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February 2003

February 2003. Teams: Human nature and human resources Building, managing and motivating. Douglas Abrams - Parallax Capital Management. Teams: Human nature and human resources. The team is the most important thing Building teams Managing and motivating teams.

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February 2003

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  1. February 2003 Teams: Human nature and human resources Building, managing and motivating Douglas Abrams - Parallax Capital Management

  2. Teams: Human nature and human resources • The team is the most important thing • Building teams • Managing and motivating teams

  3. The team is the most important thing An excellent team can succeed with a less-than-perfect idea A poor team will fail no matter how good the idea Management team Advisory board Strategic partners

  4. Organizational structure Backgrounds, experience and expertise Balance Needs Founder/CEO and management team Describing the team in the business plan

  5. What do investors look for in a team? • Completeness • Competence • Maturity • Initial team should be prepared to step aside

  6. The more complete the team; the more likely the start-up will get funded • Investors don’t like to see holes in the management team • Especially marketing, sales and business development • Finding key people takes time • Slows down introduction of product • If team is not full; acknowledge and show willingness to correct and ideas for filling

  7. Completing the Management team • Look for diversity of functional skills, backgrounds and experiences… • …to achieve complementarity of competencies and encourage creative tensions • …but maintain cohesiveness through shared vision and compatible styles/chemistry • Filling in the Key Roles: • CEO • Directors and Advisors • Functional VPs (CTO/VP Engineering, VP Marketing/ Sales, VP Operations, VP Finance) A/P Wong Poh Kam - NUS

  8. The core team • Founders • Additional talent • Investors like to see that core team have worked together before • Reduces risk of team problems • Reduces time spent building a culture

  9. The Team Building Process • The Founders • Allocation of Roles (directors, general mgt, functional mgt, core operational roles) • Bringing on board Investors & Mentors • Completing the core Management team • Strengthening the Board of Directors • Leveraging an Advisory board • Stepping aside for more capable people A/P Wong Poh Kam - NUS

  10. CEO VP Marketing & Sales VP Business development CTO/CIO VP Production CFO Management team members

  11. What is the best sequence to add people? • Technology leader - inventor or leader of engineering • Must have strong skills • Investors prefer a prior VP or veteran leader of teams • Experienced CEO • VP of Marketing • Should be part of creation of first product • VP of Business Development • May double as VP Sales or Marketing in early days • VP sales • VP Manufacturing or Operations • Must be on board in time to ship first product

  12. CEO - Chief Executive Officer • Officer of the firm principally responsible for the firm's activities • Creates and communicates shared strategic vision • Defines the business • Defines corporate culture • Final decision-maker on all important issues • Coordinates direction of other executive officers

  13. Primarily responsible for the overall success or failure of the idea, the business and the strategy Effective formulation of business definition Effective development and communication of the firm's vision Ensures consistentcy and quality across the business plan Competitive advantage Makes the sale Can share other function ("Acting CEO") CEO - criteria for success

  14. Responsible for handling funds, signing checks Keeping financial records Financing and financial planning Criteria for success Thorough, realistic and professional financial plan and projections Understanding of financial markets and company finances CFO - Chief Financial Officer

  15. CFO issues • Strong CFO/VP Finance is best for entrepreneur • Can negotiate fund-raising terms, degree of control over spending, choice of investors, etc. • VCs may prefer weaker CFO in order to retain more control over the company

  16. Responsible for technology strategy and implementationInternal and external if technology company Criteria for success - all Internal technology solutions are efficient and cost-effective Product comparison matrix Criteria for success - technology product Design Research and development Product development On schedule and under budget CTO - Chief Technology Officer

  17. Responsible for day-to-day management and operation of the firm Critiera for success Firm runs smoothly, efficiently and cost-effectively Purchasing, manufacturing or processing Operations Distribution Service Channel management COO - Chief Operating Officer

  18. Responsible for the formulation and execution of the marketing plan and sales strategy Criteria for success Well-thought-out and effective marketing and sales strategy and plan Market and competitor analysis Positioning theme Competitive advantage Product comparison matrix Pricing, branding, advertising and promotion Sales strategy and sales force VP Sales and marketing

  19. VP Business Development • New customers • Strategic partners • Potential investors

  20. Beyond the management team • Other key employees • Board of directors • Advisory board • Professional services: accountants, lawyers, etc.

  21. Role of directors and advisors • Represent investors and founders’ interest • Enhance credibility • Tap their experience, domain expertise, and network of contacts • “Sounding board”, coach, advice on key decisions • “Reality-check”: alternative, more detached view; avoid blind-spot • May play interim management role while looking for the suitable candidates • Oust and replace management if found ineffective • Advisors do not have the fiduciary responsibilities and power of directors A/P Wong Poh Kam - NUS

  22. Added sales channel Industry buzz Additional credibility Access to expertise Possible financing, possible exit strategy Complementary technology Improve branding and marketing, enhance value proposition Strategic partners

  23. Consultants and contractors • Startups are short of talent • Contractors and outsourcing fill in missing skill sets at reduced cost • Enginerring contactors • Public relations • Recruiters • Acting executives

  24. Attracting VCs without prior experience • Chances of raising funds increased if founder has prior start-up experience • Most start-ups led by people without years of experience • Be prepared to hire an outside CEO • VCs can help to find a CEO

  25. Technologist or student starting business • Get started • Complete business plan • Attract key management talent later

  26. Teams: Human nature and human resources • The team is the most important thing • Building teams • Managing and motivating teams

  27. Don’t settle for average employees • Consider marginal quality of each new employee • Each new employee must be of higher quality than the current average • If marginal quality is below average quality then average quality will decline • Only if marginal quality is above average quality then average quality will continue to increase

  28. Hire the best people you can find • Better people; less risk • A players attract more A players • Top-quality people can emerge from bankruptcies • Top managers from defunct companies • “Better to hire a leader who learned from mistakes than someone who was just lucky”

  29. Pick outstanding talent • Will represent company to investors • Must make an excellent impression • Track records • Skills • Depth of experience in areas important to SCA

  30. Where to find the right people • Strong ties and weak ties • Friends, colleagues and personal recommendations • Advisors and networks • Employment agencies • Headhunters for senior positions • Advertising • Job posting at schools A/P Wong Poh Kam - NUS

  31. Recruitment • What kind of person do you want? • Who would be the ideal person for this job? • What background? • What experience? • Career goals? • Why would they want to join? • Compensation?

  32. Finding and retaining the right people • Specific technical skills, which are the least important characteristics to look at in hiring technologists are often the most heavily weighted in hiring decisions, • Most important characteristics in technology people are: intelligence, interest in the business, teamwork, good attitude.

  33. In reviewing resumes, look for: • Logical progression of responsibility and level • All transitions explained • Consistency and direction • Look at achievements, not just responsibilities • Domain knowledge or not

  34. Look for well-rounded employees • Extra-curricular activities • Community activities • Artistic achievement • Language skills • Sports

  35. Try to look beyond the resume • What are they passionate about? • What is their potential? • What makes them special? • Look for people who want to work for a start-up, small company, entrepreneurial

  36. What qualities to look for in employee • Intelligent and good creative problem-solving skills • Highly motivated and self starting • Appropriate risk profile • Focussed • Good fit

  37. Before the interview • Shortlisting • Preparation • Format • What questions do you want to ask? • What do you need to tell the candidate? • How should you assess the interview?

  38. In the interview • Have more than one person conduct the interview • Standard questions • Where do you want to be five years from now? • Why do you want to work in this industry/company? • What three accomplishments are you most proud of? • Teamwork-related • Tricky • Creative problem solving • Estimation questions

  39. Good candidates will ask their own questions • What will constitute successful performance? • What are your biggest challenges going forward? • What do you like the most about working here?

  40. After the interview - make the decision • Right skills? Personal qualities? Good fit? • Have they done their homework? • Best compared to the rest? • Look for red flags in the CV • Passing on good candidates hurts less than hiring bad employees • Follow up with offer

  41. What does “fit” mean? • Do you want to work with them every day for the next three years? • Will they easily fit into corporate culture? • Will adding them the average performance of the team?

  42. Do you like the person? Are they: • Intelligent? • Enthusiastic? • Passionate? • Sincere? • Do they appear to like you?

  43. Admissions mistakes • Settling out of desparation • Ignoring red flags • Lawsuits and legal entanglements

  44. Lawsuits and legal entanglements • Investors do not like lawsuits or even the possibility of legal issues • Make sure employees get out clean

  45. Make sure employees got out clean from previous employer • Take nothing with you • Take no notebooks, meeting notes, schematics, drawings, business plans, or portions thereof • Make no copies of anything, not even magazine articles with your handwritten notes in the margins • Tell your supervisor the whereabouts of any electronic information storage devices that you had access to or used • Do not write any portion of the business plan until well after you have left your employers • Do not create even the appearance of taking anything with you • After leaving your employer, have your lawyer write a letter to your former employer stating your plans to start a business and asking what specific proprietary information the employer may feel you possess • Talk to no one from or at your former employer until your lawyer gives you the all-clear Nesheim - High Tech Startup

  46. Remuneration packages • Salary • Stock options • Profit sharing and bonus schemes • Pension plans • Commissions • Cars and travel expenses

  47. Packaging the Offer • Pay • Salary + Performance Bonus • Signing bonus • Generally low to conserve cash, but made up with... • Stock & stock options • Up-front stock offer • Stock options & vesting schedule/buy-back conditions • Other benefits • Generally non-existent/lower for start-ups, but should look at “Learning opportunity” and “Greater challenge/ excitement factor” A/P Wong Poh Kam - NUS

  48. Stock Options • % of stock reserved for non-founder employee stock options • higher for more knowledge-intensive start-ups • split between founders, key employees (CEO, VPs) and other employees • Incentive stock options vs. nonqualified stock options • Vesting & Buy-back conditions • Stock option cuts both way: above vs. under water • trend in Silicon Valley of giving stock option for not just employees, but for all kind of services, has been reversed after the Nasdaq meltdown A/P Wong Poh Kam - NUS

  49. Teams: Human nature and human resources • The team is the most important thing • Building teams • Managing and motivating teams

  50. Team building principles • Effective corporate governance • Separation between ownership and management, strategy and execution • Alignment of incentives • Accountability to stakeholders • Effective management structure • Build chain of command – Strategic direction – general mgt – functional mgt – core operations • Overlap mechanisms for cross-functional teamwork • Extend shared vision from the core to embrace the new, create corporate culture around core values A/P Wong Poh Kam - NUS

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