Creating Successful Boards

Business after business is hampered, rather than supported, by dysfunctional boards. Board members are picked for all the wrong reasons; because they invested, they are a friend, or someone suggested them as a quality executive. Boards are then created out of balance when it comes to the help needed because there was no plan put in place before the selection process started. Egos become the order of the day, and in the end, businesses end up with boards that don’t add value and spend time in operational detail rather than strategic direction and support.

Boards should serve two main purposes. Primarily, your board should help you, the CEO, make better decisions and grow your business more effectively. Second, they must provide the fiduciary oversight needed to manage risk and support shareholder / stakeholder investments; holding you accountable.

If you are setting up a board for the first time, you must build a plan for what you need, from talent to meeting structure and frequency. When it comes to the members selected, you should staff your board with a balanced set of talent needed to help you grow your business. From marketing to financial or development disciplines, it is critical that you staff your board like you would an executive team. Also essential is to get board talent that has the needed experience in your field of operation. If you build a board with significant experience in your field and a balanced set of professional disciplines, you will have a team that can and will help you succeed.

Yes, as you accept equity investments, you will need to allow specific board positions, so in these cases, select the best possible person from the investor group / fund and build the right talent around them to create balance. If you need to increase the size of your board to accommodate, get that done in the investment docs.

It is critical to understand that you, the CEO, need to be running your business, and your board needs to be helping you do so. Your board is not there to manage you (although they clearly have the right), and if you allow them to do so, you will create your own leadership nightmare. Select a meeting frequency that supports what you need. Build a meeting outline that provides the board the needed information to remain comfortable with your progress and when needed, provide strategic input. If you allow your board chair or board in general to get into tactical day-to-day operational issues, you will spend many frustrating hours defending your position to people who only engage in your business a few hours a year. If, on the other hand, you provide board leadership like you do your own executive team, you can create a relationship where you get the support you need, when you need it, without unnecessary projects or procedures.

Motivation – What Works and Why

“Scotty, if we don’t have full power in the next 10 seconds, we are all dead!” – James T. Kirk in more than one episode of Star Trek. When it comes to motivation, how many of us would have performed better in Scotty’s position after hearing those words?

I was recently watching Dan Pink, a TED event speaker address the subject of motivation and rewards and their actual impact on performance. He outlines multiple studies in which groups were challenged to conduct specific problem-solving tasks – some with rewards attached as motivation and some without. He notes that the studies showed an unexpected outcome – being the larger the reward, the poorer the performance. He goes on to note in more detail that the type of problem is at the root, with less complex mechanical problems being positively impacted by rewards and more complex problems actually taking a greater amount of time if rewarded. One of his closing statements leaves the viewer with the thought that truly complex problems are best solved by people whose motivation for such solution is the solution itself, and that by adding rewards we may very well be slowing down the rate at which success is achieved.

And while I can agree with much of what he said, I would like to add an additional component; that being individual personality / performance profiles. It is well understood that when it comes to “performance on the job” there are personal profiles that are more and less suited to maximum output. From sales people to downhill ski racers, there are specific profiles (mental / physical) that define the optimal performers or those who could become such. And once defined, one can then determine the motivational components needed to maximize performance – from internal to external – but all focused on success as defined by the participant.

In defense of Mr. Pink’s hypothesis, most people can relate to either being or watching someone perform a task at which they were very skilled but then needed to do so under the pressure of a reward. Take for example a good amateur golfer playing in a team event where others are counting on them to win money. All of a sudden this highly skilled person absolutely collapses because the pressure of the reward added a negative rather than positive component to the task. There are, however, people who actually perform tasks better under pressure. “When the going gets tough the tough get going,” right? These folks are defined by personal profile and can be found in all walks of life.

I would add to Mr. Pink’s conclusions that the definition of incentive or reward needs to be tailored to the personal profile and the problem at hand. In all cases, there is an incentive to perform and in many cases, that incentive is internal to the performer. But do not believe that “incentives” in the generic reduce performance. When matched improperly, they certainly can induce the opposite of what is desired, and when employed correctly, no matter the complexity, the results are improved.

For those of you who remember Star Trek, the Series – you can probably still hear Captain Kirk saying to Scotty through the intercom – “if we don’t have full power in the next ten seconds we are all dead” – he said it softly but with meaning. I would like to think that he knew Scotty’s persona well enough to know that the kind of life saving motivation he gave him would work. We can all picture someone for whom those same words would have had the opposite outcome – oops, all dead.

Founder Employees & Teamwork

You founded a company, you raised some private equity, you now have a board of directors, and you may even have brought in a CEO to help commercialize your business. So now you have an employee role in the business – could be CEO, could be VP of Development, CFO, etc. This is the critical point in time where you need to build a team with which to execute optimally. And in order to do so, this is also the point where you must shed the founder mentality.

For teams to work optimally they must be established based upon skillset and the ability to work together, and each person’s skills must be respected to maximize the value offered. This means that as the founder, you have to suppress the desire to make all decisions and you must figure out how to create working relationships that cause the maximum value to be generated by each team member. I have watched founders hire the talent they desperately need to move the business forward and then ruin any chance of that relationship lasting by continually playing the founder card and not listening or constantly challenging the talent hired in ways that drive the talent away. In the end the founders simply say – “they were the wrong person.” Wrong person because they didn’t do things the founder’s way even though the founders had no or little applicable experience or skillset.

Founders tend to be commanders. “It is my company therefore we are going to do it my way” typifies the foundation of a dysfunctional culture. If you found a baseball team and insist on playing shortstop and setting the batting order even though you have never played baseball before – your team is going to lose no matter how good the talent you hire. The better players cannot perform well enough to make up for your lack of capabilities and the environment / culture will cause the best talent to look for other teams on which to play. Team owners that really want to win hire great coaches and top quality players and stay out of their way.

If you are going to work in the company you founded or co-founded, aside from the passion you need to check the founder status at the door and engage with the rest of the team (that you need to be successful) in a manner the maximizes their ability to execute as a team. If you are going to be the CEO, then you need to learn what it takes to be a quality CEO and not just assume you can be such because you are the founder. If you are the CFO – then you need to understand the role of CFO and respect the other leadership in your organization, etc.

If you are leading and do it poorly, the entire company suffers. If you have hired a CEO and now have a particular role and yet you constantly play the founder card and disrupt the CEO’s ability to lead – then you may find yourself an unemployed founder. And yes, unless you created protection otherwise, if you do not hold a controlling interest in your business, you can be terminated.

Blocking Maximum Success

You are the founder of your business. You have grown it from scratch on your own or with a partner. You have validated that your product can be sold and your business is scaling. You, however, have never led a growing business of this type or scale potential and neither has anyone on your team. You are a smart person and because you have succeeded this far, because you were right about the product, you certainly must be qualified to keep driving the business – right?

A strong level of self-confidence is a trademark of many an entrepreneur. It clearly requires such a personal makeup to take the risks necessary to create a new business from scratch, making others believe in you in the process, and for this founders must be applauded. This same personality trait is however the one thing that ultimately stands in the way of creating truly successful businesses that grow anywhere near their potential.

Just because you were right about a market need and just because you can create and deliver a product or service that solves that need does not automatically qualify you to build a successful business. It simply means you were right about how to solve a problem. The analogy I use regularly is “just because you can engineer and build a car doesn’t qualify you to be the driver.” Designing, building, and driving are very different skills – each requiring unique capability and experience.

Founder-led businesses consistently fail to reach their potential because the founder(s), the one(s) who had the capability to recognize and solve a market problem, failed to recognize their own lack of capability and experience when it came to growing (driving) the business. A highly successful business is about far more than the product or service. It is about marketing, sales, finance, operations, leadership, team building, customer support, business culture, etc. Just as it takes a highly skilled engineer to design a quality product, it takes highly skilled people in all of the other business acumens to build a sustainable high-growth business. The most important acumen of all is leadership – someone who understands how to take a great product or service and grow a great business around it. Someone who can build the right team and culture to maximize (drive) success.

The reason many early-stage businesses fail or fail to reach their full potential is simply because the founders became the roadblock. They didn’t accept help because they already knew better. They wouldn’t relinquish operational control because their egos wouldn’t allow it. They didn’t build a proper team or culture because they didn’t understand the importance or know what one looked like.

“Companies with inept leadership usually fail in the first year or two, but even established companies can stumble badly when they outgrow the capabilities of the founding team. As a founder, you need the discipline to know when to hand over the reins to a professional manager who can take your business to the next level” (#1 on the Top Ten Reasons Start-ups Fail www.squidoo.com/starup_failures) Note that the following nine reasons on this list can be mitigated by solving the leadership issue identified in Reason #1.

The sad part of this trend is that it doesn’t have to happen. Our communities could be stronger, our businesses more vital, and our nation more stable if founders would simply be willing to engage applicable leadership at the right time.

Sure, some founders ultimately become great business leaders, but the vast majority build lifestyle-level businesses out of opportunities that were far greater. Thus their businesses never provide the economic vitality and impact that they were capable of contributing to their families, their employee’s families, and their community.

As a long-term client whose business recently grew nearly 3X in two years after turning the leadership of the business over to seasoned industry professionals said “I finally came to understand that I was the roadblock, and when I secured the right talent, got out of the way and focused on my area of technical expertise the company took off.”

The challenge to business founders is understanding the end goal. If that goal is to maximize the success of the business, and a potential exit, they must engage and empower the needed expertise and refrain from standing in their own way.

Innovation of Commercial Value

“If innovation is tainted with the idea that a resulting commercial value is necessary – true innovation will not occur.” This sentiment is heard time and again from the “scientists” that are rooted in the thought that a commercialization goal simply distracts and distorts the very process of innovation.

The thought that mankind should benefit from research and development conducted at the expense of successful commercial enterprise should not only be acceptable, it should be at the core of the process. Clearly some of the world’s most successful inventions were a result of development projects that failed and / or changed thinking in a manner that provided outcomes not initially envisioned. But like the invention of Post-it® Notes, a 3M glue development project gone wrong, the initial development itself was focused on creating a product that provided commercial value thus providing the financial resources needed for continued innovation.

Looking at the many waves of national and global economic prosperity throughout time, all have come with commercially viable innovation at their core. War, revolution, depression, recession, inflation, and all other global-changing social, political, technological, environmental, and economic triggers drive new thinking. “Necessity is the mother of invention” (Plato) is at the foundation of innovation and at the core of all of those who invest lifetimes pursuing the next idea, thing, product, service, procedure, or process.

If we are to build a viable, secure, and sustainable future, arguably innovation that provides commercial value will be at its root. And whether that innovation comes from entrepreneurs, academic science, or corporate development, it is absolutely essential that we celebrate its value to the local, regional, national and global economy.

Standing in your Own Way

You have a successful business, but new dynamics have presented you with the opportunity to create significant growth. You are excited about the potential and you start to make changes and hire additional employees. If you hire inexperienced talent, you find that the load on you, the chief decision maker, becomes overbearing and growth is diminished. If you hire experienced / skilled people, you start to feel out of control; you see decisions being made without you, purchases you did not approve, etc. You dive back into the details, request explanations, and reassert your position as chief of all things.

And in this process, founders become the roadblock to growth. They hire inexperienced people that cannot manage growth, or they hire experienced talent and give them responsibility without authority. They micro manage; inserting themselves, delaying actions, failing to take advantage of the skills hired, and in the process demoralizing their team. And while believing every step of the way that they are right, they themselves kill the ability to succeed.

The type of leadership and team required to succeed at one level of business can be significantly different than what is required to profitably scale to a much higher point. It is most certainly true that to take maximum advantage of new opportunity; old thinking must also be examined and modified. The number one killer of business opportunity is the inability of leadership to embrace the change needed in themselves.

Not knowing what you don’t know and stifling input and action from others that do know is the surest path to failure – driving many once-successful businesses under. Goals and actions created for growth become the sword by which a business actually meets its demise; all at the hands of a founder that would not change or get out of their own way. These same people believed they were right, and it was the new hires or market dynamics that caused their failure, when in fact the reason for their demise was looking at them in the mirror all along.

Social Media, Email, and Leadership

The ability to type and send messages, any time of day, in an array of methods, while arguably timesaving, creates significant communication gaffs. From email to Facebook, Twitter, LinkedIn, Plaxo, and phone-text messaging, bright, eloquent people are reduced to tabloid columnists with the stroke of key. Would-be leaders create irreparable damage to client and team relationships. Friendships are damaged. And the ability to save time ultimately works in reverse.
With the invention of the telephone, the world’s population was forced to learn to communicate without the benefit of facial expression. Early efforts were undoubtedly problematic, and still today, over a century later, misunderstandings occur daily. Advancements in communication technology require similar advancements in education, training, and discipline when it comes to the use of that technology. If it is your goal to be a quality leader (or friend) in today’s environment, then it is essential that you master the communication tools you employ.
Listed below are simple rules for all forms of non-verbal communication. Whenever you find yourself typing, or speech-to-text communicating, if you follow these guidelines, your leadership qualities will be elevated and your friendships improved.
Rules of text-based communication:

  1. Do not type or attach anything that you would be embarrased to see on the front page of your local newspaper.
  2. Never send text-media when you are mad. You can type it, even store it for review later, but if you hit the last period or exclamation point hard enough to damage your keypad, wait until a cooler head prevails to hit send.
  3.  Always add the recipient(s) last – in this way you cannot accidently send without truly wanting to do so.
  4. Don’t type content you wouldn’t deliver in person. If you can’t say it face-to-face – don’t type it.
  5. Never use text-media to communicate on personal issues such as employee reprimands, terminations, or any interpersonal issues.
  6. Remember that when you hit send, share or post – you have sent your message into the world for any and all to see – assume this is what will occur and create the content accordingly.
  7. Always spell / grammar-check your copy. Regardless of whether your kids talk in text-speak, your written content speaks volumes about your professional capabilities. If you are sloppy here – you are sloppy period.
  8. Never use text-media while operating a vehicle. There is no message more important than a human life. And if you take or damage a life while breaking this rule, no amount of messaging will ever set you free.

When it comes to communication technology, just because you can use it at this very minute, with this very thought – doesn’t mean that you should. Tools require skill to create the desired outcome – improve your communication skills and feel the results.

Culture Drives Productivity

In Lou Gerstner’s book, Who Says Elephants Can’t Dance, Mr. Gerstner is quoted as saying “I came to see, in my time at IBM, that culture isn’t just one aspect of the game – it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.” Businesses with great internal culture project the same outward. They are more productive as a business because their people are more productive individually and as a team. Leadership understands that happy and engaged people are more productive.

Most everyone has worked in a business where the culture was bad. Where mistakes were punished, poor company performance is blamed on staff, and where dictatorship was confused with leadership. In these organizations, the average employee provides less than eight hours of productivity; taking advantage of every break, commiserating with other employees over e-mail or water-cooler encounters, arriving and leaving at precise times; putting in time for money.

In businesses with a great culture, where everyone’s ideas are respected, work enjoyment and creativity is fostered, mistakes are valued as learning experiences, and success and failure is owned as a team, employees regularly provide more than eight hours of productivity. They work thru breaks, come in early, stay late, eat lunch at their desk, all because they want to. All because they enjoy what they do and are thrilled to be a part of a winning team.
If your culture is great, results will be great. If your culture is poor or worse, your results are likely to follow. Culture and the resulting morale mean everything to your business. If you adopt the “beatings will continue until morale improves” style of management, you have missed the point.

Are You a Buggy Whip Company?

With the invention of the automobile over a century ago, and the subsequent move to mass transit, the use of horses for transportation of people, goods, and services transitioned from essential to unnecessary. Along the way, many providers of related products, like wagons, buggies, and buggy whips either evolved into businesses that supported motorized vehicles, or they perished. Those that survived realized that they were in the transportation business, not the buggy or whip business. Those that perished thought the reverse.

Currently, the newspaper industry is going through a similar transition. Some see themselves to be in the “newspaper” business, while others see themselves (correctly) to be in the “news” business. Those that are in the news business, and modify the mediums by which they deliver that news to fit the market demand will survive. Those that do not will go the way of similar buggy whip producers.

All companies, regardless of size or age, must understand their business in terms of true market demand. They must monitor the evolving needs of their market and make the necessary adjustments to remain relevant. As simple as it sounds, businesses go under on a regular basis blaming market factors they could have, and should have, predicted and integrated into their strategic plans.

What business are you really in? What will that business / industry really look like in five, and then ten years? What proactive steps will you take to be relevant to your market and stay ahead of your competition?