The Company

Global leader in broadcasting technology

Harris Broadcast Communications, Inc. (www.harrisbroadcast.com) is a pioneer in the broadcast technology industry.  Anywhere broadcasters are making media moments — from the family room to the road, over the air or over the web, on a television or a tablet — Harris Broadcast is there.  Harris Broadcast is delivering innovative, end-to-end solutions to customers in more than 150 countries, including the top broadcast facilities and the most technologically advanced sports and live-event venues. Harris is also investing deeply in the next generation of technologies to expand their leadership into even more markets, geographies and applications.

At its core, Harris Broadcast Communications offers solutions that support the digital delivery, automation, and management of audio, video, and data. It offers radio and television products, systems, and services for broadcasters. Harris has an integrated, high-performance technology solution that makes video production, transmission and distribution providers do it more easily, reliably and profitably.  The company was founded in 1922 and is based in Englewood, Colorado.

In February 2013, Harris Broadcast was purchased from Harris Corporation (NYSE: HRS) by Gores Group, a leading global private equity firm headquartered in Los Angeles.  Gores Group, LLC specializes in acquiring and partnering with businesses that can benefit from their operating experience and flexible capital base.  Gores Group has become a leading investor, having demonstrated a reliable track record of creating value in its portfolio companies alongside management.

Products, Platform & Technology

Media delivery isn’t a one-size-fits-all kind of business.  Neither is Harris Broadcast.  Flexible and future-ready, Harris solutions allow customers the ability to quickly add revenue-generating services today, and affordably move to wherever those customers are headed in the future.  To achieve this, Harris Broadcast has a rich intellectual property portfolio of 241 patents held, with more than 150 patents pending.

Harris is divided into three divisions.

Media Management Solutions

MMS products and services manage digital media workflow, including sales, traffic, billing, scheduling, video asset management, and play-out automation.

Transmission Systems

This division develops hardware, firmware, and software for over-the-air TV and radio station broadcasting

Workflow, Infrastructure & Networking

The WIN division develops products and services that include routing, master control, networking, test and measurement, multi-image processing, graphics, news editing and servers.

The Position

Detail of Responsibilities

The VP Engineering will carry primary responsibilities for the following:

• Manage multiple complex projects with an emphasis on providing quality products on schedule, at or below budget, and achieving stated financial objectives.
• Oversee the design, development, testing, and documentation of all products and solutions to meet product line requirements and product development roadmap strategy.
  • Serve as primary visionary for the development and deployment of hardware and software solutions that are secure, scalable, extensible and maintainable.
  • Lead research efforts for new architectural innovations, frameworks, and techniques with close collaboration with Product Management to optimally support and align with Harris Broadcast’s sales & marketing efforts.
  • Identify, evaluate and select new and emerging technologies that can be assimilated within the company and significantly improve competitiveness.
  • Author white papers, analysis of recent technology; contribute articles and presentations which position the company as a technology leader in the space. Present papers and support company speaking opportunities at tradeshows, customer events and other external facing events.
  • Drive technology for global execution of product, platform and customer solution initiatives.
  • Develop and manage a multi-year technology roadmap, working with the business leader to link market opportunities and industry trends to specific development efforts.
• Manage multiple complex projects with an emphasis on providing quality products on schedule, at or below budget, and achieving stated financial objectives.
• Manage, evaluate, assist in developing, and implementing technical processes, disciplines, policies, and procedures in support of established product and business strategies.
• Responsible for identifying and interpreting trends in technology. Participate in business planning and communicate technical knowledge and vision of both current and future technology related to company’s competitive position.
• Responsible for the development and implementation of engineering activities to create new and improved products and solutions.
• Mentor technical management and staff to ensure continual professional growth and improvement and ensure that technical development resources support the technology vision of the company.
• Monitor industry market trends and competitors and providing intelligence on the competitive landscape and key trends occurring in the industry.
• Know and identify all internal and external technology and resources to leverage and maximize product development capabilities.
• Collaborate with Product Management/Marketing, sales and other functional areas to ensure alignment.
• Develop, track, report, and manage R&D Metrics. Develop R&D Productivity measurement strategy to optimize cost per employee and determine best locale for R&D projects, e.g. North America or lower cost geography.
• Lead Quality efforts, including Companywide QA/Test strategy.  Lead Interoperability initiatives.
• Drive productivity improvements via:
  • IP sharing and reutilization
  • Eliminating redundancies and developing Centers of Excellence
  • Moving to lower cost geographies
• Support sales pursuits via customer engagement, proof-of-concept solution demonstrations.
• Align organization to support Service via escalation methodologies.

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About the Company

Approximately thirty-five million Americans are covered by a flexible spending account (FSA) and each year, our client estimates that consumers collectively forfeit over $400 million back to employers because they don’t deplete their flexible spending accounts (FSAs).  The client operates an online shopping website for FSAs which are employer-based programs that allow consumers to set aside tax-free dollars to purchase medical products and services – from band-aids to smoking cessation programs and tens of thousands of products and services in between.

Our client is the only one-stop-shop stocked exclusively with FSA-eligible products and services so there are no guessing games as to what is and is not reimbursable, a dilemma consumers face every time they walk into a drugstore. In addition to more than four thousand FSA-eligible products, the site offers a national provider database of FSA-eligible services and an FSA Learning Center. The biggest challenge to the consumer in capitalizing on the tax benefits of the FSA is sorting through the arcane rules of what is eligible and what is not.  Given how difficult this can be for the consumer to do, many FSA account balances simply languish until year’s end, and then revert back to the employer.

The company was founded on the idea that it should be easy and convenient for a consumer to use their FSA and recently launched site enhancements, even in the face of recent eligibility changes, which require consumers to obtain a physician’s prescription for many products in order to be reimbursed by their FSA.

The Company has unequalled expertise in flexible spending account eligible products & services. FSA’s offerings include the following:

PRODUCTS: Baby care products, cold and allergy, diabetes care, digestive health, elastics/athletic treatments, eye/ear care, family planning, feminine care, first aid, foot care, home health care, oral care, pain relief products, skin care, smoking deterrents, and vitamins/dietary supplements.

SERVICES: The Company also provides services in the areas of primary care, cancer, heart health, radiology, mental and behavioral health, surgery, pathology, orthopedics and sports medicine, and women’s health services, as well as ear, nose, and throat.

The company was founded in 2010 and is based in New York, New York.

About the Position

Reporting directly to the Founder & President, the Chief Revenue Officer will play a senior leadership role overseeing all revenue generation for the company, holding leadership responsibility for a team of three to seven (plus), covering both online and offline marketing, merchandising, business development, and partner sales.

Responsible for the overall topline, the CRO will recommend appropriate strategies, tactics, and operational initiatives to continuously build measure and enhance revenue opportunities for the Company. The CRO will provide vision and leadership for each of the three major revenue legs— online acquisition, offline channel partnerships, and marketing/public relations initiatives–  specifically driving the Company’s consumer brand awareness and ubiquity.

This role will also work closely with Operations to close, onboard, and drive partner program effectiveness.  The CRO will also work in concert with Engineering to optimize UI, UX, merchandising, and retention.

Reporting directly to the President, the Chief Revenue Officer shall:

•  Successfully lead and manage a sales and e-commerce team of three to seven staff
•  Be responsible for hiring, training, measuring, and motivating the team
•  Building new and expanding existing partnerships with third-party administrators and other channel partners to drive program adoption and execution
•  Drive online marketing excellence in search engine optimization, search engine marketing, affiliate marketing, online social awareness (e.g., Twitter, blogs, Facebook) with single-minded goal of revenue growth and optimization
•  Travel when needed to meet key partners and partner prospects to establish, develop, and maintain those relationships, including the management, expansion, and renewal of multi-year partner contracts
•  Manage short- and long-term staff planning, recruitment, performance management, work assignments, training, mentoring, career development, and recognition or disciplinary actions
•  Set up processes for project team selection, resource loading, KPIs, etc.
•  Own and drive overall budgeting, forecasting, and performance measurement against goals
•  Be responsible for business planning and proposals, operating budgets, and financial terms/ conditions of contracts for all revenue channel partners.

The successful candidate must also have the ability and experience to lead a multi-disciplined organization.

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Measuring & Delivering Energy Savings

Our client  is a leading energy software company founded in 2007. Based in Boston, MA and privately held, The Company has developed patent-pending technology that enables them to retrieve utility data on behalf of virtually any household in America. Utilizing that technology, the company is the richest residential energy efficiency platform available today, and serves both customers and a variety of institutions that care about energy efficiency with its platform and the technology that underlies it. Its platform helps people to understand their energy use and be incentivized to save, as well as enables individuals to interact with and track their electric, gas, and water usage online.

The Position

The CTO/VP Engineering’s role is to oversee day to day activities of the software product development team for all of Company offerings. The role will build out and directly supervise a team of architects, software developers, quality assurance, and business analysts; identify risk and opportunity areas; and coordinate all software development activities.

This role will also work closely with Product Strategy and manage the Lead Technical Architect to envision and define features in the product roadmap and be accountable for the features development, deployment and support.  In addition to the technical leadership of the team, this role will have full management responsibility and oversight for a cross-functional group of engineering and quality assurance personnel.

Reporting directly to the CEO, the VP Engineering shall:

The successful candidate must also have the ability and experience to lead a multi-disciplined organization in a multi-location environment.

Qualifications

Essential Job Functions/Responsibilities

Ideal Candidate Profile

The diagram below illustrates the intersection of competencies critical in the position:

The Company

Creating Privacy in the Workplace via Technology

Our client is a pioneer in sound masking, paging and music engineered systems. Their products  feature cutting-edge distributed audio technology for the workplace that combines extraordinary audio performance, low impact installation and affordability. Their systems are deployed in millions of square feet of workspace while supporting normal acoustical privacy in open plan spaces and confidential speech privacy in private offices.

The company is headquartered  in the Northeast United States.

The Position

As heir apparent and key member of the management team, the Chief Operating Officer will partner with the CEO on strategy, sales & marketing as well as all decision-making issues affecting the organization Key to the role is an ability to bring prior experience and success in building and growing multiple distribution channels, scaling teams and organizations from 25 to 50+, and expanding domestic and international partners and customers.

Ideal Candidate Profile

The diagram below illustrates a comprehensive intersection of competencies critical in the COO position:

The COO’s core responsibilities will include the following—

Strategy, & Product Marketing Direction:

Collaborating with the CEO to establish a short and long-term business direction that drives the company to become an industry leader and maximize the penetration of the markets served. The COO will bear primary responsibility for refining and carrying out The Company’s strategy. This will include such activities as monitoring The Company’s current markets and its standing within them; assessing current and potential competitive activity; and evaluating opportunities for growth (new but related products, entirely new initiatives which leverage the Company’s relationships, intellectual property and intellectual capital, possible acquisitions, etc.).

Marketing:

Ensuring close symbiotic relationship between product development and customer market needs, creating demonstrable competitive differentiation and performance benefits of CSM products vis-à-vis industry competitors.

Sales & Business Development Leadership:

Setting the approach to commercialization, including direct sales, distributor agreements, and independent representative networks. First and foremost, the COO will play a hands-on role in building The Company by acting as its most-senior business generator and evangelist. He or she must understand both The Company’s capabilities and the market’s needs, and combine those understandings to identify and pursue specific new opportunities.

Engineering, Manufacturing & Operations:

To a lesser extent the COO will share oversight of engineering, manufacturing and production teams responsible for product development, production, establishing build/buy/outsource decisions, quality control etc.

Staff— team building, development, mentorship:

The COO is responsible for human capital planning and hiring. As important, the position will actively be responsible for developing new and existing staff to help prepare them for company growth and increased leadership responsibilities at all levels. Finally, the new COO will serve as leader and mentor to the founding team and as a complement to their existing skills. He or she will do this through personal interactions with colleagues, as well as by maintaining management practices which reinforce a positive internal culture and help the company establish a reputation as a rewarding place to build a career. This individual will be expected to set high standards and hold people accountable, and to create an environment in which people work cooperatively and focus on building the long-term value of the enterprise. When management slots open up, the COO must be able to hire executives who can make significant contributions, not only as individuals but by building effective teams in their own areas of the business; he or she will also have to upgrade the organization when necessary by replacing underperformers with strong new recruits.

Investors/shareholders & board — milestone management, any follow-on fundraising, and liquidity strategy: Along with the CEO, the new COO is co-liaison to the board and will aggressively manage milestone deliverables, be a key leader at board meetings and to board/investor communications. The COO will be responsible for developing and managing against an annual operating plan and in addition to possible follow-on fundraising, will be accountable for optimizing the harvest for all shareholders. This includes continuous improvement of operational efficiency and effectiveness by assessing, upgrading or installing new operational systems, processes and methodologies. In addition, the COO will continually review activity reports and financial statements to determine progress and status in attaining objectives and revise tactics in accordance with current conditions. Combining these, the COO will execute and achieve annual growth targets while gaining increased leverage on costs and operating expenses.

STAGE:

Key background & successful experience with company growth stage includes—

• Board/investor communication and management

• VP level hiring across the organizational spectrum

• Growing sales from `$5M to >$50M

• Industry partner mapping for growth and harvest

• M&A negotiation experience

INTERNATIONAL:

Previous exposure to international business, in particular international dealer and distribution channels is beneficial. This includes the ability to work effectively in other parts of the world, and an appreciation for the ways in which cultures and business practices differ from country to country.

EDUCATION:

Undergraduate degree required, with preference for mechanical or electrical engineering, MBA or other advanced degree a plus.

GENERAL:

Finally, this individual should have as many as possible of the traits required to succeed in any CEO position:

• High levels of intelligence, analytical strength and conceptual ability.

• The ability, and willingness, to set and communicate demanding standards for professional staff and to hold people accountable for their performance; at the same time, sensitivity to, and insight into, individuals’ capabilities and development needs.

• Decisiveness when necessary, coupled with a willingness to seek input and build consensus as much as possible.

• Unquestioned honesty and integrity; also, loyalty to colleagues and to the organization, and the ability to inspire loyalty. This person should have the ability to identify and focus on The Company’s best interests, rather than the agenda of any individual or group within the Firm.

• A very high level of energy and commitment, combined with enthusiasm and a positive attitude.

• Excellent writing and speaking skills; this individual must be able to communicate complex ideas and information clearly and concisely.

• Outstanding planning and organization skills.

• Good strategic instincts and long-term vision; the ability to address both big-picture issues and detailed, day-to-day management concerns.

• In general, the business and personal skills, and the absolute commitment, required to make a major contribution to The Company during the coming years.

Team

Reporting to the CEO, the COO shares the responsibility for sales, marketing, operations, product and finance. Total employee base is approximately 25 and growing.

Financial Backing & Budget

The Company is profitable and growing at a 30%+ annual rate.  Seed and growth capital has been provided by one strategic partner in a joint-venture structure.  No other outside investment capital has been required.

Compensation

Compensation is competitive with the position’s requirements. In a performance-based environment, this will include base salary, incentive bonus structure based on both individual and company milestones, and a stakeholder position in the company.

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.

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Should you hire a veteran or wean & train when building a growth-stage company?

[originally written for Mass High Tech]

In our role as executive search consultants for growth-stage companies, one of the questions that seems to continually vex the CEO is how best to build out their team.   This question often narrows to a discussion around whether it would be better to hire a senior level person first in each of the key functional roles in the organization chart, or rather to hire a more junior level person and hire at a higher level once the company has built up some “traction.” For our purposes, traction can be defined as any or all of a number of indicators, including revenue, funding, or product development milestones.

Short answer, “It depends…”

When asked this question, the CEOs and venture capitalists we talked to universally responded, “It depends….” So then the question became, “On what?”  The answers came back and included the following key variables to balance when trying to decide on whether to hire high or low when you first fill a key position in your early-stage venture—

• • Funding—Money is certainly a gaiting factor for most early-stage companies, and often the largest line item on the P&L is salaries & wages.  Putting in a leadership team too early all at cash compensation that runs north of $150,000 can certainly create a net-cash-burn that would rival the bubble days.   However, “talented people hire talented people,” says Lou Volpe, Managing General Partner of Kodiak Venture Partners.   And talent doesn’t necessarily mean ‘experienced.’ Talent alone is usually less expensive.”
• • Composition of the Incumbent Team— You need to have a balanced team.  Companies are often referred to as “engineering culture,” or sales, or finance-driven.  This speaks to an inherent imbalance in the leadership team.  Kodiak’s Volpe emphasized that, “you need to think of the entire picture, the entire team.  You need to have it balanced.  If you have too much strength in one function, you’ll be out-of balance and the company will suffer accordingly.”
• • Stage of Company— If too early-stage a company, it may be difficult to attract the world-class talent you need.   This conflicts to some extent with the current thinking today popularized by Jim Collins in his book, Good to Great.  In one of the areas Collins explored with the “great” companies he studied, he and his team learned that these companies focused on “getting the right people on the bus,” then deciding where they were going to drive it.  David Power, a Partner at Fidelity Ventures, qualified Collins’ observations, saying, “If you’re a charismatic enough leader, you might be able to get everyone on the bus BEFORE you start to drive, but every company doesn’t have that privilege, especially when young, and often capital-constrained/higher-risk.  You need to be able to give talented executives that you are seeking to attract some general direction, to be able to explain to a ‘hire-high’ A-player why the company and role should have great appeal to the candidate.”
• • Which Function It Is — There are certain functions in an early-stage company where hiring the best is critical early on.  One such critical area is hiring into the leadership roles responsible for the product development in the company—engineering in the case of technology product, or science in the case of biotechnology/life sciences.  CEO Tuan Ha-Ngoc  said that it was critical for Genpath’s success to get the best Chief Science Officer they could find, and they did.   One of the VC’s commented however that the finance function is a perfect example of where hiring low is often the right thing to do—the company only needs a part time finance person at its earliest stages, then a controller later on, and then if the company is looking to go public, a world class CFO.
• • Speed of Anticipated Growth— If the company is anticipated to grow slowly, it is possible that a person can grow in parallel with the company.  However, given the often-cannibalistic nature of technology and sciences companies, “slow” is often not an option due to fears of product obsolescence, time limits on patents, or pure competitive pressures.    Globespan’s David Fachetti put it clearly, saying, “Hire higher for fast growth companies.  The opportunity will grow into the people, rather than the people grow into the opportunity.  Talented and experienced executives will bring up the level of the opportunity to meet their needs, and in so doing will accelerate the company’s growth.”
• • Price point of Product /Service— Enterprise software or very expensive hardware sold into the C-levels within the Global 2000 may put pressure on the upside of the high/low spectrum.  Kodiak’s Lou Volpe feels that if price-points are high, it is likely the company will need more senior/experienced talent to get it to market.

Universal Truths

All those interviewed agreed on a number of best practices.  The one that stood out most is the need to hire what was referred to as “quality.” There are two primary axes on candidate qualifications briefly mentioned earlier—the first is quality or “talent,” and the second is experience.  If you hire someone with both, this defines the “hire high” approach.  If you hire someone with only quality, but less experience, it points to the “hire low” approach.

Hire quality

Those we spoke with also included several other must-have characteristics further define “quality.”  Fidelity Ventures’ David Power ticked off the first four:

• • Motivation
• • Intelligence
• • Integrity
• • Ability to produce results

Joel Rosen, veteran CEO and former venture capitalist  at Charles River Ventures added two more:

• • Passion about the business
• • Cultural fit with the rest of the team

One other CEO punctuated the list:

• • Work ethic

Though no doubt there are many more, these rose to the top of the list when trying to describe what “quality” in a hire looks like.

Hire experience

The other half of our working definition of “hiring high” we’ve termed earlier as “experience.”  David Fachetti at Globespan Capital articulated four key areas he probes to determine whether candidates he interviews have what he defines as experience:

1. 1. Lifecycle experience: prior experience at a similar stage of company development
2. 2. Domain experience:  prior experience in the same industry sector as the current company
3. 3. Functional experience: prior experience playing a similar functional role (marketing, sales, technology, finance, etc.)
4. 4. Relationships experience:  has the individual worked with others on the team before?

Don’t skimp when it comes to Leadership experience

One more key experience criterion, especially when “hiring high,” is leadership experience.  One CEO emphasized that, “experience and skills aren’t a surrogate for leadership.  If you’re going to be growing a team, you’ll fail without it.”

Determine where you need your best gene pool

Another common refrain was that–in an early stage company–there are at least three key roles where you want to hire high, rather than low.  Dave Fachetti, Principal at Globespan Capital Partners, summed it up, saying, “For a company to have a solid foundation for growth, bench strength needs to exist at the highest functional levels in technology (VP Engineering/CTO), sales, and the senior P&L role of CEO.  Scott Griffith, Zipcar CEO emphasized that each company can differ, so “get the strategy right, and THEN hire high into the key stress points of that strategy.”

One qualifier made by Genpath CEO Tuan Ha-Ngoc was the impact of the differences between technology companies and life sciences companies.  In pure technology companies, there is an additional emphasis on the importance of hiring a high level of experience into the position where the technology meets the customer, someone who has the pulse and understanding of the market into which the technology will be selling.    In life sciences, the pain of disease is more often self-evident, where technology can sometimes mistakenly be developed for technology’s sake, a “build it and they will come” approach.

Make sure executives can “zoom out and zoom in”

The individual has to be able to both lead a function and do the function.  In other words, if the decision is made to hire a VP Sales, that VP Sales has to be able to “carry the bag” and actually do the selling, as well as hire, train, motivate, and manage a sales force when the time comes.    Similarly, an early-stage VP Engineering should be able to code as well as architect early on, until more hands can be hired.  Early on at Yahoo!, the company determined that one of the key hiring criteria for any employee was that they could “zoom in and zoom out.”   Every new hire had to be able to think strategically at the 50,000 foot level, but also be able to go back to ground-zero and execute the strategy.   Zipcar’s Griffith—a licensed airplane pilot—added, “You have to be a pilot, willing to get under the plane and check all the equipment yourself, take off, navigate, AND safely land in order to get successfully from point of origin to destination.”

Biases & Cautions

Not surprisingly there were biases that had formed from the individual operating experiences of each CEO or VC with whom we talked.   And interestingly, despite these biases, many gave examples of a hiring circumstance that ran counter to their bias that worked out particularly well, or a hire that fit their bias that failed.   Following are some of the biases and cautions that stood out.

If you’re the CEO, don’t hire low in an area just because it’s your functional strength

There was a great deal of alignment on this issue, and it’s a chronic mistake the venture capitalists we talked to saw in their portfolio companies.   David Power at Fidelity Ventures elaborated saying that “If a CEO hires a weaker player into a function where that CEO has expertise, say the marketing function, the CEO ends up still managing marketing instead of doing what the CEO should be doing—running the company.  You want to hire at equal levels across the functional spectrum.”  Joel Rosen at Charles River Ventures added, “younger companies don’t have a lot of training infrastructure.  The company is running too fast to have the leeway to train much.  Although this isn’t a law of nature, the biggest gaiting factor to growth is often bandwidth, particularly that of the CEO.”

Don’t hire talent too late

Genpath CEO Tuan Ha-Ngoc put it simply and elegantly—“It is rare that the company fails because you hired high-caliber talent too early.  It’s usually that the company hired too late.”

If you hire high, think about assigning multiple roles

One of the ways you can often get top talent in early-stage companies is to offer multiple roles that will allow the higher-level executive an opportunity to stretch their wings.  Lou Volpe at Kodiak added, “If hiring a senior engineering executive early-on, think about giving them QA, support, and/or manufacturing, even product management.”

The probability of a successful high/low hire is predicated on the clarity of the task

Put another way, the murkier the goals, strategies, and tactics of a particular functional area, the more you will bias your hiring toward the high side of the spectrum of experience.  Conversely, if the responsibilities of the position are well defined and clear, a lower-hire might be just the right fit.  As EquipNet CEO Roger Gallo put it, “Is the hire going to be focused on fulfilling known initiatives,

or rather creating and forging entirely new ones?”

Think about making a “high-low sandwich”

To this point, no mention has been made of the obvious question when talking about whether to hire high or hire low—what about “hiring in the middle”?  Kodiak’s Lou Volpe admits a bias to a combination approach of hiring a low with a high—“Hire high, and then do a step function, and hire low.  In sales for example, hire the VP, and then hire one or two lower-level individual contributors, one or more of which can be step-up candidates into the middle role of manager or director further down the company development cycle.”

What about hiring high/low when it comes to hiring the CEO?

This question is complex enough to support itself as a single topic of discussion with the venture capitalists and CEOs we consulted.  However, Fidelity Ventures’ David Power listed three circumstances where hiring a step-up/“low” candidate into the CEO position can work—

1. 1. When a particular functional area is important to the stage of company growth (hiring a VP Sales or VP Marketing into the CEO position when the company is just entering its revenue stage)
2. 2. When continual technological innovation/engineering is inherent to an industry sector (hiring a VP Engineering or CTO into the CEO position because of the pressures for recurring and sustainable technology innovation)
3. 3. When you can get someone who is traditionally “out of reach” (hiring a superstar VP level candidate into the CEO position because a step-up is the only way you can attract that particular talent)

With all of the above thoughts on best practices regarding hiring for early-stage companies, an image formed to sum up some of the wisdom of the CEOs and VCs we consulted.   Perhaps it’s not too different from how many parents buy clothes for their fast growing child—you pick the color and the style, and then have them walk up the rack trying on increasingly larger sizes until the piece of clothing actually falls right off.  You then step it back one size, and buy that one.   It’s just small enough that it can be worn now, but it leaves plenty of room for future growth.

The Leading Provider of Wealth Marketing Solutions

Based in New York City, our client provides strategic and interactive marketing solutions for wealth management firms and luxury brands. The company offers strategy planning and research services; online marketing and advertising programs; and e-marketing tools, which comprise a suite of software offering an e-marketing platform that allows communication with clients and prospects. It also provides marketing services, including print and online content publishing, brand and identity creative, creative strategy and planning, logo and mark creation, graphic design and layout, editorial design, copywriting, multimedia design, video and audio production, prepress and print, and collateral development services. In addition, the company offers interactive solutions, such as Web design, Web building and analytics, Internet and intranet/micro site development, information architecture, SEM/SEO, systematic design, content management, E-commerce, and Internet application development services,  and multichannel integrated marketing, rich and emerging media, media strategy, media planning and buying, and strategy and creative development services.

The company has become the pre-eminent provider of interactive agency expertise, accompanied by specific CRM oriented software tools to help their marquis clients, including Merrill Lynch, Morgan Stanley, Charles Schwab and Barclays.

The Position

Reporting to the CEO, the SVP Technology’s role is to oversee day to day activities of the software product development and enterprise architecture integration teams for the company’s Software as a Service (SaaS) offerings. The SVP will directly supervise a team of software developers, quality assurance, and business analysts; identify risk and opportunity areas; and coordinate all software development activities.

The head of technology will also work closely with Product Strategy on the business side and manage the Lead Technical Architect to envision and define features in the product roadmap and be accountable for the features development, deployment and support.  In addition to the technical leadership of the team, this role has full management responsibility and oversight for a cross-functional group of engineering personnel.

The SVP Technology shall:

• • Manage software architecture, design, development, procurement, and integration. Also manage tier-2 and higher support once software has been placed into operations.
• • Achieve cost, schedule, technical and quality performance for delivered software. Compile, maintain, schedule, resource, execute prioritized lists of development projects, including planning and managing the budget and scheduling personnel and vendor contracts to meet project needs. Collect metrics on development performance and report on them.
• • Collaborate with other functional managers (customer facing business units, systems engineering, QA, and operations) to ensure architectural integrity, effective integration and test, and ongoing system stability.
• • Direct technical subcontractor management including contract negotiation, technical support, budgetary management and program management of various contracts and associated budgets.   Coordinate vendor contracts, deliveries and schedule with affected company parties.  Contract with vendors for services to support engineering while addressing Intellectual Property, Non-Disclosures and Statements of Work.
• • Manage short- and long-term staff planning, recruitment, performance management, work assignments, training, mentoring, career development, and recognition or disciplinary action.
• • Be responsible for business planning and proposals, operating budgets and financial terms / conditions of contracts for both internal and external customers.

The successful candidate must also have the ability and experience to lead a multi-disciplined organization in a multi-location environment.

Qualifications

• • Minimum of 10 years overall software development experience, with no less than 5 years in a SaaS environment as well as at least 5 years of management experience.
• • 2-3 years of senior-level or leadership experience in a software environment with 10 or more direct reports.
• • Experience working with product managers and other business stakeholders to set timeliness, budget resources, and manage expectations and quality of the development process
• • Advanced understanding of SaaS web application programming architectures, including standards for security, scalability and configurability
• • Expertise and experience in implementing and overseeing measures for data security, business continuity, disaster recovery
• • Deep understanding of load balancing and performance optimization  principals for high volume/transaction web applications
• • Strong skills in Java software development.
• • Experience with refactoring and eliminating legacy dependencies
• • Demonstrated substantial leadership in both technical and management areas
• • Experience leading development efforts using a variety of different SDLC approaches (waterfall, agile, etc.)
• • Knowledge of multi-threaded programming
• • Outstanding collaboration skills, excellent communication skills, an ability to look at the big picture

Essential Job Functions/Responsibilities

• • Lead software and front-end engineers in the specification, design and development and support of all our applications, including websites/products, our core services and our internal and external tools
• • Provide hands-on technical management leadership and support to software development team of 12 – 15 engineers
• • Identify skill and performance gaps in current organization and provide improvement plans
• • Improve existing processes and establish new processes for efficient development and high quality output
• • Evaluate and enhance overall development environment, release practices and Quality Assurance methodology
• • Instate and maintain development standards, code reviews, unit testing and integration testing frameworks
• • Maintain overall ownership / accountability for data security, business continuity, disaster recovery
• • Work in tandem with Technical architect and development team to identify and implement new measures for system performance optimization under high load
• • Lead, recruit, develop and supervise the development team members
• • Evaluate and take accountability for decisions on key technologies adopted
• • Ensure proper development of technical specifications and documentation.
• • Estimate resource usage and timeliness for development team
• • Review team members’ detailed design of components/modules/code
• • Provide a good balance of experience and skills in several front-end and/or back-end technologies
• • Strong relational database skills, preferably MY SQL Serve
• • Knowledge of latest web technologies with understanding of AJAX and RIA
• • Ability to translate technology choices into business implications

The diagram below illustrates the intersection of competencies critical in the SVP Technology position:

Compensation

Compensation is competitive with the position’s requirements.  In a performance-based environment, this will include base salary, incentive bonus structure based on both individual, department, and corporate qualitative and quantitative MBOs, and a potential stakeholder position in the company.

Our client is tearing down the walls of the pixel landscape.  The Company has developed proprietary breakthrough software that functions as a pixels operating system, moving video display from one source projecting one visual, to infinite sources projecting virtually unlimited visuals.  And all of this is at a pixel-density that can go beyond high-definition quality, at commodity projection device cost, with no manual calibration or image “stitching” required.  The Company”s technology is used in various applications ranging from simulation and training to museum displays and digital signage.  The company serves corporate, government, and academic organizations.

Market Opportunity

Industry Outlook (software-enabled displays):

• •    Visual simulation and Large Venue Display – $1.4B and $22.2B
• •    Growing rapidly – 14.1% and 23.3% CAGR
• •    Incumbent companies expensive, inflexible, and manually aligned – the bottleneck to widespread use of advanced display
• •    Commercial public venue display increased from $16.5B to $22.2B from 2005-2007
• •    iSuppli (major research firm) predicts $51B by 2011
• •    Multiple options for use: API for large, seamless displays and computing clusters with over 6xHD resolutions displays; or seamless displays up to 6xHD with no application integration.

A single Company server can calibrate multiple displays and is not limited by projection hardware type or resolution.

The Position

The CEO’s core responsibilities will include:

Marketing direction:

Marketing strategy & product marketing– Establishing a short and long-term business direction the drives the company to become an industry leader and maximize the penetration of the markets served.

Business development, including channel sales, OEM & relationships, and all distribution agreements

Operations– Product delivery, deployment, fulfillment and post-sales customer relationship management.

Manufacturing & Operations:

Oversight of manufacturing and production teams responsible for commercializing the technology, establishing build/buy/outsource decisions, etcetera. Working with the rest of the team, oversight of quality assurance, working with the CTO to ensure that product development meets various international multi-regional market-driven specifications and is “rolled out” smoothly and on schedule.

Staff- team building, development, mentorship:  The CEO is responsible for human capital planning and hiring.  As important, the position will actively be responsible for developing new and existing staff to help prepare them for company growth and increased leadership responsibilities at all levels.  Finally, the new CEO will serve as leader and mentor to the founding team and as a complement to their existing skills.

Investors/shareholders & board - milestone management, follow-on fundraising, liquidity strategy: The new CEO is primary liaison to the board and will aggressively manage milestone deliverables, be a key contributor at board meetings and to board/investor communications.  The CEO will be responsible for developing and managing against an annual operating plan and in addition to possible follow-on fundraising, will be accountable for optimizing the harvest for all shareholders.

Ideal Candidate Profile

The diagram below illustrates the intersection of competencies critical in the new CEO:

Compensation

Compensation is competitive with the position’s requirements.  In a performance-based environment, this will include base salary, milestone/incentive bonus structure, and a stakeholder position in the company.

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.

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…