Monthly Archives: September 2015

Hiring Dilemmas

When starting a business it is important to understand who and when to hire someone. The people you hire will play a very vital role in the success or failure of your company. You need to know whom you are hiring, and realize the relationship you have to this person. At the same time, you need to realize when to hire someone. Hiring someone can have financial impact on your payroll, but also the original role someone is hired for can change as the company changes. The original hire may not be able to adapt to changes to the company or the changes that will evolve with their position.

The relationship that a founder has with their employees can be very impactful on the business. Hiring family and friends that are close in your social network can cause a very pleasant work environment. Having this type of environment can cause more productivity and a more enjoyable workplace. Hiring someone simply based on their credentials qualifying them for the desired position may be a way to find someone to fit into that specific role, but may not fit into the culture of the company causing dilemmas in the work environment.

Hiring friends and family can also back fire on your personal relationships and business. The overall success of your business needs to come first, and this can create significant turmoil when friends and family are involved in the business. According to the article “Why You Shouldn’t Hire Family to Work at Your Startup,” running a startup is a very rewarding experience, and the business becomes like your second home. The article gives the below reasons for being cautious about hiring family.

  • Family members may not always be the most qualified for the position. You may have the best intentions at heart, but when hiring a family member you may be over looking some of the qualifications really needed to help scale the business.
  • With family involved it is inevitable to have favoritism involved in the work place. It is important to have a well-defined business where favoritism will not deter from this.
  • In entrepreneurship, failure is common. To overcome adversity and continue on your entrepreneurial journey’s it may be beneficial to keep family separate. It is always important to have family’s support, but not necessarily their involvement.
  • It is important to eliminate variables that could cloud your judgment or expertise. Often times with family, there can be side baggage that could prevent you from using your best judgment or expertise.

It is important to know the role you are hiring for and how that can change as the company changes. Noam Wasserman describes in his book “The Founder’s Dilemmas” how a certain role can go from being a “player to a coach.” For example, in the initial phases of a company, the sales director may be the one making all the phones calls, attempting to make all the sales themselves, this being the “player.” As the company grows, its sales “player” may start to have more and more people under him, whom he must manage and “coach.” The founder must understand the roles they’re hiring for, and what the role may become in the future. It is important the person hired for the job is the best fit for the initial position and will be the best fit for the position as the company evolves.

Once you find the best possible candidate, at the best possible time, it is important to keep them at the company to ensure the most growth possible. The best of the best want to work for the best, so it is important to make sure that as the founder, you are running the best possible business, only keeping the best on board with the company. It is important to keep a close eye on your organizational structure and be aware of any changes that can have an impact on the overall success of the business.

Sources:

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Under30CEO. Why You Shouldn’t Hire Family to Work at Your Startup. 9 September 2013. http://under30ceo.com/why-you-shouldnt-hire-family-to-work-at-     your-start-up/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Role Predicaments

There comes a time when roles are going to need to be assigned within a company to determine who handles what aspects of a business. Businesses have these roles so that things can run as effectively and efficiently as possible. How these roles are decided on can vary immensely, but have a drastic outcome on the ultimate success of the business.

In a lot of cases the “idea guy” or founder of the business takes on the role of the CEO/President, the role that has the ultimate say on how the business is run. This occurs a lot because the “idea guy” treats the business as if it were his/her own child. Putting all the effort into making the idea into a business, most feel that it is their right to be in the top leadership position because they will put in the most to make sure it is successful. It can sometimes be extremely difficult for a founder to let someone else take on the leadership role, but can often lead to the most success for the business itself due to someone’s experiences actually running a business.

In the book “The Founders Dilemma, Noam Wasserman states there are three things that should be considered when analyzing who should take on the leadership role. The amount of commitment the founders have towards the business; the business will need someone who is fully committed to the success of the business with minimal external distractions or interests that could take away from the ultimate success. The person who came up with the original idea may feel that they have majority interests and stake in the business. The amount of financial, social, and human capital each founder possesses should help determine which role they take.

The founders of a business are typically most successful when they go into starting the business with its best interest in mind. In the article “What if You’re Not CEO Material?” by David Cohen, David gives an example of a business named SendGrid where he invested into the company that was having success through his own Techstars company that offers star-ups accelerator programs. When David and another venture capitalist made their investment and became board members, they had a talk with the original founder that in the future they may need to bring on an outside CEO. The original founder agreed to this due his lack of experience operating a business of this caliber at the executive level. The original founder, on his own terms, quickly started to realize that he was still learning on the job and this was slowing down the company. David gives the below words of advise when it comes to deciding on whether or not to become the CEO of your own start-up.

  • Just because you make a mistake you shouldn’t step down
  • Talk to advisors you trust, then trust them
  • Surround yourself with experienced CEO’s
  • Visualize the future

The people who take on the roles within an organization are the people who can be the deciding factors on whether or not the business succeeds. It is important early on to recognize these people and hire the top A-players. There are specific roles where the employee will have the set skills needed in order for them to be successful in that position. Besides the specific training or education someone may have had, there are other attributes of a potential employee that can make them an A-Player or a C-Player. These attributes may not be obvious from the start, but can be attributed to a certain upbringing, or certain experiences in life that have developed the person into what they are today. These attributes may not always be obvious, but they are often attributes that can’t be taught.

It is important to realize the strengths and weaknesses that you as a founder posses, and the strengths and weaknesses of the people that are brought on to fill the designated roles to make the business successful. The ultimate outcome of any business are the people involved in making it run successfully. Never underestimate the difference that one person can make.

Sources:

Cohen, David. What if You’re Not CEO Material. Inc.com. 15 February 2012.     http://www.inc.com/david-cohen/what-if-youre-not-ceo-material.html

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Building the team.

The formation of a team can be one of the most important steps in business when it comes to building a successful company. A team can be defined as a group of people who have one common purpose. As it relates to business, the cofounders of a business have one common purpose and that it is to create a successful business. Every member of the team should play a vital role in this common purpose of success, just as in the case of sports; each team member will play a role in the win or loss of the game. Each team member involved in a start-up will play a role in the success or failure of the business.

Frequently, when forming a business, entrepreneurs will form a team with people they’re familiar with or close to. The people we are familiar with are often the people who have similar skill sets, same contacts, same personality, and same interests. It is much easier and quicker to locate potential cofounders within ones immediate social group. Creating homogenous teams will often allow for cohesiveness amongst all members in the beginning stages of the business. The homogeneity and cohesiveness will allow for effective communication and boundaries as the business is in the beginning stage of starting up.

When starting a business it can seem tempting to bring on people you’re familiar with, but there are many downfalls to doing this. To have a successful team or business you need to have a variety of team members with different skill sets and social networks that all contribute to the ultimate success. If an entrepreneur brings on people they’re close to, with similar skill sets and social circles as them, it is likely that there will be skill sets and contacts needed, but not apart of the team. Noam Wasserman in the book “The Founders Dilemma” gives an example of Pandora founder Tim Westergren bringing on a CEO and CTO to help form Pandora Radio. Tim knew that his and his personal friends musical background would not be sufficient in starting up his idea that involved music but needed a lot of technical and business experience in order to make it successful. Tim brought on a CEO who had experience in similar database start-ups as Pandora and experience in dealing with venture capitalists. This CEO also had social capital through his experiences starting businesses and was able to recruit an engineer that brought expertise to the technical side of things. The process of forming the Pandora team may have taken more time to set up, but the 3 cofounders all bring something different to the table that lead to the success of the business.

In today’s business world, companies are constantly innovating to keep up with the ever-changing markets. Having a diverse team can better help problem solve the constant changes that will occur in any business. In an article by Ekaterina Walter “Reaping the Benefits of Diversity For Modern Business Innovation” she states that diversity in perspectives, cultures, experiences, age, and gender are all essential for growth and prosperity for any company because diversity breeds innovation.

It is imperative that the founder of any company brings on the right team members at the right time. Building a team to develop a successful business is a very important process. Founders must do what is best for the business in the short and long term. Bringing in a diverse group of top talented individuals that will be able to contribute the business will be crucial in the starting phases of the business, but also crucial for the long-term success of the company further down the road.

Sources:

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Walter, Ekaterina. Reaping the Benefits of Diversity for Modern Business Innovation.     Forbes.com. 14 January 2014.             http://www.forbes.com/sites/ekaterinawalter/2014/01/14/reaping-the-    benefits-of-diversity-for-modern-business-innovation/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Accumulating Capital

When starting a business there are so many events that occur in our daily lives that can have a major impact on the success of a future business endeavor. Events that we never realize could have a significant impact until later on down the road. The college professor who knew everything humanly possible about financing a business, the super techy friend who could solve anything when it came to technology, or the internship where you met some of the most skilled sales people can all greatly impact the knowledge/expertise that can be brought to the table when beginning your startup. This knowledge and expertise can also be referred to as social capital.

Social capital is something that accumulates over time. It can be acquired through friends, family, coworkers, teachers, bosses, and even strangers. Building strong social networks, especially as it relates to business and the industry you wish to operate in, can be extremely vital to success of your future business. Books, podcasts, and lectures are other forms of social capital. Just as we can learn from the people in our social networks, the knowledge and information gained from books and similar avenues can add to our social capital.

In addition to the people we meet, having sufficient money, or available financial capital, can make all the difference when it comes time to starting a business. Typically, individuals who start businesses need surplus capital in order to initiate a new business venture. There are the essentials that people need in order to survive, like shelter and food, and then there are the aspects of life that people become accustomed to that may be more of a luxury. In order to have additional capital on reserve, luxuries include going out to eat, or driving a fancy car, may need to be removed out of the lifestyle in order to start and maintain a business, especially in the beginning stages of business.

As stated in the book “The Founder’s Dilemmas” by Noam Wasserman, “the accumulation of one type of capital can be a virtuous cycle.” Research has proven that people who collect more social and financial capital are able to start their business venture much quicker. In the article “Four Steps to Building Social Capital” by Ivan Misner, the author suggests looking at relationships as currency. He states that it does not do you any good to network and meet knowledgeable people and never talk to them again. He states that its not important how many contacts you make but about the lasting relationships that are generated that can be beneficial to both parties.

Capital plays a major role in the success of any business. Social capital can provide years of knowledge that can prevent mistakes from occurring, and it can be the difference between success and failure. Financial capital can be the limiting factor that allows someone to go out and pursue their dream of starting their own business. According to Noam Wasserman, a study showed that 51.3% of people who had seriously considered becoming an entrepreneur did not pursue this path because they lacked the financial capital necessary to get started. In all the forms of capital, it is important to capitalize on it before, during, and after starting a business.

Sources:

Misner, Ivan. Four Steps to Building Social Capital. Entrepreneur.com. 8 May 2011.    http://www.entrepreneur.com/article/219590

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

To be King, or to be Rich.

There are many different motivations that compel a person to start their own business. According to Noam Wasserman in the book “The Founder’s Dilemmas” the main two motivators are control and making money. Starting a business takes a great amount of sacrifice in order to be successful. Making all of these sacrifices would make a business owner less inclined to part ways with any control of their company. They put in the blood, sweat, and tears into building the company and want to be the “King” or “Queen” of their domain.

At the same time, the business owners other main motivator is to make money. Any business needs to make money in order to survive, but most business owners want the business to generate as much profit as possible. One might consider that giving up equity in their company will cause them to lose money because they don’t own as much, but having the best possible team working for the business, or getting an investment at a crucial time, can make all the difference when it comes to the business seeing significant profit.

The best of both worlds would be to be the Rich King or Queen. This is not always obtainable. There are great/famous entrepreneurs that have been able to accomplish being the rich King/Queen of their empire, but there are far more entrepreneurs that have made tremendous amounts of money by giving up a certain amount of their company in order to help it grow. There are also the entrepreneurs who would not part ways with any portion, or too little of their company and have failed, being the King/Queen of nothing in the end.

In an interview with fashion brand’s Jimmy Choo founder, Tamara Mellen, by Kimberly Weisul, Tamara gives the analogy that you would rather have a smaller slice of a bigger pie, comparing your business and the potential market it can reach. Tamara states that the magic number should be controlling 51% of the business. As a founder you want to have that final say on the decisions that can have a major impact on your business, but you also want to be able to grow the business to a point where it is sustainable and profitable. Bringing in additional investors or expertise can be vital to the success of the business.

There are so many different motivations for starting a business and it is important for the owner not to forget the main purposes for starting their business. It can be easy for someone to get caught up in all the different happenings that go on with business and lose track of why they started the business in the first place. There are so many reasons for starting a business, including the two Noam Wasserman states most common, the money and the power, and it is important to know the difference between them. In an ideal world the entrepreneur is the Rich King or Queen that is dominating the business field in which they’re operating, but this is normally not the case and the entrepreneur needs to be aware what their end game goal is.

Sources:

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Weisul, Kimberly. Jimmy Choo’s Founder on Always Keeping Control of Your Company.            www.Inc.com. 26 November 2014. http://www.inc.com/kimberly-       weisul/why-your-magic-number-jimmy-choo-founder.html. 8 August 2015.