The Entrepreneur Life

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Letting Go of a Founder

Fired red stamp

We’ve all read of horror stories of VCs forcing actions leading founders to leave their companies. But are there reasons for a founder to leave voluntarily or being asked to leave by other founders or the management team? Many a times, the answer is yes.

When people set out to start a business, a few jump in with little planning. Most though, do so after much forethought. Even when a good deal of planning has gone into starting a company, it is the rare entrepreneur who has actually thought about a scenario in which the founder leaves.

I realise that the very thought may sound nihilistic to some readers — can there be a start-up without the founder or can start-ups that survive without the founder do well or at the very least exist meaningfully?

The answer to both questions fortunately is yes. Apple is probably the best illustration of this, with Steve Wozniak leaving to pursue other interests and Steve Jobs being ousted by John Sculley – so not one, but both founders left (or had to leave). Of course Jobs’ return and subsequent success is a matter for another article altogether.

So what should a founder or founding team consider about the possibility of one or more founders leaving, voluntarily or otherwise, the company they founded? Is this inevitable? Can this be avoided? Or should this be planned for and if so how?

Before we examine these questions, it’s worth reflecting that few companies — Microsoft under Bill Gates or Dell Computer under Michael Dell being the exceptions — survive, grow and actually thrive under the same helmsman from founding to widely acclaimed success. Change at the top is more the norm than the exception. However start-ups, particularly in their early days, are so closely identified with their founders — and founders with their companies — the change, of a founder leaving or being asked to leave, can be traumatic. So it is best planned for and, hopefully, never actually encountered.

Leaving voluntarily

I remember the day when one of my partners informed me that another of our founding team (there were five of us founders) wanted to quit. We had not been at it for a year and the fire of a new adventure still burned in our heart and flushed our cheeks — so it came as a shock!

In this instance, the issue was one of personal belief regarding religion in the workplace. I am not sure, to that day, we had even thought about religion (or its absence in my view and excessive presence in the departing partner’s view). This is an instance where a founder wanted to leave voluntarily as he felt there was an irreconcilable difference in personal beliefs.

There can be numerous reasons for a founder to leave voluntarily, many of which may have nothing to do with the business itself — family commitments (wife wants to relocate) or health reasons (allergies in Bangalore) are examples.

Of course, there could be several other reasons — loss of faith in business partners; the gradual realisation that a start-up is not for him or her; or the thought of a Web-based cobbler service no longer exciting them — there are as many reasons for a founder to leave as there are people.

Having an inter se — Latin for “between or amongst themselves” — agreement amongst the founding team members is the best way to prepare for this eventuality. While the heartache that follows the departure of a founder may take time to dissipate, such an agreement will minimise the business impact. Also, the fact that such an agreement is in place prepares the concerned parties to consider the possibility of a founder leaving and address the potential causes up-front.

A good inter se agreement would at the least cover issues pertaining to shareholding: Do insiders or the company get first right of refusal? Will the leaving partner be permitted to still hold some or all of his or her shares? If so, will he or she retain voting rights? If the company bought the shares, how would these be valued? What would the payment terms be? How would the death (strictly speaking this would be an involuntary departure) of a partner be handled?

A good corporate lawyer would be able to pull together a reasonably well thought out inter se agreement. Most people are comfortable having health insurance and don’t blame it as the cause when they fall sick. However, many folk balk at having an inter se agreement believing this may sow the seeds for the undesirable to happen.

As someone who’s been there more than once, I would say that you are better of thinking and planning for all eventualities and this will never be the cause of a partner leaving. And you will be glad it is in place, when they do actually leave.

Forced to Leave

There are primarily two different stakeholders — the Board of Directors and the management team — who may force a founder to leave.

In venture-funded companies — most of which have active boards — the board could be the primary driver for change, particularly if a founder is the CEO of the company. This could arise for good reason — if the company is growing faster than the CEO/founder is, someone else should be brought in as a replacement.

The founder, in this instance, could then focus on other areas such as key technology, marketing or other contributions.But if he is not prepared for the shift, he may be asked to leave.

Alternately, a founder may be asked to leave for not-so-good reasons such as having rubbed powerful board members the wrong way.

For such founder/CEOs of venture-backed companies, having an explicit employment agreement could avert dismissal under unfavourable terms or without cause.

The other founders or management team, particularly in closely held start-ups, can also force a founder to leave.

Again, the reasons could range from the appropriate, namely incompetence, unethical behaviour or sexual harassment, to the inappropriate — politicking with other members of the founding or senior team in the company.

The best way to address this is to have a clearly spelt out code of conduct, periodic performance reviews (including peer feedback) and open communication so that there are no surprises.

The inter se agreement is once again a good safety net for all parties in this instance.

Asked to leave

This is the hardest thing to both plan for and execute. While asking a founder to leave may not sound that different from forcing them to leave, it is not trivial and is the most likely of the three situations an entrepreneur will be faced with.

When a founder is caught stealing, for instance, the decision can be black-and-white and he can be terminated or forced to leave.

However, it is much harder to confront and tackle issues that have to do with cultural mismatch or personal behaviour that, while legal, show poor judgment or the more common issue of self aggrandisement at the cost of the company or its employees.

The best way to address this situation is to ask ourselves the question, if the person doing this was an employee or anyone other than a founder, would they be asked to leave. If the answer is ‘yes’ for an employee, it ought to be ‘yes’ for a founder.

This is, of course, easier said than done — for founders have great emotive appeal — to the rest of the company, the community and, of course, to themselves!

However, as our mothers taught us, a stitch in time, does indeed, save nine!

Here experience and my scuffed knees speak — all those start-ups that avoid confronting this sooner, end up regretting it later.

(This article was published in the Business Line print edition dated December 15, 2008)

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Decisions – how do we make them effectively

Decision Making Chart

Life has a nasty way of springing surprises on you. The only certainty, it would appear, is that you will encounter a lot of uncertainty. Being an entrepreneur is no different. If you are like me, you might have thought you made your hardest decision when you chose to become an entrepreneur.

Wrong! Before you know it, the business, customers, employees and the world at large are bringing problems that require you to make decisions. There also seem to be few easy decisions. Why didn’t anyone tell you about this? Well, you heard it here first — much of your productive time as an entrepreneur will go to making, hopefully, good decisions.

“Effective executives do not make a great many decisions. They concentrate on the important ones,” says Peter Drucker in his book The Effective Executive. Simple as Drucker’s assertion sounds, it is hard in the fog of entrepreneurial battle to focus on the important few. So how do you identify the important from the merely urgent or routine problems? Having identified these, how can you make good or effective decisions?

Is this your decision?
The best way to make good decisions is to first determine if it is even your decision to make. Entrepreneurs — and here I speak with some experience — love to be in the thick of things. “The equipment is stuck in Customs. We won’t be able to ship our product on time. What do we do?” “He won’t accept our offer without a joining bonus. Should we offer him one?” “The customer will not issue a purchase order without a penalty clause. Do we agree to one?”

Issues like these will keep popping up all the time. While you may love playing Captain Crunch, the one everyone goes to for decisions, you would be mistaken to offer one for every question posed. If you want your business to grow and, importantly, if you want to have a personal life, it is critical that most decisions be made by other people. That is the first decision you have to make every time, answering the question: Is this a decision someone else should be making?

So how do you determine which decisions are yours to make? I’d recommend that you use the following simple guideline — if a year from now it would still matter what decision you make now, then it is probably something you want to be involved in. For instance, agreeing to a penalty clause in a multi-year contract with the Government will matter. Similarly, anything that involves the culture of your organisation or shareholding or capitalisation would make the cut. Most other decisions can probably be made by someone else. Which of course brings up the question: How do you ensure that the decisions others make do not drown your business?

Decision mechanics
Having a well thought out and tested process for decision making will not only help you but your entire team make the right decisions. Here again, I refer to the work of Peter Drucker who spells out a five-step decision-making process. They are:

  • Comprehending the nature of the problem or decision — is it generic or an exception?
  • Understanding the boundary conditions of the problem.
  • Figuring out the right solution without considering real world compromises that might be needed.
  • The action required to execute the decision.
  • Validating the appropriateness of the decision once taken.

At first glance, it may seem tough to figure out what to do if your product won’t ship on time. Most operational issues do not require executive decision making. As in the example of agreeing to a penalty clause in your Government order or deciding to do business with the Government or setting up an overseas distributor — issues that will have a long-term impact on your business — a well thought out process helps. Further, it allows your senior staff or other partners to use the same methods and yardsticks to make their decisions. This way your direct presence or involvement is not needed in each time.

Drucker makes the point that one rarely encounters truly exceptional cases. Most situations you encounter, even if new to your business, are generic and would require a rule to be fashioned. “We don’t sign penalty clauses in our contracts or any penalty or liability clause cannot exceed the value of the contract itself,” is a rule you can formulate. “We may offer discounts or walk away but no penalty clauses,” is another. It is critical to define the problem before you attempt to make a decision. This requires the first three steps to be followed rigorously. Subsequently, dealing in the real world rather than in some ideal scenario, it is important to ensure that the solution is effective. And this should not merely be faith-based but data-driven; such validation after a decision is made will ensure you continue to make good decisions or learn from bad ones.

The five steps could take a few minutes in some instances and a few weeks in others. Either way, it will help you make measured decisions. Needless to say no process is infallible and good leaders trust their instincts. Of course, great leaders know when not to rely on their instincts but to get the data first.

Not making a decision is a decision
The former Indian Prime Minister P. V. Narasimha Rao epitomised the art of non-decision making or so it seemed. Legend has it that he’d avoid making difficult decisions and in time, the problem would disappear or resolve itself. As an entrepreneur you will rarely have the luxury of ignoring decision making. That is not to say you will not do it. I have avoided the hard decision to let go of some difficult employees, as my staff keep reminding me frequently. Such avoidance of decision making is the classical ostrich-sticking-its-head-in-the-sand syndrome.

It is critical to recognise that it is a legitimate decision when you decide to not make a decision. It’s worth reading the previous sentence more than once — it is not intended as a play on words. Choosing to not make a decision is completely different from avoiding a decision. The difference is that you have made an explicit choice, one with consequences that you understand and are prepared to live with. Such a choice is particularly appropriate when it is evident that the situation will take care of itself. More importantly, it is of little importance, even if annoying, and is unlikely to have any material impact. In such circumstances, it is worth keeping in mind the Roman edict, “De minimis non curat praetor”or “the magistrate does not consider trifles!”

This article was published in the Business Line print edition dated November 17, 2008

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Managing Time – your most precious resource

Stopwatch“Remember that time is money,” said Benjamin Franklin, statesman, philosopher and one of the founding fathers of the US. Maybe it’s because he made this statement nearly three centuries ago in 1748 that many of us don’t remember it. Capital, people and even technology can be obtained by debt or equity, hiring or licensing. However, the one thing that no entrepreneur can get more of is time. Yet most of us treat our own time as a fungible commodity available in endless supply. Bankruptcies, broken marriages, debt traps and nervous breakdowns have not cured many of this fallacy. To be successful as entrepreneurs, it is critical that we recognise time is a perishable commodity.

Just as our favourite foods are probably the least healthy, we will discover that many of our favourite activities as founders and entrepreneurs are the biggest waste of time. Even as crash diets don’t work, and diets have to be combined with exercise, using our time effectively calls for both a balancing of our activities with objectives and a good deal of self-discipline. Self-discipline, in particular, is not a strength of many of us entrepreneurs. At times, we even wear our lack of it as a badge of honour, mistaking ad hoc behaviour for freedom and lack of discipline for being creative and unfettered.

At the other end of the spectrum, young or first-time entrepreneurs and particularly Indian entrepreneurs are loathe to appear rude to elders, be they advisors, board members, customers or suppliers. Neither of these behaviours contributes to success at work.

If time is indeed our most precious resource, how do we save and deploy it better? And how do we find the time for this new “time-saving” project? Much like brushing your teeth, make planning your day a daily habit, done before you embark on anything else. And here is one way to go about it.

Measure it

Even when I have walked for just one day, I find myself checking my weight. (Okay I admit, more than once a day). And the reason I do that (and am pretty sure I am not the only one) is we can only change what we measure. If your plan is to save time (or lose weight, or make money) if you don’t measure it, you cannot address it, let alone fix it. So right after reading this article, take a piece of paper and once every hour write down what you did. You don’t need software or a PDA — a pencil and a sheet of paper are sufficient. Begin with your workday — say 9 am to 5 pm and do this for the next five working days.

Be honest with yourself — write down “read the newspaper” if that is what you did, or “idled in the cafeteria,” “worked on Jameson proposal,” “weekly staff meeting,” or “browsing the Internet”. Even this exercise will show how much time is unaccounted for. As with taking antibiotics, if you miss one dose (or hour), continue with the subsequent dose (next hour) and write down your hourly activities for 40 hours.

As with exercise, let a colleague or an administrative assistant or if you are bold enough your spouse, know about the little project you are doing and they will ensure that you follow through.

Once you have a week’s worth of data, analyse it. This again does not require college math — just break it down into simple categories relevant to your business. For instance, it could be simply high-level categories of what you deem are value-added activities — customer contact time, employee contact time, planning, product development and activities such as lunch, entertainment, travel, other phone calls and meetings. Alternately, if you are analytical, you could break this down into greater detail. Either way, the idea is to first identify where your time goes and what activities cumulatively consume how much of your time. Most people report that meetings and interruptions are the biggest thieves of time. Depending on your business and your personal style, you may find other categories of activities to be your largest time sinks.

Prioritise it

Assuming that you have not keeled over in surprise to see where your time truly goes, you are ready to take charge of your time budget. Stephen Covey, author of First Things First, narrates the story of a speaker who walks his audience through the process of filling an empty bucket, first with rocks, then with gravel, sand and finally water. When he first fills the bucket with rocks, the audience responds positively to his question whether the bucket is full. But watching him pour gravel into the rock-filled bucket, they realise the bucket can take more. Only when he finally fills it with water and states that the bucket is full, do they agree it truly is. The insight from this exercise, Stephen Covey narrates, is that if they had tried to fill the bucket in any other order, not as many of the large rocks would have been accommodated. In this story, your day/time is the bucket and the truly important things that you want to get accomplished, the big rocks. All the other stuff — browsing the Internet, reading the newspaper, tea breaks — are all water and sand taking up space that should have rightly gone for your important tasks.

So having analysed how your time is being spent, you need to prioritise what is important — for the week and for the day. Begin by doing those that are of the highest priority first. Then move on to lower priority items. This is harder than it sounds as all too often something of a lower priority will be (or at least seem) a whole lot easier to get done — make that phone call, pay that bill. So it takes self-discipline (there’s that word again) and focus to ensure that time does not get away from you. But once you make it a habit to work on the high-priority items first, you will find it easier and the time you save will be reward enough to continue the practice.

Value it

If all of us worked by ourselves, measuring and prioritising would be sufficient to deliver significant time-saving and productivity gain. However, few of us have that luxury (in my case punishment, if I had to work by myself) and this brings us to a large source of time wastage — meetings and interactions with other people. Contrary to popular belief, it is not others who cause us to waste our time but ourselves. How often have we communicated how valuable that new iPhone is or how precious that autographed book? Yet, we rarely assert that time is precious.

So this source of wasted time can only be tamed by us valuing our time and demonstrating that we value our time. This begins with being punctual, staying on schedule and demonstrating through our actions that we value our (and others’) time. This is the hardest of the three steps I have outlined. If not done right, you will at best come across as insensitive or at worst insufferable and self-important. In that event, it might not hurt to have a bucket, some rocks, and sand handy or at least a copy of this article.

An earlier version of this article first appeared in The Hindu BusinessLine.

3 Steps to Build Your Startup’s Brand

The Coca-Cola logo is an example of a widely-r...

If I had a dollar for every prospective employee who said he loves what he’s seen and heard at our company but his father/spouse/friends feel more comfortable if he joins ‘Giant Co Ltd’ next door, I’d be a rich man. And every one of those prospects was honest enough to admit that their father/spouse/friends felt far more comfortable with the safety, reputation and BRAND of ‘Giant Co Ltd’.

Brand, the very word seems to connote a variety of images. Advertisements, billboards and neon signs, models and Bollywood stars are what many people associate with the word. If you probe further, you may hear AirTel, Britannia, Disney, Coca-Cola and Pepsi or Sony and Samsung as companies that people think of as brands.

People in the trade, be it marketers or financiers, talk of brand equity, brand loyalty, and brand names. When you talk to entrepreneurs about brands and what it means to them, they, particularly those in the early stages of their business, admit that brand is important and something that they aspire to build one of these days. However, right now they have to run and take care of this cash flow matter or woo that key hire, so they will get back to it when they have more time and when it’s more appropriate!

So what is a brand and how much should entrepreneurs care about it? And when should they care about it? Doesn’t it cost a lot of money to build a brand? Is it a luxury for a struggling start-up? These are a few questions worth considering and answering even as you embark on your business.

Brands, simply put, are what people think they are. In other words, when people associate Amul with butter, Kissan with jam, Disney with TV (if you are an Indian child) or with Mickey (if you are a 40-year-old American) that is what those brands are. Beyond word association, they often denote something specific — what marketers such as Al Ries, co-author of Positioning: The Battle for Your Mind call the brand promise. For instance, among cars BMW promises performance, Mercedes luxury, Toyota reliability, and Volvo safety.

The key point that Al Ries has been making for the better part of three decades is that a brand’s positioning or promise is determined by how it is perceived by the consumer and not what you as the product or service’s maker believe or state it to be. In the simplest sense, as a start-up or an entrepreneur, if you comprehend and internalise this, you are already on the road to building a differentiated brand.

Know yourself

You have already persuaded some friends and a few former colleagues to join your start-up and are now trying to hire a few more key people. “I am quite happy where I am right now. I am not really looking for a change,” is what you’d usually hear from really good people, the kind you’d want to hire for your start-up. One of the key factors in their decision-making will be your brand and what it’s perceived as. At this stage, when you have just started or have not even become operational, it may seem counter-intuitive to talk about your ‘brand’ — don’t be fooled, the day you began dealing with people other than the founders, you began building your brand.

The reality is that your candidate is thinking about the pros and cons of staying at his present job and the alternative opportunities he may have elsewhere . In other words, he is positioning this opportunity against others and the moment he does that, he is associating a brand such as ‘risky’ or ‘unique opportunity’ or ‘great technology’ with your company. If you want to participate in this mental conversation and persuade him to indeed make the leap to your organisation, having clarity about your brand and what it connotes is critical.

The best way to build your brand is to have clarity — namely knowing yourself — as in what does your business stand for, what do you promise your employees, your customers, and other stakeholders. Once you have the clarity, state it and act on it each day. The day you open shop, your brand matters, and if you don’t state it and shape it yourself, the other guys will be they competitors or prospective employees and, most importantly, the spouses of your current employees.

Be yourself

As Anthony J. D’Angelo, creator of The Inspiration Book Series put it: “If you talk the talk, you damn well better walk the walk.” If you thought knowing yourself and stating it succinctly for others was hard, being yourself consistently is harder still. At this point, particularly in the context of start-ups and entrepreneurs, it’s worth pointing out that ‘brand’ is not something people associate with your product alone, but with your company and many times with your employees and you.

Southwest Airlines is one of the best examples of such brand value and perception permeating not merely the flights and on-board service, but also the founder and first CEO Herb Kelleher and all employees of Southwest from gate agents to in-flight staff be they pilots or cabin crew. So if your image is one of love and fun (as it is with Southwest), you had better exhibit it every day and everywhere.

Nearer home, the Tata brand as personified most recently in the Nano announcement or how Ratan Tata himself is perceived or how an entire earlier generation views the Tata Administrative Service, speaks of knowing and being oneself.

Just as it is a good idea to get a friend signed up when you embark on any new and often difficult activity (running three miles a day or yoga), walking your talk as an entrepreneur is easier if you get your team signed up. They are with you every day and will be (much like your spouse) the first to point out when you stray from the path of walking your talk. So if you make that guy who has come to interview with you wait interminably while you finish something, you are not walking your talk of “individuals matter” (if that is your position). Similarly, if you say “Ship it so that we can make the billing and we can fix it afterwards,” you are not walking the talk of “quality at affordable prices”. As any married person will vouch, telling the truth is always the less expensive option (regardless of near-term consequences). Similarly, being true to who you say you are as a business is the best way to building a brand. Who said it would be easy?

Sell yourself

Jack Stack, founder and CEO of Springfield ReManufacturing Corp (SRC) in his book A Stake in the Outcome states: “The company is the product.” For an entrepreneur and a start-up, there is no truer statement of their raison d’etre. It is easy to ascribe a brand or positioning to your products or services, but much harder to both conceive of and work on your company itself as the product. Great entrepreneurs, be it Dhirubhai Ambani or Richard Branson, have known this intuitively and Reliance and Virgin are a direct result of this ‘company is the product’ philosophy.

From day one, it is this vision of what your company is (or will be) that you need to sell, starting with your team all the way to your customers and their customers (the reason Intel advertises its products to consumers, who are its customers’ customers). Some of you may feel uncomfortable with the idea of ‘selling’, be it your products, your company or yourself. The lesson you need to draw from good sales people is that selling is less about talking and all about listening!

So listen to what the world is telling you and be consistent and true to yourself, and the brand will take care of itself.

This article was first published in the Business Line print edition dated September 8, 2008

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Mentoring folks – can start-ups afford to not do it?

Maybe you can tell your team about your desire to partner with us.

As soon as these words left my mouth, I realised that I had made a major faux pas. The words were addressed to the visiting CEO of one of our major prospects; one we had been trying to get interested in our products and services for nearly a year.

I was young and probably viewed myself as the hotshot marketing guy and the words had rushed out due to my frustration at dealing with the lack of coherence within their company.

Our chairman, who had put his personal credibility on the line to bring this gentleman in, was still reeling from the shock and the look on the face of our CEO made his desire to eviscerate me amply clear. In this instance, except for some ruffled egos, no permanent damage resulted from my inopportune directness. It could have been a lot worse.

It is through such avoidable mistakes that many of us learn the nuances and subtleties of doing business. In this particular instance, our chairman — luckily — did not confine himself to dressing me down (in private), but counselled me on what I had done wrong and how it could have been handled better, even while getting my message across.

I wish I could say such specific feedback and mentoring happens all the time in companies, let alone start-ups, but this seems to be the exception rather than the rule.

A common excuse in most start-ups is that “We are running at a hundred miles an hour, you just have to dive in and swim.”

So training, if at all, is mostly confined to a quick orientation session: “This is where the bathrooms are, here is where the hardware team sits and finance is over in that corner and oh, here’s your team and your desk. Good luck!” But it is in start-ups that we need to pay attention to mentoring.

The very word with its connotations of ongoing and consistent, if not continuous, investment of an already overworked person’s time seems such a luxury — which explains why most of us fail to give mentoring its due. Big mistake! Particularly since start-ups, with a small group of people, try to hire the best, and that Linux guru or penny pinching accountant we hired are often worth their weight in gold for their technical skills, but are often just not fit for normal human company.

When you have taken the trouble to hire the best, you often find they have come with as large a set of challenges to overcome as they have key skills.

And if they happen to be fresh graduates, then you have your work cut out!

Who mentors whom?
You have resolved that mentoring is the way to go to take your company to the next level. Now all you have to figure out is who needs to be mentored. This may not always be an easy thing to figure out. A simple rule of thumb I’d suggest is that anyone who has moved into a new role, particularly if he or she is being promoted, needs to be mentored. While this is true even for lateral moves such as the engineer who moves into marketing or the finance guy who wants to move into sales, all individuals you hope to grow into a leadership role have to be mentored. Lest you groan loudly or at the very least roll your eyes at the thought of all that overhead, mentoring, while very important, if done right need not be a major time drain.

Who should do the mentoring?
Conventional wisdom (or if we are to believe Hollywood) paints a mentor as middle-aged guy, greying if not balding, teaching the young buck a thing or two. Experience matters, not just to be knowledgeable, but for credibility as well. Such experience could reside in a young but proven manufacturing supervisor who has managed a unionised workforce, just as easily it could in a white collar vice-president of engineering. So knowledge that stems from direct experience, a willingness to share and patience are key attributes that a mentor should possess for the whole mentoring programme to work. It certainly helps if the mentor is well thought of in the organisation and experienced in multiple domains if not in multiple departments. Many a time, a mentor may come from outside the organisation — for instance, an up and coming woman manager may only find a mentor who has both the experience and empathy outside her company. An executive staff member may look to a member of the board for guidance and mentoring. The key to successfully mentoring your future stars is for such mentoring to be sought by the employee rather than it being prescribed like medicine! Of course, your actions and culture will have a good deal to do with whether people seek such mentoring.

How do you mentor?
In one word, gingerly. Mentoring has far too much in common with parenting, most of all in that there are many ways to mess it up, calling for therapy for all concerned! As this has not stopped us from having children, clearly it is not sufficient cause to avoid mentoring.

Albert J. Bernstein and Sydney Craft Rozen in their book Dinosaur Brains – Dealing with All Those Impossible People at Work talk about the rules of a mentoring relationship. They advise prospective mentors to think in terms of a contract and ask “What would you like me to do,” so that a mentoring relationship doesn’t fall into a parent-child role or a courtship role in the case of people of opposite genders. As a mentor, they warn, if you don’t consciously think and state your expectations, you may end up with vague emotional ties that result in anger or guilt from unmet expectations.

Once all the parties have stated their expectations, mentoring can be a very enlightening, fulfilling and rewarding experience. For practical reasons, it is important to have some regularity (monthly, quarterly) to your interactions and sustain these meetings, whether in person or on the phone, even when there seems to be “nothing” to discuss. Being available in times of crises certainly helps, but there is a fine line between being helpful and becoming a crutch, that you should not cross and must monitor to keep both of you honest. Asking questions, open-ended ones at that, is a sure fire way to do this, rather than providing the solutions that you know will work.

Mentoring Successfully
If mentoring at times seems like crossing a minefield, you need only to talk to parents of adolescents to know you have the easier job. With all the energy and emotions that need to be expended, mentoring, when done well, pays off in spades. Otherwise, every one of your promising employees is learning all the lessons the hard way. Mentoring with its real life coaching, the occasional nudge and shove will make it a lot less painful and a lot more productive. The hard part of mentoring is resisting the urge to act yourself when decisive action is called for; for the person being mentored, these are the best opportunities to learn, so allow them to do so by cajoling, pleading or where required threatening if plain old reasoning doesn’t work. The harder part is knowing when the bird is ready to leave the nest and providing the autonomy and respect for them to do just that. Mentors who can do that are the ones who are truly successful.

This article first appeared in the Hindu BusinessLine in August 2008.


Is a Board of Advisors important for a startup?

Photo: Esthr via Compfight

Photo: Esthr via Compfight

“I am trying to hire a CEO for my manufacturing business. If I give him equity, what should I do for my existing GMs?” One of my early-morning jogging partners shot this at me recently. Mine was a group of men, all in their early- to mid-forties. Many members of the walking (some ambling) group run their own businesses. Many a morning, we end up discussing the challenges someone in the group faces that week.

It surprises me to see that many firms lack a truly functional board of directors or, at the very least, an active board of advisors, though they have become reasonably successful. Each of these firms fulfils the mandatory requirements for the appropriate number of directors and periodic board meetings and minutes—often honoured more in the breach than in the observance. Ironically, this state is probably truest in entrepreneurial firms that would benefit the most in having such a functional board of directors or advisors.

Many entrepreneurial firms start off as proprietorships. They do so for a number of reasons, which range from the simplicity of the business to a founder feeling uncomfortable having partners or other equity owners. As the business grows, the more successful ones—even while staying private and closely held—end up having additional partners, external investors or employee shareholders. The ones that go public are beholden to a new set of statutory and practical rules of operations. However, proprietorships, partnerships and most limited companies are run far too long with little external help or advice, let alone oversight, that a well-constituted board of advisors or directors can provide.

Company Law and the law of the land recognise, empower and hold responsible the members of a company’s board of directors, to stringent legal and statutory criteria; for all intent and purposes, it doesn’t recognise any locus standi for a member of the board of advisors. For this very reason, people who don’t want to deal with the legal liabilities of being board members may be open to being a member of a company’s board of advisors.

The reason why am I so bullish on a board of directors or advisors is that I see a board playing the same role for a company that a good mentor would play for an individual. In other words, it acts as a sounding board, an experienced hand to guide through the shoals of business and someone to keep honesty intact.

In the case of my friend who wondered whether to give his CEO-candidate equity in the company; and if so, how to structure the vesting or earn-out of the equity, and how to handle equity to his current general managers, he sought help from us, his peers, as well as an HR consultant from the local management institute. Consultants can bring value with their external viewpoint, domain expertise and articulate the options available. But they do this with little context about the business.

On the other hand, a board member would have the larger context of a business, the history of the key staff and the challenges the business faces. So, when they bring their expertise of having seen and handled equity structuring in other companies and make recommendations, they do so within the specific context of your business.

Such a context may include constraints that one has, commitments one has already made, and contributions other long time employees have made. They may also understand the blind spots, prejudices and weaknesses, and be in a position to champion a course of action in a far more an effective manner than a consultant.

As business operational heads, most of us don’t think twice about seeking external expertise, like hiring an IT or a PR consultant or an intellectual property lawyer. We would be better off constituting an operational board of advisors, who can not only bring in such subject-matter experts, but can also provide a sustained, steadying hand over time to our businesses and ourselves as leaders.

This article first appeared in Outlook Business in August 2008.

Hiring for a startup

From my latest article, the first in the second phase of the Start-up Logic entrepreneurship series in the Hindu BusinessLine.

Her father is in the lobby, waiting to meet you,” I was told. I wasn’t sure I had heard right, so when I stepped out into the little passage that served as the “lobby” of our start-up, there was indeed a gentleman, probably in his late fifties, waiting there. Granted it’s not every new employee’s father who travels 2,000 km to meet her prospective employers, but as a start-up you should expect the unexpected. More importantly, be prepar ed to do the unexpected to find, hire and retain the right people.

Read the rest here.

Back to Basics – Entrepreneurship

Much like riding a bicycle or swimming, with entrepreneurship too, no amount of study or theory can take the place of plunging right in. Yes, some scraped knees, water swallowed and spat out and wounded egos are likely to result, but nothing helps you learn like real-world experience.

Over the past several months, I have tried to walk through a typical, if there is any such thing, life cycle of an entrepreneur. From when the thought to start something first lodges itself in your mind through all the way to exiting your business, the entrepreneurial journey is a roller-coaster ride on steroids. As happened with me, and every parent prior to me, you are clueless when people tell you, “Your life will change once you have children.” They could just as well be talking about being an entrepreneur. All the reading, talking and thinking does not prepare you for it — it’s messy, sleep-depriving, unpredictable and will make you want to cry! Yet, it is is exhilarating, scary and fun all at the same time.

Better men and women than I have written oodles about entrepreneurship and start-ups — the how-to, why and wherefore and the blogosphere is a cacophony of advice givers. So is there anything left to say? My two cents is that it is certainly worth repeating the basics, the foundation on which all endeavours entrepreneurial and otherwise rest and build on. And this is what I shall strive to do in this article.

What: It’s the Journey

My accountant used to tell the tale of how, when a youngish man passed away, his brother standing by the funeral pyre had a flash, a rare moment of insight about how ephemeral life is and how trivial most concerns that dog all of us are. Yet, an hour later when he returned home, he chided his wife on how cold the coffee she served was! It is hard enough to be receptive to the flash of insight and nearly impossible to stay in it every moment.

Yet, as an entrepreneur (or as a parent or spouse), it’s worth reminding ourselves that we should accept, internalise and live the truth, that ‘It’s the journey that counts’.

Many of us fall into the trap of posing most issues as an ‘either-or’ situation. If you are not striving, you are complacent (not content); if you aren’t successful, you have failed; if you aren’t paranoid, you will be dead!

Reality, however, tends to be a lot more nuanced, filled with shades of grey rather than just black and white. If we succumb to it, there are endless ways to pull ourselves down even without competitors or sometimes customers doing it. To what most people would say such as “Keep an eye on your goal at all times” (which you should), “Stay focused” (which you should), “Persevere (beyond reason),” my recommendation is to remind yourself each day that “It’s the journey that matters.”

For even if you get where you (think you) want to be, if you don’t enjoy your trip there or worse yet, you don’t get there, it would all have been a waste.

So, write it down, post it on your desk; better yet, make it your screensaver!

Who: It’s the People

No journey is much fun if you have to do it all alone. Of course, having obnoxious, inconsiderate or downright horrible travel companions is probably the only thing that is worse than travelling alone. Entrepreneurs by nature like getting things done and if you are like me, many times, you’ll have the feeling that no one else can do as good a job as you can (not true). So taking on a partner or hiring and training employees will all, at times, seem far more trouble than it is worth, but no enterprise worth its salt has been built by one person, however heroic — even Superman needed Jimmy Olsen ever so often.

The trouble, of course, with people is that they are people, with all their foibles and baggage, social and emotional. Peter Drucker in his book The Effective Executive speaks of making strength productive by not hiring to minimise weaknesses but to maximise strength. He narrates how: ‘President Lincoln when told that General Grant, his new commander-in-chief, was fond of the bottle said: “If I knew his brand, I’d send a barrel or so to some other generals.” Lincoln assuredly knew all about the bottle and its dangers. Lincoln (however) chose his general for his tested ability to win battles and not for his sobriety, that is for the absence of weakness.’

Paul Hawken, entrepreneur, raconteur and teacher, speaking about the people you want on your team, says “… it makes no sense whatsoever to hire any but the best people you can possibly find. Your employees shouldn’t admire you. That is kid stuff. You should admire your employees.” So make sure you don’t travel alone and that you pick your travel companions carefully for their strengths.

How: Don’t forget to have fun

At least three thesauruses that I consulted report the words fun, joy and playful as synonyms. And who am I to disagree with them? Neither should you!

Business, commerce, entrepreneurship — all sound like serious stuff and all too often we treat them that way, but high cholesterol, hypertension and stomach ulcers are a lot more serious. So having fun, being joyful and keeping work playful is important. The real world in the form of payroll, accounts payable, demanding customers and disgruntled employees make it hard. It is the rare business that manages to accomplish this without ceaseless vigil and trying hard. While we may take our business seriously, we had better not take ourselves too seriously. I will be the first to admit that this, like most good advice, is easier said than done.

Nevertheless, the baristas at Starbucks, the concierge at the Windsor Manor hotel in Bangalore and my local barber all live the maxim that work can be fun! There will be enough folks telling you how to do or not do stuff or why you will fail. The easiest way to have fun is to prove the naysayers, who will be coming out of the woodwork daily, wrong. The best revenge at all times, I believe, is having a good time.

So focus on making sure that the journey for the folks travelling with you and for yourself is fruitful, fun and fulfilling today, and other things will take care of themselves.

This article was published in the Business Line print edition dated June 2008

Exiting your business

Whenever I read of a prenuptial agreement, I react viscerally. Not that I am particularly romantic, nevertheless there is a sense of foreboding. Putting in place an agreement should the relationship fall apart, even before the marriage, seems unsettling to say the least. In the Indian context, where marriages are still largely arranged and families actively contribute to heal rifts (and in some instances serve as the source), there is no major downside to a pre-nuptial lack of preparation. However, in the case of entrepreneurial businesses, even those that plan well before starting up, often give little thought to how it might end.

As an entrepreneur, you conceived a business idea and shaped it to meet a large market need. With love and, at times, feelings bordering on hate or insanity you have nursed, nurtured and grown it to a stage where you now have a reasonably stable business. Along the way, you have brought on board employees, partners and other owners who have ridden the enterprise’s roller-coaster ride with you. You are just getting accustomed to the growing pains (which only seem to change and never cease) and look ahead to what’s next. Of course, even if you are not there yet personally, your employees, investors and likely, your spouse are pushing you to figure out what’s next.

I use the term ‘exiting your business’ for this phase of your business. It may involve an actual exit, such as selling your company or even shutting it down or a major change in shareholding (which I deem a virtual exit) such as going public or a significant dilution of equity, ideally with some financial upside for the present shareholders. If you are not hyperventilating by the end of the previous sentence, you are ready to consider what the best manner to exit your business is.

Are there alternatives to exiting your business? Indeed, there are. You could choose — as many of the companies described in Bo Burlingham’s book Small Giants have — to stay privately held and of finite size. This has its share of challenges including the growth path for your senior team members, monetisation of people’s equity and succession planning. As Bo Burlingham puts it “(You will face) the same choice that all successful entrepreneurs are faced with sooner or later, although most don’t realise that there even is a choice until it’s too late.” So how do you ensure that your exit is smooth?

Know thyself

As with starting a business, exiting a business begins with understanding yourself. The good news is that you are no longer the person who started your business. Therefore, what you want today is likely to have changed. Even if you feel it hasn’t, it’s well worth being certain.

Begin by asking yourself: “What is it I want?” Do you want to grow the business to many times the size it is? Do you merely want to cut back on the hours you are working? Do you want to hand the company over to someone else and not be the person with whom the buck stops? Are you capable of letting go? Would you drive your spouse and family batty if you were no longer an entrepreneur here? These questions are all valid regardless of whether you intend to go public, sell the company, shut it down or raise another round of capital.

A recent example of not being clear is when Bill Gates stepped aside to let Steve Ballmer, his college buddy and confidant of decades, take over the number 1 spot at Microsoft. An article in The Wall Street Journal reports that there were shouting matches and even a dramatic walkout by Gates after an argument. According to the paper, these run-ins “paralysed business strategy decisions that the company still wrestles with today.” Eventually, as another commentator observed, “Mr Gates had an epiphany about his own role and stepped back.”

Before you make plans to exit your business, it is important to recognise that most exits are beginnings rather than endings. For instance, if it involves selling your company and you are no longer going to be involved, you’d have to figure out what you would want to do; more importantly, you would have to be clear about what would happen to your employees with you out of the picture. If the buyer wants you to stay, what will your role be and how happy are you going to be in it? How long should you stay? If you are taking the company public or taking in equity, how will having a formal board of directors impact your business or you? And if you are going to shut down your company, what is the fair thing to do by your employees? Most importantly, when do you walk away from any transaction? In other words, what are you not prepared to give up? Ideally, you run through this exercise annually rather than the night after you receive a call about a possible merger or acquisition.

Exit is a project

In the early days of your business, you probably prided yourself on the speed with which you made decisions. And as an entrepreneur, you still have a disdain for all things that seem to slow you down. If so, be warned that exiting your company is a Project with a capital P! It requires serious chunks of your time and 100 per cent of your mindshare at such times. You should run it as you’d run any major project — it may turn out to be the most critical one in your professional career.

In crunch times, most of us revert, almost atavistically, to our native comfort zone. Leaders who come from a sales background view this as a sales deal, technical folk as a test of their technological capability — in other words as a specific challenge from outside that needs to be dealt with aggressively. Usually, the biggest and most non-trivial challenges of an exit lie inside the company.

The communications and people aspects of an exit — from company intent, “Why are we raising money?” or “Are we in trouble?” to the personal, “Will I keep my job? Should I be buying those vested options?” to a possibly critical “Do I want to bother my boss with this minor issue in the midst of all this?” are critical. Your team may not only have a lot of questions but may also be quite distracted, which is not good for the business or the exit. Therefore, having a clear plan, that includes entry and exit criteria (such as when will this project be killed, if at all), objective targets (“What do I consider a fair share price?”), milestones (“By when do we intend to conclude this, either way?”), roles and responsibilities (“Who does what and how?”) and continual tracking (weekly meetings, daily or alternate day calls) is vital.

Regardless of how hard you think the exit project will be, it will be harder still! So get professional help. It is useful to have the buffer of a professional intermediary, who’ll be objective and ensure that the process does not get derailed and keeps you honest. And be prepared to pay them — they’ll earn every dime if you pick them well.

Business as usual

All of us have been in situations when, even as a key customer meeting is running late, we get a page saying that a top technical guy has resigned and our alarm reminds us of a promise made to the little one not to miss her school play again. As we race madly from the meeting, the fuel indicator glows red and the accountant calls to say that the wire transfer has not come in and tomorrow’s payroll is at risk. Now imagine doing all of this while your spouse is not in town, you have a head cold and a twisted ankle. Trying to manage an exit even as you run your business is all of the above and then getting pulled over for speeding by a surly cop.

It is easy to lose sight of the fact that you have a business to run, especially if you find the exit project exciting and exhilarating. But it is important to keep in mind that by the time the day of the IPO or the selling agreement arrives , you had better still have a viable, vibrant business. And this will not happen by itself. When you are sitting across the table from your institutional investors or prospective buyers, it is this healthy business, running as a well-oiled machine, which is going to allow you to be a cool yet formidable negotiator. It is useful to keep in mind that the exit project is just that — one of several in your business and not necessarily one that will be successful.

So keep your eye on the ball and remember your core objective — sustaining and running your business as though you intend to do it for the rest of your professional life!

This article was published in the Business Line print edition in June 2008.

Marketing your entrepreneurial business for success

From my tenth article in the Start-up Logic entrepreneurship series in the Hindu BusinessLine

Most people seem to have a reasonable idea of what engineering (design and build stuff), finance (manage the money) or sales (make money by selling stuff) do in a business. Marketing is another story altogether, being confused with sales in the best case or perceived as a money-sucking black hole in the worst. It is likely the most misunderstood part of doing business.

Read the rest here.

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