Tag Archives: High potential

Entrepreneurs Have Not Because They Ask Not

The world of entrepreneurship is becoming more divided almost daily between the “haves” and the “have nots.” In this context, we would be referring to technology. Whether a start-up is seen as a technology company or not is determining not only valuations, but access to resources. One of the more common resources available to tech companies that “have” what others presume it takes to cash out somewhere in their trajectory for a very favorable multiple is an incubator, increasingly referred to synonymously as an accelerator.

Until very recently, these accelerators extract an equity position in the start-up company’s cap table in order to justify the risk of helping them for very little compensation up front. Most tech entrepreneurs learn to play the game this way and progress through the angel–Series A–Series B–etc process if they hit their milestones. But…the “have nots” bristle at the model and try to create worthwhile businesses without giving up equity. Unfortunately, they also try to go without mentoring and systematic instruction–to their detriment.

There is an emerging trend toward fee-based offerings that is on the horizon. Organizations like EntreDot, with a fashion innovation center and an industry agnostic innovation center in downtown Cary, NC, prefer the fee-based “pay to play” model. The premise is that a Main Street entrepreneur (otherwise known as “have not”) needs access to resources just like a tech start-up. In order for the innovation centers to provide services like instruction, mentoring, and space, they charge the entrepreneur on a “pay-as-you-go” basis. While this may be an affront to the typical “have” start-up mentality, it meets with less resistance among “have nots.”

Leaders of accelerators around the country who are trying to convert to more of the fee-based services model point to the fact that competition is stiffer than ever to get into the top  accelerators and too many entrepreneurs are being left by the wayside, just as the “have nots” have been for a longer period of time. What the newly disenfranchised and ignored sectors of entrepreneurship have in common is that they are trying to figure out how to commercialize an idea.  They each need help to do so!

Alexander Taub, the director of business development at the Des Moines, Iowa-based mobile-payment network Dwolla, spoke recently with Lauren Cannon for an article on the topic for Young Entrepreneur. Really young companies that aren’t necessarily ready for the big time may not benefit from accelerators, he says. Still, Taub does use General Assembly’s offices, which serve as Dwolla’s NYC home base. The value from using the co-working space stems from connecting with other companies that are also being incubated there, he says. “That’s definitely worth it… We’re part of the community.”

Plus, the experience might be worth paying a little extra for. At the Cary Innovation Center, less than six months of involvement has lead to strong growth for its initial two residents, Shelten Media and the CaryCitizen. Shelten saw an increase in billings of over 60% in her first 60 days and is now looking for larger space at the Center. CaryCitizen has seen their staff grow from two to five people as advertising revenues have increased. Both companies appreciate the value of the mentoring, but are committed to the program due to the cross pollination occurring among the residents. While it is definitely a significant and personal choice to decide to become a part of an accelerator (or innovation center as EntreDot calls theirs), the proof is in the results. As long as those serving the participants help them achieve desirable results, they will enjoy helping both the “have nots” and some who would otherwise be in the “have” category.

 

It’s the Emotions, Stupid!

 

Have you ever seen a scenario like the following play out? Someone new joins the company. After the newness wears off, the new hire finds someone with whom he can identify and begins “sharing” concerns about the workplace. The things he brings up, purportedly, are meant to help. After a while, the observations being offered shift from seemingly inane to almost accusatory about other members of the team. Eventually, the newbie may feel emboldened to make suggestions about hiring, firing, and everything in between as though having the authority and credibility to make such changes.

Over time, the positive culture in your department or broader category begins to turn negative at times. Other staff members come to you as a manager and let you know that they, too, have been approached by the newbie with complaints.  At this point, it is not uncommon for us to feel embarrassed, frustrated, or angry about what’s happening. We can become justifiably fearful that one person is poisoning many others. Like a contagious disease, negativity can soon permeate an organization if unchecked.

Even when organizational performance is sky high, a pervasive negative attitude can sap your group of the energy needed to sustain success. Emotions are an important part of the workplace–on both good and bad ways. Many of us have been victims of horrid customer service from employees of organizations who clearly do not enjoy what they do for a living. Contrastingly, we all hopefully have had the experience of a “Ritz Carlton” type experience where the employee loves serving customers.

Tony Schwartz, writing for the Harvard Business Review Blog Network, decided to let go of (just such a) negative executive, “both because he’d lost the trust of our team, and because I didn’t believe he was capable of changing. The day I made the move, it was as if a cloud had lifted and the sun came back out.”

Lessons Schwartz took away from this experience:

  • The emotions people bring to work are as important as their cognitive skills, and especially so for leaders.
  • Because it’s not possible to check our emotions at the door when we get to work — even when that’s expected — it pays to be aware of what we’re feeling in any given moment. You can’t change what you don’t notice.
  • Negative emotions spread fast and they’re highly toxic. The problem with the executive we let go was not that he was critical, but rather that he was so singularly focused on what was wrong that he lost sight of the bigger picture, including his own negative impact on others.
  • Authenticity matters because you can’t fake positivity for long. It is possible to put on a “game face” — to say you’re feeling one way when you’re actually feeling another — but the truth will ultimately reveal itself in your facial, vocal, and postural cues. We must learn to monitor and manage our moods.
  • The key to balancing realism and optimism is to embrace the paradox of realistic optimism. Practically, that means having the faith to tell the most hopeful and empowering story possible in any given situation, but also the willingness to confront difficult facts as they arise and deal with them directly.

In working with organizations on development issues and advising them on strategy, I have found that emotions are often the elephant in the room, undiscussed but omnipresent. For this reason, I often lead workshops on the topic of emotional intelligence (EQ).  When it comes to high potential leaders, EQ mentoring can help change behaviors and create a more healthy environment in which better decisions are likely to be made. 

Founders Overdose on “Sweets”

 

How can too much of a good thing be very very bad in management? Imbalance, for one, is a perfect example of “overdosing” on what, in isolation, is innocuous. In the Research Triangle Park area of North Carolina, like the Bay area of California, or a certain part of Massachusetts, technology companies abound and the media is in love with the fruits of the labors of the company founders. Certainly, without the contribution of needed jobs, tax revenues, and similar benefits, the local economies in these regions would suffer. But, on a far more local level–that of the management of a team of people–there can be an inherent problem that is both insidious and solvable.

The concentration of too much emphasis on software development skills, for instance, to the exclusion of other needful disciplines can become a company’s undoing in an imperceptible yet profound way. We must acknowledge that, as human beings, we are most comfortable surrounding ourselves with others who think similarly to us, have homogeneous backgrounds, and understand what we’re trying to communicate  quickly. The danger, though, is one of management myopia. Without a team of executives who bring complementary viewpoints–that are different yet legitimate in their own right–it becomes easy to suffer from the group-think phenomenon like a bunch of lemmings.

Organizations that allow themselves to be managed by cookie cutter leaders are often blindsided by development that Porter’s Five Forces, a SWOT analysis, or common sense in the eyes of an outsider could have anticipated. Market shifts–whether in the realm of sales, finance, operations, or a myriad of other subsets–when realized too late can lead to a company’s fall into a type of death spiral. Turnaround practitioners far and wide have witnessed the phenomenon more times than they’d like to admit and cringe upon encountering it because they know it could have been avoided.

One of the great turnaround consultants I studied in performing research that led to the establishment of the Turnaround Management Association was Donald Bibeault. Bibeault wrote that, “A special case of imbalance in the top team–particularly at the board level–is a weak finance function. This may appear through the company as a general phenomenon, resulting in inadequate financial and accounting controls. But even when these systems are perfectly adequate, their message may not be heard at board level because the finance function is not strongly represented there.”

What should we make of such an observation, then, in our own companies? Firstly, that true outside boards of directors with balance can be a great asset to an organization. These veterans have “been there, done that!” Secondly, as one goes about building a team, become more self-aware of the temptation to populate the organization with a clique of robots, who while very intelligent in their domain, are ignorant on many other topics. Thirdly, consider the value of co-founders and mentors whose life experience is very different than one’s own–albeit they should have been successful in whatever they have previously pursued.

Don’t overdose on what is sweet–do what is nutritional for your organization!

What Can EQ Do For You?

Whether your executive team is trying to evaluate cultural fit, develop a post-merger integration strategy, or simply run a business, emotional intelligence is the key to decision making.  Some proof of the benefits of superior emotional intelligence:

1. The US Air Force used the EQ-I to select recruiters (the Air Force’s front-line HR
personnel) and found that the most successful recruiters scored significantly higher in
the emotional intelligence competencies of Assertiveness, Empathy, Happiness, and
Emotional Self Awareness. The Air Force also found that by using emotional
intelligence to select recruiters, they increased their ability to predict successful
recruiters by nearly three-fold. The immediate gain was a saving of $3 million
annually. These gains resulted in the Government Accounting Office submitting a
report to Congress, which led to a request that the Secretary of Defense order all
branches of the armed forces to adopt this procedure in recruitment and selection.
(The GAO report is titled, “Military Recruiting: The Department of Defense Could
Improve Its Recruiter Selection and Incentive Systems,” and it was submitted to
Congress January 30, 1998. Richard Handley and Reuven Bar-On provided this
information.)
2. Experienced partners in a multinational consulting firm were assessed on the EI
competencies plus three others. Partners who scored above the median on 9 or more
of the 20 competencies delivered $1.2 million more profit from their accounts than
did other partners – a 139 percent incremental gain (Boyatzis, 1999).
3. An analysis of more than 300 top-level executives from fifteen global companies
showed that six emotional competencies distinguished stars from the average:
Influence, Team Leadership, Organizational Awareness, self-confidence,
Achievement Drive, and Leadership (Spencer, L. M., Jr., 1997).
4. In jobs of medium complexity (sales clerks, mechanics), a top performer is 12 times
more productive than those at the bottom and 85 percent more productive than an
average performer. In the most complex jobs (insurance salespeople, account
managers), a top performer is 127 percent more productive than an average performer
(Hunter, Schmidt, & Judiesch, 1990). Competency research in over 200 companies
and organizations worldwide suggests that about one-third of this difference is due to
technical skill and cognitive ability while two-thirds is due to emotional competence
(Goleman, 1998). (In top leadership positions, over four-fifths of the difference is
due to emotional competence.)
5. At L’Oreal, sales agents selected on the basis of certain emotional competencies
significantly outsold salespeople selected using the company’s old selection
procedure. On an annual basis, salespeople selected on the basis of emotional
competence sold $91,370 more than other salespeople did, for a net revenue increase
of $2,558,360. Salespeople selected on the basis of emotional competence also had
63% less turnover during the first year than those selected in the typical way (Spencer
& Spencer, 1993; Spencer, McClelland, & Kelner, 1997).
6. In a national insurance company, insurance sales agents who were weak in emotional
competencies such as self-confidence, initiative, and empathy sold policies with an
average premium of $54,000. Those who were very strong in at least 5 of 8 key
emotional competencies sold policies worth $114,000 (Hay/McBer Research and
Innovation Group, 1997).
7. In a large beverage firm, using standard methods to hire division presidents, 50% left
within two years, mostly because of poor performance. When they started selecting
based on emotional competencies such as initiative, self-confidence, and leadership,
only 6% left in two years. Furthermore, the executives selected based on emotional
competence were far more likely to perform in the top third based on salary bonuses
for performance of the divisions they led: 87% were in the top third. In addition,
division leaders with these competencies outperformed their targets by 15 to 20
percent. Those who lacked them under-performed by almost 20% (McClelland,
1999).
8. Research by the Center for Creative Leadership has found that the primary causes of
derailment in executives involve deficits in emotional competence. The three primary
ones are difficulty in handling change, not being able to work well in a team, and
poor interpersonal relations.
9. After supervisors in a manufacturing plant received training in emotional
competencies such as how to listen better and help employees resolve problems on
their own, lost-time accidents were reduced by 50 percent, formal grievances were
reduced from an average of 15 per year to 3 per year, and the plant exceeded
productivity goals by $250,000 (Pesuric & Byham, 1996). In another manufacturing
plant where supervisors received similar training, production increased 17 percent.
There was no such increase in production for a group of matched supervisors who
were not trained (Porras & Anderson, 1981).
10. One of the foundations of emotional competence — accurate self-assessment — was
associated with superior performance among several hundred managers from 12
different organizations (Boyatzis, 1982).
11. Another emotional competence, the ability to handle stress, was linked to success as a
store manager in a retail chain. The most successful store managers were those best
able to handle stress. Success was based on net profits, sales per square foot, sales
per employee, and per dollar inventory investment (Lusch & Serpkeuci, 1990).
12. Optimism is another emotional competence that leads to increased productivity. New
salesmen at Met Life who scored high on a test of “learned optimism” sold 37 percent
more life insurance in their first two years than pessimists (Seligman, 1990).
13. A study of 130 executives found that how well people handled their own emotions
determined how much people around them preferred to deal with them (Walter V.
Clarke Associates, 1997).
14. For sales reps at a computer company, those hired based on their emotional
competence were 90% more likely to finish their training than those hired on other
criteria (Hay/McBer Research and Innovation Group, 1997).
15. At a national furniture retailer, sales people hired based on emotional competence had
half the dropout rate during their first year (Hay/McBer Research and Innovation
Group, 1997).
16. For 515 senior executives analyzed by the search firm Egon Zehnder International,
those who were primarily strong in emotional intelligence were more likely to
succeed than those who were strongest in either relevant previous experience or IQ.
In other words, emotional intelligence was a better predictor of success than either
relevant previous experience or high IQ. More specifically, the executive was high in
emotional intelligence in 74 percent of the successes and only in 24 percent of the
failures. The study included executives in Latin America, Germany, and Japan, and
the results were almost identical in all three cultures.
17. The following description of a “star” performer reveals how several emotional
competencies (noted in italics) were critical in his success: Michael Iem worked at
Tandem Computers. Shortly after joining the company as a junior staff analyst, he
became aware of the market trend away from mainframe computers to networks that
linked workstations and personal computers (Service Orientation). Iem realized that
unless Tandem responded to the trend, its products would become obsolete (Initiative
and Innovation). He had to convince Tandem’s managers that their old emphasis on
mainframes was no longer appropriate (Influence) and then develop a system using
new technology (Leadership, Change Catalyst). He spent four years showing off his
new system to customers and company sales personnel before the new network
applications were fully accepted (Self-confidence, Self-Control, Achievement Drive)
(from Richman, L. S., “How to get ahead in America,” Fortune, May 16, 1994, pp.
46-54).
18. Financial advisors at American Express whose managers completed the Emotional
Competence training program were compared to an equal number whose managers
had not. During the year following training, the advisors of trained managers grew
their businesses by 18.1% compared to 16.2% for those whose managers were
untrained.
19. The most successful debt collectors in a large collection agency had an average goal
attainment of 163 percent over a three-month period. They were compared with a
group of collectors who achieved an average of only 80 percent over the same time
period. The most successful collectors scored significantly higher in the emotional
intelligence competencies of self-actualization, independence, and optimism. (Selfactualization
refers to a well-developed, inner knowledge of one’s own goals and a
sense of pride in one’s work.) (Bachman et al., 2000).

-Cary Cherniss, Ph.D., Rutgers University

What role does emotional intelligence (EQ) play in your organization’s management? How can it become more integral?

Due Diligence Must Include Culture

60% of mergers, acquisitions, and joint ventures fail to perform up to expectations in their first year, often because of cultural incompatibilities between the two prospective partners. The losses in shareholder value are in the hundreds of millions of dollars in many of these star-crossed liaisons. Cultural Due Diligence is a technique for keeping both eyes wide open when approaching an attractive prospect, whether for a merger, joint venture, or offshore vendor.

-Wayne State University, Institute for Information Technology and Culture

When two companies agree to join forces in some type of agreement, cultural fit is usually the last factor considered-if at all! Instead, many numbers are crunched, recrunched, and analyzed ad nauseum. Market impact, anticipated back office savings, etc receive the lion’s share of the secondary consideration after financial statement items. “Culture” is perceived as too soft an issue to justify the time and attention of high-powered executives. Big mistake!

At the very minimum, the operating environment and organizational structure of each entity needs to be explored. When we are working with a client, we use the following two charts to help us ask solid questions about these two components of culture. From the answers received, we make value judgments and recommendations as to the degree of “fit” between organizations and what to do about it.

In considering the operating environment, we look at whether the company has a long-range or short-term approach to management. We ask questions to determine whether the organization is more entrepreneurial or bureaucratic. Quality initiatives are a good indicator of what aspects of performance are most important to management. The degree an strength of market competition for each party is important. How decisions are made is another leading indicator of what it may be like to work alongside the other team.

How management handles relationships with employees, (unions), and contractors is important to search out. Is giving back to the community and having respect for the environment a value of the other organization? Do meaningful tasks get delegated effectively, or are there barriers to professional development , shared responsibility, and growth through the contributions of many? Discovering how the other party perceives risk and builds strategy accordingly is a key conversation. When one’s competitive advantages are articulated, it is vital to verify how strong they are in the eyes of the buyers.

In addition to the operating environment, it is critical to understand the organizational structures that represent the philosophy of your intended. Do employees have direct access to top executives, or must they work through a layered management team? Understand whether the employees feel that they are protected to the point of not being allowed to make any mistakes. Examine whether generalist skills are valued versus everyone having a narrow scope. Look at the board of directors to see whether it is comprised of objective, strong leaders. Pay attention to the diversity of the employees and management team.

If the other company has a multi-office system, is it managed out of corporate, or are those in the field given autonomy? Notice whether task or relationships seem to carry more weight. Analyze the turnover rate among management and key positions. Is the human resources department deep enough to undertake complex issues like training and development, talent management, succession planning, coaching and the like, or compliance focused? Ask for examples of how technology is used to solve problems and enhance work flow.

The careful review of these “soft” factors can save you some headaches and hardships–do it! (We would love to help.)