hiring resources, and making decisions that are difficult to undo.  Instead, you need to be in that strategic marketing role in sales longer than most start-ups might think.  Don’t even OFFER sales pipeline reports.  It’s not an issue with the start-up’s products, it’s the market.  Quarter-over-quarter projections are almost impossible.”  So where is the line, and where do you know that you have a product that the market is ready for?  “THAT is the art in sales pipeline management,” says Anthos.  “It’s definitely not a science.”

Strategic consideration in building the sales pipeline–—proper reference customer sequencing

Another wrinkle in building an early-stage sales pipeline CEOs mentioned was the proper ordering of reference customers.  There is a step before managing the pipeline process or implementing some tool to help in pipeline forecasting.  This is determining what is the optimal sequencing of customers you go to in order to create proof points and references to scale customer acquisition most efficiently and effectively. Do you sell big customers first, then the small customers, or smaller customers and build up to bigger ones?  CEOs concurred, —“It depends on capital resources available.”

MISTAKES & LEARNINGS

Three major reasons deals don’t get done–

1) Budgets are frozen

2) Technology shifts

3) Competition– you get beaten

However, there are a number of other reasons in addition to these three that were honorable mentions when talking shop with these CEOs on mistakes they’ve made and subsequent lessons learned.

Delegating too much pipeline management to the VP Sales…

The CEO usually gets slammed because s/he trusted a VP of Sales that hasn’t sufficiently vetted the prospect added Anthos.  Make sure you ask the tough questions of your VP Sales as well if you have one.

The pig stuck at the back end of the python…

Chuck Dornbush emphasized that he learned early from making the mistake of having prospects move only in a single direction, saying,   “There needs to be two-way triggers at either end.  Something can go from a higher stage to a lower stage, not just upward.  You need to be disciplined in reclassifying each prospect.”

Forecasting off new sales people…

Joyce Durst learned that with new sales reps, it’s very difficult to “learn them” in terms of their different realism/optimism quotients.  Until you have a good read, go conservative.

Trusting the “happy ears”–making a process exception…

One of the CEOs paraphrased what he’s heard so many times from his sales team—–“Although our average sales cycle time is 6 months, I’m REALLY confident this one won’t be the ‘average’… let’s fast track it; am sure it’s going to close… “  This is equivalent to the pig not entering the python through the mouth, but surgically implanted close to the tail.  And is just about as unrealistic to happen with a python as with your prospect.

Targeting the wrong people…

Other CEOs recounted a common sales problem where a sales team was targeting the tech person with a sexy demo-able product, getting great interest, and then recognizing too late that this function had no budget authority.

Relying on sales channel partners’ own pipeline discipline…

Another CEO commented that to qualify leads from a sales channel partner, it’s like the game of telephone.  What is spoken to the first person in a line of people is never what ends up being the message received at the other end… optimism breeds like rabbits.  CEO Durst maintains that if a prospect has been brought in through an indirect channel partner, “and they’ve gotten us involved, the sales channel rep is put through the same pipeline “challenge” as those sales executives who are selling direct.

Be more aggressive about accurately qualifying the leads early…

Tim Butler recounted a circumstance where the prospect was qualified by the sales executive as a potentially very large order.   Because of this, extra resources, time, and effort were leveraged against the opportunity.  It “starts out as a big huge deal, and ends up as a small deal with ‘potential down the road,’ which creates a real mismatch between deal potential to sales effort.  Cost of sales ends up way too high.”

The “close” as drug for the sales team…

Butler added that not only can you spend too much on resources out of balance with the size of the order, but often the sales team has a natural tendency to want to close a transaction just for the high that comes along with it, regardless of the deal’s size.  “You end up expending too many resources on the smaller deals just to close them, and therefore starving the larger deals of resources.   There is a natural tendency to lose discipline in prioritizing prospects.  The ‘close’ is a drug.”  Tim suggests developing incentive structures to get the sales team to do a better job of pipeline prioritization.

Giving away the store to make the deal happen…

Often a hidden gotcha in trying to close the deal in technology sales is the development and customization resources committed to the prospect. This can quickly turn a good deal into red-ink resources sinkhole.

Taking high level executive enthusiasm as surrogate for following the process…

One CEO talked about a bad experience where they had been trapped several times selling to the pharma industry by taking their high-level executives making global commitments to move something ahead.   They allowed themselves to believe that –because they liked and trusted the people—they didn’t ask the standard questions like where is the clear path to success, budget allocation, or who’s going to pay for it.  Don’t take in good faith that senior level staff executives have access to whatever budget they want.

Beware of “false summits”…

One CEO recounted a story where it took more than a year to close a prospect, and the process reminded him of a mountaineering term where you think you’ve reached the top, only to learn it’s just a “false summit.”   On three separate occasions, he thought they’d identified the decision-maker only to learn that it was just the next layer up in a longer process.  He emphasized that you have to ask the questions flat out, “Is the money coming from YOUR account… ?  Are YOU the one who’s going to sign the PO.”  It simply isn’t enough to ask, “Are you going to be the one making the decision?”

Beware of “technology shifts”…

Another CEO offered a particularly gruesome tale of what happens when you get blindsided by a tectonic shift in the technology landscape.  It was a billion dollar technology corporation and a million-plus dollar deal.    The CFO who needed to sign off on the purchase order had a heart attack and the deal got shelved for six months.  Sure enough a technology shift occurred.  He stated that he felt that CEOs don’t smell technology shifts early enough.  And he got caught developing his software solution on the wrong platform.   His learnings were multiple—Tech shifts happen all the time, so you have to have contingency plans.  There has to be a realization that you “eat your old,” not “eat your young.”  What technology companies do more often is eat their young by canceling development projects before they make it out of the womb.  They’re not willing to suffer short-term pain for long-term gain.

Beware of acquisitions…

Jim Lawton recounted a story that–—although having a silver lining—–made him very aware of the unpredictability of closing a customer.  Jim’s company had done a pilot, the ROI was there, they were “cruising through the sales process, and dotting i’s and crossing t’s all the way along.  Even the CFO says it’s doable.”  Then Lawton learns that the prospect has been acquired  possibly scuttling any chance of a deal.  In this case, however, the CFO recognized the potentially significant benefits for the acquiring company as well as for his own – and working closely with Lawton’s team, developed a pitch that extrapolated the results and opportunities in a broader context.   The CFO was became the internal champion, and pitched the solution to the CEO of the acquiring company, which ultimately gave its approval for the investment to be made in Lawton’s technology.  Lawton’s lessons for managing the sales pipeline at risk? 1) Short term ROI levels the playing field of change.  2) Understand a prospect’s own agenda – in this case, the powerful ROI provided on plank in a platform for lobbying for job security and new opportunities  3) Never give up on a prospect, even when the odds seem insurmountable.

Your sales force needs to be able to sell both outside AND in…

Another CEO recounted hiring a sales executive who had been an engineering support person and wanted to transition into sales.  He was the antithesis of the sales guy; wasn’t well groomed, didn’t look good, was a bit clumsy in social skills.  The CEO’s instinct was that this person could do the solutions selling required, and the candidate could really understand the customer, because he’d BEEN one at one time.  The first deal this sales person brought in required some custom work from engineering.  It turned out that he was really good on the customer side, but HORRIBLE inside the company, building the support  & coalition required to deliver the ultimate product promised to the customer.  The CEO’s take-away from this experience is  that a good sales person doesn’t just have to be good selling on the outside, but also on the inside.  And this is particularly true in start-ups because inside resources are ALWAYS over committed, so skills required to lobby for mind share within your own company are essential.

Have more than one touch point within the prospect…

As a punctuation to all the feedback CEOs offered on the topic of sales pipeline mangement, yet another CEO gave their worst mistake, and how it’s changed their sales pipeline management process forever.  Her sales team had identified a prospect’s CIO as the power and the champion within his company.  There were continued promises that the purchase order was forthcoming.  After several exasperated attempts to determine the hiccup, they learned that the CIO had “fallen out of favor” with senior management because he hadn’t delivered on another technology implementation, so wasn’t going to be given any authority to take on more responsibility.

[Originally authored for publication in Mass HighTech]

We’re often asked how to establish fair market compensation when it comes to CEOs of privately held companies, often with venture capital or private equity backing.

Below is one method that can be employed as a jumping off point for this calculus:

1)     “De-risked,” how much is a CEO worth?  Is  $500 -$1M a year too much?  For our purposes here, we’re talking about a talented CEO.  Not someone below average, but above the average, one that a retained executive search firm, venture or private equity investor, or board of directors would be proud to put in the role.   Rather than pick some arbitrary number, this should be  ”market set,” by looking at what someone working for any global 2000 company (i.e. General Electric or other similar) earns annually.  From our executive search experience and database of compensation comparables in these companies, base salary is usually between 250K and 400K, depending upon how big the divisional P&L responsibility is, there is usually a bonus that is between 50-100% of base, and an LTIP (long term incentive plan) that-once partial vesting begins-can generate from 100K up to 250K or more a year in cash.

2)     So, the cash component of a comparable, including average base, annual average bonus, and yearly LTIP pay-out looks something like this:

Base ~ 300K

Bonus ~250K

LTIP (cash only) ~ 200K

TOTAL: 750K

* This does not include any meaningful RSUs (restricted stock units) that are usually also part of that package, which could add another 200K or more per year in value to a general manager’s package with true P&L responsibility for their division, group, or sector/segment.

* This is also not indexed to geography/cost of living.  If the position is in New York City tri-state area (New York, northern New Jersey, southern Connecticut), San Francisco, Boston, London, Singapore, Hong Kong, or Tokyo, a multiplier factor needs to be used to level-set for cost of living increase required for those metropolitan areas.

3)      Now, back out the cash portion of a CEO’s compensation for the company that they’re stepping into (say 250K a year in cash in smaller companies as all base, or combination of base + cash bonus).  So you’re left with say 500K that needs to be made up in equity, on a per anum basis.

4)      Over how many years is the liquidity horizon (and/or vesting rate, 3, 4 ,5 years)? Let’s say it’s 4 years, at net 500K, equals ~$2 million

5)      Now, this is with ZERO beta risk factor.  Add back the beta risk of an earlier stage company.  Let’s assume a global 200 company equals “1.”  A CEO role in a privately held, externally backed company is not “1″.  It’s probably a multiplier of 1.5, or 2.  For a pre-revenue, VC-backed company with high burn rate, it could be as much as in the 3 to 5 range.  Note that any illiquid company is inherently risky in terms of cashing in any equity at a reasonable price.  Let’s pick a beta risk multiplier of 2.5 times riskier than “average.” So, 2M * 2.5 = 5M.  Note that when there are preferences for the investors that create an exit hurdle rate before any common shareholders get paid, beta risk goes up accordingly unless the CEO participates in any exit event via cash carve out or other instrument.   As mentioned above, a recent IPO that represents a reasonable market comparable netted a CEO who joined the company 4 years ago $20M.  Using this number, the CEO’s compensation was $5M a year, or a beta multiplier of approximately 5.

6)     Then, are there any combat pay provisions you need to add in (warts that a CEO or executive team member is required to overcome and vanquish in their role that are above and beyond the normal call of duty)-reconstituting the executive team, or raising an outside round of capital because existing investors are tapped out, or starting up an Asia manufacturing capability that will require the CEO to take a dozen 15-hour flights one-way to get up and running.

7)      Finally, you have to look at what likely dilution there is going to be to an initial options grant for the CEO.  If you start with a 6% stake in an early stage company in a Series A funding, and you then raise a series B and C, depending upon valuation for those rounds, the CEO will likely end up below 3% as a “fully diluted” stakeholder.  There is an argument to be made that any of the management team critical to the success of the company will be “topped off” at later funding events in order to keep them motivated.  However, there is no guarantee that this happens.  It’s only good business sense to do it.  For the CEO, it is more important what s/he ends up with, not how much with which they start.

8)     Add water, and stir…

Notes & disclaimers:

• * This is not intended to be biased in any direction, to any party, neither CEO candidate, nor company and/or investor.
• * This is only one way of calculating compensation, indeed there are many others.
• * There is no way an earl- stage emerging/growth company will be able to compensate a CEO in all cash, nor truly be able to offset the risks inherent in this stage of venture.  The CEO either accepts this, or is not truly capable of working successfully in this milieu.
• * Other than the impact of cost of living  adjustments to base compensation, each CEO candidate comes with what we refer to as their own subjective “keep the lights on” cash needs.  We calculate this simply as the amount of cash required on a yearly basis to cover their living/family obligations without having to write checks out of savings to cover it.  Some CEO candidates may have 3 children in private school or college, while others may have no children and no mortgage.  Cash needs therefore may range widely, and need to be adjusted for using equity as a “leveler” (less cash-needy, higher the equity, and vice versa)
• * Alternatives to paying bonuses in cash might be to pay bonuses in equity, upon achievement of key milestones for the company
• * This same calculus can be applied to the Vice President level as well, subject to appropriate adjustments downward in cash and equity
• * In a circumstance where there is a “turn-around” required, equity may not be enough of a certainly to attract a competent CEO for the challenge ahead.  In these circumstances, a cash carve-out may be warranted in addition and/or in substitution for a stakeholder role.  The cash carve-out may be just for the CEO, or for the key management team required to achieve the turn-around.  Often, the cash-carve out structure is a percentage of total sale price over a certain amount, with the possibility for an accelerator depending upon exit/liquidity circumstances/outcome.
• * Often the question of anti-dilution comes up in an effort to assure a CEO of a certain percentage of equity upon liquidity.  Granting 5% equity to a CEO at a Series A financing with anti-dilution would ensure that the CEO retained his or her stake across the growth and additional funding needs of the company.  However, this is rarely a good mechanism, as the CEO becomes less interested in new company valuations at subsequent funding events, and becomes misaligned with the company’s investors.

Below is the hyperlink to our latest CEO peers “speed-survey,” exclusively for growth-stage CEOs.  Topic– “Preparing for Recovery?”

http://surveys.polldaddy.com/s/D3642F14267CCC14/

We at BSG Team Ventures periodically take the temperature of the markets we serve. This speed survey is no more than 10 questions, simple multiple-choice.

Knowledge is power.  Aggregated peer-provided knowledge is “actionable power.”

We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

Feel free to forward to the qualified CEOs in your sphere of influence.  The more data generated, the more accurate the trend lines.

All responses are anonymous due to the web-based survey technology employed.

We will forward the survey results within the next two weeks to the email address on file.  Please let us know if there is another email address you wish us to send the results to as well.