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- Creating a Winning Team
“To be as good as it can be, a team has to buy into what you as the coach are doing. They have to feel you’re a part of them and they’re a part of you.” – Bobby Knight, College Basketball coach (led teams to win 902 NCAA Division I men's college basketball games) Would you have hired John Wooden, arguably the best college basketball coach ever, to lead your football team to the Super Bowl? What about Vince Lombardi or Don Shula, both Hall of Fame football coaches, to win the Stanley Cup? I build winning teams. I built them for my startups and when I was an individual contributor at major international companies. They were completely different experiences. At startups, I needed to build teams that could hit the ground running and deliver instant wins. At established companies, it can be a longer process and the teams are very different. What do sports teams have to do with business? Let’s say you have a start-up and want to build a team that will deliver a win immediately. If we go back to the sports analogy, you might think that finding the BEST coach would work. John Wooden, for example, had the stats to back up the claim to be one of the winningest coaches in the world . . . just not in football. What he could have brought is a culture of winning and leadership, bringing his old “playbook” from a different sport. What he couldn’t provide was on-the-field knowledge and strategies. “It's the little details that are vital. Little things make big things happen.” John Wooden, UCLA Bruins (10 National Collegiate Athletic Association championships in a 12-year period) When building a team in business, it’s easy to hire a strong leader from another industry. Yes, they have the metrics to show they can lead. However, when it comes to providing feedback about the details, they can’t. Imagine a basketball coach trying to tell a football lineman that he needs to work on certain skills – skills that the coach has never learned or taught. The player won’t respect the coach’s words and buy into the message because the coach has never played that game. Sure, given five years to study football, the basketball coach might make a good football leader and be able to provide specific insights. That won’t work if they’re trying to WIN NOW! “Coaches who can outline plays on a black board are a dime a dozen. The ones who win get inside their player and motivate.” Vince Lombardi, Green Bay Packers (5 Super Bowl wins in 9 years) Back to business. The VP of Sales from a chain of car dealerships will definitely bring the data. However, when moved to lead for a completely different product, despite loads of experience and enthusiasm, he can’t really understand sales that take longer than an afternoon. Nor has he ever had to work with clients and engineers to customize products that fill their technology needs. Sure, he can tell you how to order a vehicle with specific accessories or color but, again, it’s a quick process. Mature businesses can afford relationship building that produce sales further down the road. Burn rates on startups simply don’t allow for that. In the tech world, business truly moves at the speed of light. There isn’t a lot of time for steep learning curves. There’s no time for a coach to learn the game. That’s why hiring someone with direct experience in that space and a pipeline of existing prospects and relationships, achieves the “win now” scenario. When I built teams for my startups, that is exactly what I did. I found people from the same industry, with the same customers with success leading smaller teams and promoted them to executive leadership positions that leveraged their existing skills and relationships on a broader scale. I needed them to lead from within, boots on the ground, able to assist at every step, and provide positive motivation. The results were immediate. We didn’t win the Super Bowl, but we built great companies.
- Short-term vs. Long-term: Aligning Company Goals for Success and Sustainability
There are two types of goals that will make up your overall business strategy; short-term and long-term. Businesses can fail for a variety of reasons, but one of the most common is due to a failure to solidify and align long-term and short-term goals. For example, a business may not have a clearly identifiable strategy and simply be focused on this quarter's profits, without understanding how achieving this quarters’ profit goals impact future business objectives and sustainability of the business. A company's short-term goals will be very different depending on the long-term strategy. For example, the online giant Amazon did not make any profit for years, and still shows marginal profitability as it focuses on long term growth initiatives. Amazon gave growth and customer acquisition greater importance than immediate profits. They keep their prices very low, sometimes to the point of losing money, but these short-term tactics aligns with their long-term strategy; to be an industry leader and own a huge portion of the online sales market. Had Amazon favored profits over growth, they may not be the disruptive and industry redefining force of the digital age that they have become. Following are some of the ways you can ensure your company's goals are clearly defined and that your short-term goals support your long-term objectives. Always Be Thinking About the Exit Strategy Too often start-ups as well as established firms don't have a clear exit strategy in place. There is an inherent tendency to focus on immediate gratification for objectives that may have little to no correlation to long term success. When companies do this, their default “exit” strategy often results in business failure. Failure is not an exit strategy. When and how you plan to exit will have a major bearing on short-term goals. A company with an exit strategy of eighteen months, such as a pre-IPO entity, will set very different short-term goals than a company with an exit strategy of ten years, such as a family owned business. These two companies will have to make very different choices when it comes to staffing, product development, capital allocation, among many other strategic decisions. Set Long-Term Goals Before Setting Short-Term Tactics Short-term planning should align with long-term goals; not the other way around. When you have a clear plan for your organization, you can create short-term tactics that uphold that longer-term vision. Remember that the best goals follow the S.M.A.R.T acronym. They are Specific, Measurable, Attainable, Relevant, and Timely. This means that your long-term goal should be something concrete and easily identifiable. Vague goals such as “Grow the business” will not lead you to success, nor do they enable alignment within the organization. A better goal would be, “Increase profits by 25% within two years’ time.” This goal is specific. It can easily be measured to see whether you've achieved it, and it has a time frame attached to it. Organizational, departmental, and individual goals can all then be aligned with their respective contribution to increasing profits by 25%. Break Long-Term Goals into Short-Term Tactics One way to ensure that your short-term goals align with your long-term goals is to create them by breaking your long-term goals down into smaller defined tactics and timeframe for achievement. To go back to the example above, if your goal is to increase profits by 25% within two years’ time, then you could break this down by quarter. You could set a goal of a profit increase of 4% each fiscal quarter, or you could divide that 25% another way if you know that some quarters see greater revenue than others. For a seasonal business, you may aim for a 10% increase during Q3 or Q4 and have lower quotas for quarters when you don't see as much demand. Remember that a two-year goal would only be considered long-term, if your exit is planned for two or three years in the future. If you have a twenty-year exit strategy, then a two-year goal would fall under the short-term. The measurement period may vary from one organization to the next; however, the primary importance is that it is consistently understood throughout the organization. Remember that Success is not just about Profit: It is also about Sustainability I started my first business in the “.com” era, a time marked by a huge boom and subsequent bust of many online businesses, and the resulting loss in billions of investment dollars. During this time, I remember seeing a seemingly never-ending stream of success stories in the press. The problem with these “successful” businesses is that they were focused largely on fundamentally flawed business assumptions that had no clear path for profitability. They didn't have a sharp vision for the future and they weren't making strategic decisions with longevity in mind. For these reasons, these “success” stories, became stories of failure. Failure was their only exit strategy, and when they ran out of funds, they were forced to shut down. When to Start Planning? If you haven’t already done so, the best time to start thinking about your long-term and short-term goals, and making sure these goals align with one another, is now! Especially for start-ups, if you've already been in business for some time and your focus has been merely on short term ‘survival’, you can start making smart and future-focused decisions today. Start by thinking about your exit strategy. How long do you want to operate this business? How will you know when it is time to sell the business? Do you ever plan to go public (IPO) or will your business remain privately-owned? These are just a few of the questions that you'll want to consider, as you formulate your long-term business strategy. Your goals may change as the business grows or as the industry changes, but it is vital to have that plan in place and ensure that the goals are clearly communicated throughout the organization. When you take the time to think about the future, it is much more likely that your company will have a future!
- 5 Considerations Before Making Your Next Hire
Whether you’re a start-up, growing business, or established Fortune 500, the market for labor has never seemed tighter than in recent months. Talent is scarce yet budgets are thin, and making the wrong hire can cost fifty percent or more of the hire’s first year salary inclusive of the time, effort and non-recoverable resources associated with both the wrong hire and the new replacement. Having hired dozens of team members at all levels of an organization from executive level to entry level, and with start-ups and Fortune 500’s, I’ve found the following key guidelines that will help in making the right hiring decision while saving money along the way. 1) Do you really need to make the new hire, and add headcount, expenses, and the associated management time and effort? Consider using the “gig economy” to contract specific skills when needed and as needed. With resources like Fiverr (https://www.fiverr.com) at your disposal, a diverse global workforce is now accessible to anyone. Consider someone already inside the company. Consider reallocating existing personnel from another department to avoid the need for the learning curve of hiring from outside. 2) Does the position being filled provide more value in the immediate term, or long term? In a tight labor market the “ideal” hire is not as easy to find as it once was. Organizations often make the mistake of placing industry experience over aptitude and capability. For example, I still see almost all job openings requiring “x years of experience in selling widgets. ” Hiring managers needto ask themselves in such situations if the most important part of the job is to know “widgets,” or is the most important part to have fundamental and proven experience and the ability to learn the needed “widget” knowledge? Determine whether experiential knowledge or aptitude for the role is more important, and prioritize the recruiting criteria accordingly. Don’t let “experience” be confused with true aptitude to successfully perform within a given role. If you need results next week, industry knowledge and experience counts. When the hiring need is for longer term and larger scale results, ensure overall aptitude is the dominant hiring metric. 3) Be clear about hiring for the right culture and fit. Especially with so many start-ups and even large organizations taking on an entrepreneurial feel, it is critical to ensure the size, scope, and projected growth of the role are consistent with the career paths of the individual being hired. With so many qualified candidates having similarly qualified technical skills, often the key to success is better more measured by how they collaborate with others, as well as share information and knowledge for mutual shared success. 4) Find employees who are not afraid of embracing healthy conflict, and use this as strategic advantage. "We don't all have to get along all the time!" Hire someone who can be confident in taking and providing honest and candid feedback in a professional manner. If you’ve developed a culture of trust and open collaboration, you’ll find more success by hiring individuals whoare comfortable standing behind their own knowledge and experience, yet at the same time able to support consensus of the team over their individual agenda. 5) Test for “Drive”. I’ve successfully used resources such as SalesDrive (https://salesdrive.info) when putting together sales teams. This test measures an individuals 1) Need for Achievement, 2) Competitiveness, and 3) Optimism. We can readily teach product knowledge, company processes and procedures; however, we can’t teach the innate desire to win. Aptitude, attitude, motivation, need for achievement, etc. are attributes that cannot readily be taught. As managers, we can provide incentives to drive certain behaviors, but we can’t teach drive. Don’t wait until after they’re hired to find out. "The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it." Theodore Roosevelt
- 5 Keys to a Successful Exit Strategy
Gallup CEO and Chairman Jim Clifton revealed that “for the first time in 35 years American business deaths now outnumber business births.” And it’s not just small and medium-sized businesses feeling the pinch. In 2015 the number of publicly traded U.S. companies filing for bankruptcy in a first quarter was reported to have reached a five-year high. Having successfully navigated two startups from inception through successful exit, as well as having been involved in Private Equity-backed transactions, exits, and M&A, I’ve seen several characteristics that have led to both successful as well as unsuccessful exits. I remember clearly when I was in the early stages of my first startup, when my business was self-funded and relying on a fundamental basic business strategy to move forward…sell something to somebody and sell it at a profit if we wanted to keep the lights on. To most of us, especially those of us involved with large and/or public organizations, operating at a profit appears to be a fairly straightforward business premise. However, counter that with the perspective of one of my first employees. She had come to us from a “dot com” VC-backed start-up. We listened to her as she talked frequently of her prior employers’ fantastic culture, really smart people, great pay, and weekly happy hours and employee birthday celebrations. This culture contrasted starkly with our more mundane day-to-day grind of staying on task to generate profitable sales in the tech sector during the dot.com implosion. Why would someone work for our company, with tighter operating controls and measurements, when her prior employer provided such a cultural Utopia? When we asked her why she left such a wonderful company and culture, her response was commonplace at the time. “We ran out of money and everyone was let go.” How fascinating that a company that essentially burned through one hundred percent of their investor money and terminated the employment of all of their employees without warning was so revered! We were merely a company that worked hard to make a monthly profit and provide long term employment and opportunity for personal and professional growth. Our strategy prioritized a path of generating profitable revenues that resulted in being selected one of the Top 100 Fastest Growing Companies in the Dallas-Ft.Worth area. There were a number of reasons that led to the distinctly different outcomes for these two companies. Following are five keys that my company addressed that ultimately led to a successful exit six years after inception, all of which are excerpts from my forthcoming book, Failure Is Not an Exit Strategy. 1) It’s never too early to think about your exit plan Understand the odds of various exit scenarios and determine what may be most suitable to your industry, investor/ownership base, and intended timing. It’s important to spend time learning about your potential exit options regardless of when or how you are planning for an exit to occur. Exit plans can have significant influence over your company’s product development, technology deployment, staffing, pricing, and financing decisions. The exit plan for a start-up technology business is likely to be materially different than that of an established company, private equity backed firm, public companies, family business, etc. Incorporating what value the business brings to the marketplace, and over what timeframe that value can be maximized can be a key determinant of what exit, if any, is most appropriate. 2) 10% Vision, 90% Alignment Alignment of the company’s people, assets, marketing, operational and financial resources is critical to successful outcomes. Leadership needs to be responsible and held accountable for clearly and succinctly communicating the vision for the business. However, this vision should be easily understood among all departments and all levels within the organization, in a form that enables operational departments to use the vision to generate aligned actionable and measurable deliverables. Being clear about the direction, even if it involves adjusting along the journey, requires alignment and clear communication among all resources within the organization. Poor management and a lack of communication between departments often results in rapid growth of costs, a commensurate decrease in operational control, and a misunderstood action plan for the employees. 3) Performance Metrics that Matter Understanding the best metrics for managing the business is crucial when it comes time to exit. Net promoter scores, churn rate, and agreement duration may be essential measurement tools for technology companies. Assets under management may be more relevant for financially-centric firms, while EBITDA is going to be a key metric for traditional enterprises. Determine early on what metrics will drive your business value, and ensure they are communicated frequently throughout the organization. As an example, one of the most valuable yet difficult-to-calculate metrics for startups and high-growth firms should be the customer acquisition cost, (“CAC”). Venture backed start-ups should be understanding the true cost of customer acquisition, and be able to clearly demonstrate to existing and potential investors how this cost is derived. How long does it take to acquire a customer? How many resources are engaged in both the pre- and post-acquisition sales process? How much ongoing support does a specific client require? The significant increase in subscription-type business makes the understanding and management of this metric critical to both business valuation as well as business continuity. For subscription-based businesses, traditional measures of business health don’t work, but the lifetime customer value/customer acquisition cost ratio does. 4) Let business purpose determine the exit and timing As suggested in the first key above, the exit and timing may be different for different businesses, as well as being specifically aligned to the company leadership. For start-ups, is the business being built with an IPO in mind, or is it intended to be an ongoing legacy to be transferred to family members or other insiders? Some firms are managed in line with quarterly financials, while others may be on a multi-year or even generational duration. Understanding what the business purpose is, and managing against that timeframe and expectation, will result in operational actions that align with the exit expectations. When implementing an operational plan for my first startup for example, we made operating decisions based upon planning for 1) the need to provide our own internally-generated capital for growth and not having to rely upon capital markets, and 2) no planning would dictate that we would have to have a short-term exit plan, which would enable us to not have to sell during a period of weak market demand and thus we could run the business indefinitely. We operated on that conservative basis the first several years of the business, and it enabled us to navigate through the internet bubble and subsequent crash without relying upon outside investment capital. Many startups fail today because their entire business model is built on the assumption that they will obtain more capital tomorrow to fund the unprofitable business model they operate today. 5) Stakeholder alignment Who are the investors? Are your goals aligned with theirs? Are you an owner/operator, or do you have other investors? Even if it is “friends and family,”, is there a clearly laid out exit plan, either in its entirety or for the individual owners? From personal experience, I can assure you that the perception and interests of the stakeholders are vastly different on the first day than they will be in year three! Understanding and preparing for these differences early on can avoid significant disputes and potential litigation later in the business lifecycle. Private equity owners and public stockholders will likely have clearly defined parameters of goals and expectations. Understanding and ensuring there are ways to accommodate the needs of various stakeholders will facilitate strategic and exit plans later in the business lifecycle. There is unfortunately no “silver bullet” that dictates an exact answer at the outset for some relatively unknown future exit plan. Markets, strategies, competitors and personnel often shift over the lifecycle of the business causing material changes to the original expectations. However, addressing as much of this with the stakeholders sooner rather than later can dramatically increase your odds of success.