Events and
publications
June 23, 2010
Business model innovation
8.00 – 9.00 am
University of San Diego
July 23, 2010
Free
webinar: Agile Strategy for New Ventures
An introduction to applying the principles of agile strategy to maximize new
venture success.
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Building an effective management team
For business ventures focused on commercializing innovation, an effective management team is one of the primary drivers of value. Venture capital firms and other investors always stress that the importance of the management team for venture success - many prefer an A-level team with a B-level idea than the opposite. Similarly, noted author and professor Jeffrey Pfeffer contends that it is “more important to manage your business right, than to be in the “right” business. Success comes from being able to effectively implement a competitive strategy, not merely from having one.”
Yet building an effective management team, like building any team, is challenging, and is certainly more than just assembling talented people. Consider the United States Olympic basketball teams in 2004 and 2008. The 2004 team was essentially an assembly of individual stars who did not play effectively as a team. By contrast, the 2008 “Redeem Team” performed more like a true high-performance team, and as a result easily won gold.
So how does a venture build an effective management team? What are the practical, essential steps CEOs should take to succeed in this critical area?
In the Innovation Venture Model, our best practice innovation and venture management methodology, management team effectiveness is achieved through doing three things well:
- Organization – defining the team correctly - the roles needed and their responsibilities
- People – putting the right individuals in each role and helping them succeed
- Teamwork – getting the team to work together effectively.
Organization
The first step is to define the team correctly. Unlike in basketball, there are no standard positions on a venture’s management team. The foundation of success in building an effective management team is to define the team’s, and by extension the organization’s, roles and responsibilities carefully and thoughtfully.
Define roles and structure
In many ventures, insufficient thought is given to the management team and functional roles and structure. Frequently the CEO or founder will put in place an organizational structure that replicates his or her previous experience. In other cases, roles and structure are defined based on the skills or preferences of the incumbents. Internal politics often comes into play, with individual managers seeking roles and responsibilities that give them more personal power and influence.
The correct approach is to begin with the needs of the business. What is the strategy and business model? Based on these, what are the core daily tasks and activities that need to be done? What are the key initiatives that need to be accomplished?
Once these are detailed out, the next step is to review all these activities and initiatives and explore alternate ways in which to group them. To do so, it is a good idea to define a set of criteria to guide you. These might include:
- Defining roles that ensure all the key activities and initiatives will get done properly.
- Defining roles that will reasonably fit with skills available in the market (as an example, many ventures have a VP Sales and Marketing, but in practice there are few executives who truly have top class skills in both disciplines; despite the coordination challenges, ventures are typically better off creating separate sales and marketing VP roles so that they can find people who can actually perform the roles successfully)
- Defining the right number of roles – too few, and the roles become impossible to do; too many, and costs will be too high, and there will problems of communication and coordination
- Maintaining a reasonable balance of responsibilities and workload amongst the team
- Ensuring that the right roles report directly to the CEO – critical roles should not be assigned at a lower level, nor should less critical roles report to the CEO
- Defining roles that will attract executives of approximately the same level of capability and experience – having some roles defined to require senior, experienced executives and others to require more junior people creates a built-in imbalance in the team.
This analysis and definition must first be done in the abstract, disconnected from any incumbent executives. Once the theoretical ideal roles and structure are defined, in practice they may need to be adjusted to account for the particular capabilities of existing executives. However, at least you will clearly see where you are comprising the ideal, and where you may need to make a change in the future.
Bear in mind that your management team structure and roles will need to evolve relatively frequently as the needs of the business change. It is important that all executives understand this up front, so that expectations are set accordingly. This applies even to the CEO.
Clarify focus and responsibilities
In finalizing the team’s roles and structures, ensure each executive has a clear, distinct focus and a clear, distinct set of responsibilities. In this sense, strive to make your management team’s focus and responsibilities “MECE” – mutually exclusive and collectively exhaustive. Many problems arise in organizations and amongst management teams when
- executives are not clear as to their individual focus and responsibilities
- individual focus or responsibilities overlap, or
- some elements of focus or some responsibilities fall through the cracks.
In doing so, ensure each executive is clear on how your overall strategy and business plan translates into each person’s goals and responsibilities, and vice versa.
Getting your executives’ focus and responsibilities right is enormously important, as it cascades down the organization and becomes the primary determinant of what all your people do every day, and how easy or difficult it is for them to be successful.
Give executives freedom balanced with accountability
Once you have clearly defined each executive’s focus and responsibilities, it is essential to give them the freedom to act. Many ventures are led by CEOs who consciously or unconsciously micro-manage their executives. By doing so, the CEO ensures both that his or her attention is not focused on those issues that are the true province of the CEO, and also does not get the best out of his or her team members. Management team members should be given the tools and resources to do their jobs, and then allowed to perform freely.
Balancing this freedom is the vital concept of true accountability. Each executive must be held accountable for his or her goals and responsibilities. Simply put, this means there are real consequences, both positive and negative, for each executive’s performance. Executives who achieve their goals and fulfill their responsibilities are rewarded; those who do not are not rewarded, and ultimately may even be replaced.
People
With a well thought out organization in place, you can focus on filling your management positions with people best suited to execute the defined roles and responsibilities to implement your venture’s strategy.
Recruit the right people
Attracting the right people to fill your management team is one of the most important tasks of the CEO. The people you bring onto your team must possess the right individual and collective skills, market knowledge and passion.
Often early-stage venture founders tend bring on people with whom they are close or have worked in the past. While it is important to know, trust, and be able to collaborate with the people in your team, it is essential to be rigorous in identifying the right skills and experience needed to fulfill the roles and responsibilities that you have defined as needed.
Once you have determined these attributes, explore multiple channels to find the right people. It is frequently unnecessary to hire an expensive search consultant – with the right effort in networking and using the web, most ventures can generate a strong pool of candidates from whom to choose.
To maximize your chances of success, clearly define your ideal profile candidates, as specifically as possible – including the education, companies, positions and geographies you would ideally like to see on their resumes. Then seek out people that closely match your ideal.
Equally important, clearly define your value proposition to prospective executives. Good people have many career options – why should they select your business as a venue for their talents and energies?