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Human Capital: the importance of high performance teams to start-up success.

Outline

  Context

  Team diversity & dynamics

  On hiring

  Culture

  Communication style

  Compensation / incentive programs

  Advisory Boards

  Challenges, closing

Context: my background

  U of Waterloo, Chartered Accountant, Queens U & UWO Executive Development

  20+ years in tech companies   Co-founded DCI, grew to 60 staff then RTO on TSE

  Country manager HUBER+SUHNER

  Swiss multi-national, “blue chip”

  Team of 125 within 2,300 globally

  CEO BTI Systems to 2008   Raised ~$60M VC over 4 rounds

  From 12 to 225 employees

  Revenue from $0 to $40M

  Currently EiR MaRS, freelance consulting, and equity partner in e-Security professional services firm TRM Technologies

Context my typical playing field:

 A (very) technical product

 A technical sales process

 A long, complex, B2B sales cycle

 High growth market dynamics

 Very much a David & Goliath landscape

High Performance teams...

 Communicate openly, with diversity of opinion

 Align on 3 or 4 top initiatives and track them

 Plan as a group: short & long term & with plan “B”s (and have resiliency - High AQ = Adversity Quotient)

 Are accountable to deliver

Multi-functional teams…

Software engineers

Product Management

Hardware engineers

Marketing HR Sales

Quality Operations

Manufacturing Finance Administration

Investors Customer Service

Management

Directors

OR

Venus & Mars

Research

Sales & Marketing Software Engineers

+

= ???

+

Motivation & drive: different strokes for different folks

•  Peer recognition

•  Papers published, patent applications

•  Speaking at industry forums

•  Technical challenge

•  “coin operated”

•  “show me the money”

But wait a minute: we’re not that different

1.  Everyone needs recognition - the “feeling” that you are important,

contributing to the success of the business, that your efforts are respected

and appreciated by fellow employees

  On budget / On time

  Cracking a new customer

  Customer testimonials – helping solve real problems

2.  Technical teams want to work on a successful products.

Sales teams want to sell winning products.

The common metric is real customers /market share

Fostering teamwork

  Trade notes

•  Technical teams are starved for customer feedback •  Sales teams are starved to technical innovation / uniqueness

  Push decisions to where the expertise resides

  The key linkage between Development, Operations and Sales is Product marketing / product line management

  On occasion…take a ‘software geek’ to a customer, and bring a ‘sales puke’ into the lab

On hiring

  Bring in PLM, marketing / sales, & HR early…

  Have a hiring plan – force rank key hire timing.

  Hire the best you can – have choices – don’t compromise or settle

  Attitude over Academic credentials

  Be careful with big company experience (no job too small attitude)

  Use all the “free tools you can, especially

  Director and investor referrals are great but…

On hiring

  Refer to the March 24th EN101 “HR for Entrepreneurs”

  Do employment agreements right and from the start

  Compensation plans

  Termination & Severance

  IP protection that survives employment term

  Caution re structure - when choosing consulting vs.

temporary employment vs. permanent employment – this

can set precedents downstream that are difficult to undo.

Culture

Every company has a culture, every company has politics

  Perception is reality

  Work with it

My observations:

1. Culture changes with company lifecycle:

•  The $1M, 5M, 10M, 25M, 50M barriers

2.  In Canada, we’re trés multinational: use it to your advantage

3. As the leader: be candid •  Candid = Integrity

•  A culture of candour is a source of sustainable competitive advantage

4. Celebrate wins, debrief setbacks, encourage mistakes (but not repeat

mistakes)

Communication style

  As CEO - Be yourself, know your biases

  Be OPEN, honest, straightforward

  Have the tough conversation

  Stop management “happy talk”

  Soft on the people, HARD on the problem

  Be inclusive: tie in the remote teams

  Set 3, clear company goals & repeat them

  Share the numbers: good & bad

  Regular informal & formal updates

  Have fun!!

Compensation & Incentives

  Fair, transparent and equitable

•  People talk, especially engineers

  Salaries (the “start-up” factor)

•  You have to be competitive – but not the highest

•  Sometimes you want to pay a premium for “A+” players

•  Test candidates with “we like you but simply can’t afford you…”

•  It’s the “rich experience and reward that trump pure $$$ - that is how you

compete with the big companies…

Compensation & Incentives

  Company-wide incentive plan

•  10% “at plan” , 20% stretch •  Metrics must be aggressive, but realistic, and simple enough •  Combination of financial / market / product milestones •  Always drive home the capital efficiency message (Cash Flow Positive…)

  Stock Options (ESOP)

•  A key tool, but don’t oversell them

  “Fun” and other rewards work

•  Create a friendly competition / bragging rights •  Do not require big bags of $$$ •  Examples: IP², a goofy award, employee referral bonus

Advisory Boards

  Very helpful to young companies – but more informal, without governance and director liability responsibilities

  Try to complement the in-house expertise across broad functional areas (technology, sales & marketing, finance)

  Pedigree is great, but access to the advisor and willingness to help is equally important

  Can use members formally and on ad hoc basis

  Compensate typically with options or per diems

  I’ve used 1 yr renewable terms, options granted annually with immediate vesting

  Make it enjoyable for all - dinners or special events…

Tech team challenges

1.  The Investor / VC influence

•  The same vested interest or ?? •  An exit and minimum 20% IRR is natural

2.  As the company grows up…

•  Start-up excuses go away

•  Employment / HR expectations expand

•  Balancing formal (e.g. employee handbook) with

informal (“just do it”) gets harder

•  Speed and flexibility diminish

•  Management teams hit glass ceilings

Closing comments: high performance teams for success

1.  COMMUNICATE

  Set a tone that is open, based on mutual respect, and interactive

2.  ALIGN

  Don’t all drink the Kool-Aid™: get all the customer / market touch you can

  Structure rewards & incentives to reinforce the behaviour & culture you are looking for

3.  PLAN

  A high AQ team will handle the inevitable speed bumps

4.  DELIVER

  If individuals and team FOCUS on the delivery of KEY goals it will automatically

generate a performance culture

pg 21

Lance Laking Entrepreneur-in-Residence, Advisory Services, Venture Group

MaRS Discovery District T (613)797-9033 E llaking@marsdd.com W www.marsdd.com