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

  Challenges

  Closing comments

Definitions

 Human capital refers to the stock of skills and knowledge embodied in the ability to perform labour so as to produce economic value.

 High Performance Teams: Teams that are highly focused on their goals.

Context: my background

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

  20+ years in tech companies   Co-founded DCI

  Grew team of ~60, RTO on TSE

  Country manager HUBER+SUHNER

  Swiss multi-national, “blue chip”

  Team of 125 inside 2,300 globally

  CEO BTI Systems

  Raised ~$60M VC over 4 rounds

  From 12 to 225 employees

  Revenue from $0 to $40M

  Currently freelancing: Singletrack

  Teams of 8 to 88, from IT to Cleantech

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

Multi-functional teams…

Software engineers Product Management

Hardware engineers

Marketing

HR Sales

Quality

Operations

Manufacturing

Finance

Administration

Investors Customer Service

Management

Directors

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, that

you are contributing to the success of the business, and that your efforts

are respected and appreciated by fellow employees

  On budget / On time

  Cracking a new customer

  Selling on value

  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

Great (Management) teams have:

1. Diversity to accommodate wide range of variables

2. High “AQ” (Adversity Quotient = measure of human resiliency)

3.  Psychological safety (to call out decisions)

4.  Prior interaction (know each member’s SWOT)

5.  Clarity of purpose and direction

6.  A Plan “B”

On hiring

  Hire the best talent available – don’t compromise

  Attitude over Academic credentials

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

  Use

  Director and investor referrals are great but…

  You can compete with high paying companies…

  For tech plays: hire product management early

Shifting Investment in Human Capital

Source: 2009 OCETA SDTC “Cleantech Growth & Go-to-Market Report”

“Make Sufficient & Well-Timed

Investments in Sales and

Marketing”

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, De-brief Setbacks, encourage mistakes (but not

repeat mistakes)

Communication style

  Not your `typical` Tech CEO

  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 over-arching objectives, & repeat

  Share the numbers, the good, the bad & the ugly

  Regular informal updates

  Semi-annual formal update

  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

•  You have to pay a premium for “A” players – but it’s worth it

•  Challenge, responsibility, recognition and reward 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 •  Combination of financial / market / product milestones •  Always drive home the capital efficiency message (Cash Flow Positive…)

  Stock Options (ESOP)

•  Still in vogue, but not Holy Grail

  “Fun” and other rewards work

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

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

•  “Act BIG, be small” gets harder

Closing comments: leveraging human capital for success

1.  A high AQ team will handle the inevitable speed bumps

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

3.  Bring in Organizational Development / HR expertise as early as you can

4.  Communicate frequently – informally and formally

5.  Tie in customer and market touch wherever and whenever you can

6.  Structure rewards and incentives to reinforce the behaviour and culture

that you are looking for

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