A recent Stanford Business School journal article points out the importance of a good management team to investors, “Venture capitalists consistently emphasize the importance of the management team in an entrepreneurial venture and focus much of their due diligence on the key people involved. They assert that a good idea is only executable when implemented by a top-notch executive team.” If professional investors feel that extensive due diligence should be spent on management team members, you should probably spend even more effort in selecting your key team members. Management teams can make or break a company and turn a struggling business into a great business. I have personally seen businesses built around products and ideas that I would have never believed in, but that succeeded because management was able to position their products in such a way that made them attractive and provided value for customers. Through all of my experience, I fully subscribe to this idea and always seek to help my clients understand this concept. So where do you start?
Building the Right Team
When building your team, here are 3 tips I have gathered over the years that I know lead to all-star management teams:
- Vision: Find people that share your vision for the product and company. I have met countless professionals that would excel in their roles (helping the company excel as well), if only they were passionate about what they were doing. Management that doesn’t believe in the product can suck the life out of your company. Consider a legend like Steve Jobs who would work for hours and hours perfecting products because he believed in the perfect user experience.
- Yin and yang: An ancient Chinese philosophy that illustrates how opposite forces are actually complementary. Consider, for example, a married couple you know who have very similar, strong personalities. At times, they can be a bit overwhelming and too much of the same thing. There isn’t a mellow one to balance the eccentric one out. You need partners and co-workers who can see things from different angles and that can bring different ideas to the table from their diversified backgrounds. Don’t hire people who agree with you all the time or you feel are afraid to disagree. In fact, if the outsourced CFO’s I work with didn’t have divergent opinions once in a while, I would get nervous.
- Division of labor: Many economists have emphasized the division of labor, which is based on the idea that people are much for efficient when they can concentrate and specialize in one area. Instead of having each worker assemble one widget at a time, use an assembly line and have one worker assemble one part, then the next worker assemble the next part, and so on. The same holds for your management team. Not only do you want each person to specialize and be specialists, but you also want them working on what you hired them for in the first place. I have seen way too many businesses who have their marketing VP step into an HR role or salesmen spending excess amounts of time dealing with office supplies. Clearly the caveat here is that in a small, 3-founder company, you wear multiple hats. But as you grow, keep division of labor top of mind. The more specialized each person is, the more efficient your company will run.
One more anecdote – try not to get your personal feelings or relationships too involved. Do not hire your cousin to be VP of customer relations just because he is your cousin. Find another role for him and hire someone who is exceptional at customer relations.