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Human Capital: the importance of high performance teams to start-up success.
Outline
Context
Team diversity & dynamics
On hiring
Culture
Communication style
Compensation / incentive programs
Advisory Boards
Challenges, closing
Context: my background
U of Waterloo, Chartered Accountant, Queens U & UWO Executive Development
20+ years in tech companies Co-founded DCI, grew to 60 staff then RTO on TSE
Country manager HUBER+SUHNER
Swiss multi-national, “blue chip”
Team of 125 within 2,300 globally
CEO BTI Systems to 2008 Raised ~$60M VC over 4 rounds
From 12 to 225 employees
Revenue from $0 to $40M
Currently EiR MaRS, freelance consulting, and equity partner in e-Security professional services firm TRM Technologies
Context my typical playing field:
A (very) technical product
A technical sales process
A long, complex, B2B sales cycle
High growth market dynamics
Very much a David & Goliath landscape
High Performance teams...
Communicate openly, with diversity of opinion
Align on 3 or 4 top initiatives and track them
Plan as a group: short & long term & with plan “B”s (and have resiliency - High AQ = Adversity Quotient)
Are accountable to deliver
Multi-functional teams…
Software engineers
Product Management
Hardware engineers
Marketing HR Sales
Quality Operations
Manufacturing Finance Administration
Investors Customer Service
Management
Directors
OR
Venus & Mars
Research
Sales & Marketing Software Engineers
+
= ???
+
Motivation & drive: different strokes for different folks
• Peer recognition
• Papers published, patent applications
• Speaking at industry forums
• Technical challenge
• “coin operated”
• “show me the money”
But wait a minute: we’re not that different
1. Everyone needs recognition - the “feeling” that you are important,
contributing to the success of the business, that your efforts are respected
and appreciated by fellow employees
On budget / On time
Cracking a new customer
Customer testimonials – helping solve real problems
2. Technical teams want to work on a successful products.
Sales teams want to sell winning products.
The common metric is real customers /market share
Fostering teamwork
Trade notes
• Technical teams are starved for customer feedback • Sales teams are starved to technical innovation / uniqueness
Push decisions to where the expertise resides
The key linkage between Development, Operations and Sales is Product marketing / product line management
On occasion…take a ‘software geek’ to a customer, and bring a ‘sales puke’ into the lab
On hiring
Bring in PLM, marketing / sales, & HR early…
Have a hiring plan – force rank key hire timing.
Hire the best you can – have choices – don’t compromise or settle
Attitude over Academic credentials
Be careful with big company experience (no job too small attitude)
Use all the “free tools you can, especially
Director and investor referrals are great but…
On hiring
Refer to the March 24th EN101 “HR for Entrepreneurs”
Do employment agreements right and from the start
Compensation plans
Termination & Severance
IP protection that survives employment term
Caution re structure - when choosing consulting vs.
temporary employment vs. permanent employment – this
can set precedents downstream that are difficult to undo.
Culture
Every company has a culture, every company has politics
Perception is reality
Work with it
My observations:
1. Culture changes with company lifecycle:
• The $1M, 5M, 10M, 25M, 50M barriers
2. In Canada, we’re trés multinational: use it to your advantage
3. As the leader: be candid • Candid = Integrity
• A culture of candour is a source of sustainable competitive advantage
4. Celebrate wins, debrief setbacks, encourage mistakes (but not repeat
mistakes)
Communication style
As CEO - Be yourself, know your biases
Be OPEN, honest, straightforward
Have the tough conversation
Stop management “happy talk”
Soft on the people, HARD on the problem
Be inclusive: tie in the remote teams
Set 3, clear company goals & repeat them
Share the numbers: good & bad
Regular informal & formal updates
Have fun!!
Compensation & Incentives
Fair, transparent and equitable
• People talk, especially engineers
Salaries (the “start-up” factor)
• You have to be competitive – but not the highest
• Sometimes you want to pay a premium for “A+” players
• Test candidates with “we like you but simply can’t afford you…”
• It’s the “rich experience and reward that trump pure $$$ - that is how you
compete with the big companies…
Compensation & Incentives
Company-wide incentive plan
• 10% “at plan” , 20% stretch • Metrics must be aggressive, but realistic, and simple enough • Combination of financial / market / product milestones • Always drive home the capital efficiency message (Cash Flow Positive…)
Stock Options (ESOP)
• A key tool, but don’t oversell them
“Fun” and other rewards work
• Create a friendly competition / bragging rights • Do not require big bags of $$$ • Examples: IP², a goofy award, employee referral bonus
Advisory Boards
Very helpful to young companies – but more informal, without governance and director liability responsibilities
Try to complement the in-house expertise across broad functional areas (technology, sales & marketing, finance)
Pedigree is great, but access to the advisor and willingness to help is equally important
Can use members formally and on ad hoc basis
Compensate typically with options or per diems
I’ve used 1 yr renewable terms, options granted annually with immediate vesting
Make it enjoyable for all - dinners or special events…
Tech team challenges
1. The Investor / VC influence
• The same vested interest or ?? • An exit and minimum 20% IRR is natural
2. As the company grows up…
• Start-up excuses go away
• Employment / HR expectations expand
• Balancing formal (e.g. employee handbook) with
informal (“just do it”) gets harder
• Speed and flexibility diminish
• Management teams hit glass ceilings
Closing comments: high performance teams for success
1. COMMUNICATE
Set a tone that is open, based on mutual respect, and interactive
2. ALIGN
Don’t all drink the Kool-Aid™: get all the customer / market touch you can
Structure rewards & incentives to reinforce the behaviour & culture you are looking for
3. PLAN
A high AQ team will handle the inevitable speed bumps
4. DELIVER
If individuals and team FOCUS on the delivery of KEY goals it will automatically
generate a performance culture
pg 21
Lance Laking Entrepreneur-in-Residence, Advisory Services, Venture Group
MaRS Discovery District T (613)797-9033 E [email protected] W www.marsdd.com