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Open debate, disagreement, challenges: MANAGING A STARTUP (One in a series)

How much debate and disagreement is there in your startup?

Does your CEO confine people to walls, inside of silos for each department?

If you responded with a "Yes" or "Sometimes" then listen to this:

Startups that succeed are the ones that encourage open, aggressive talk, discussion, debate and -- yes, anger -- as issues and problems are encountered and dealt with.

Startups are not about controlling wild people or slave-driving hired help.

New enterprises are about encouraging innovation, creativity and determination that overcome walls, barriers, surprises and approaching disasters.

CEOs who create a culture that operates with open debate and disagreement will generate superior results. The rest will die of mediocrity as they run into overwhelming competition generated by innovations stimulated by open debate.

This is especially challenging for Asians who were schooled in obedience to superiors. But when they join a startup whose culture is open to criticizing the boss, they are quickly transformed into creative thinkers. I've been watching this happen to a Korean-Chinese startup I've been coaching. The results are world-class and a joy to watch.

A tip for CEOs: ask your board of directors to probe how open your company culture is to criticizing the boss. There are several ways to do it, just do it. Then you will not be the last to know when you have a serious problem of a closed company (hours before you get fired).

BOTTOM LINE: One of your most precious assets in a startup is innovation. Innovation comes from lack of fear when criticizing other employees, but especially the boss, the CEO. If you, the CEO, encourage that, your company will tackle the big problems faster and more creatively, when they pop up (and you can count on the bad ones surprising you, month after month). When you learn how to do this, you'll add an amazing power to your unfair advantage.

MANAGING A STARTUP (One in a series): Good people are not enough - they have to be great

Question: How many good people does a startup need?
Answer: None -- good people make too many mistakes. Startups must have great people.

People are what make a startup. Make it great or go broke. There is nothing in between. You win or lose because of the greatness of startup people. Startup winning is not about the idea, the technology, the marketing, or the strategy or the money. It is about people.

Starting with your core team, startups cannot make compromises. Core management means someone who knows how to run a business (CEO), someone who knows how to find customers (marketing), and someone who can build what you have created in your mind (engineering). If you get that right, you'll get your money and the next layer of great people for your company.

Great people need to be on your board of directors. Less than the best board members can make your life as CEO hell and they can wreck your startup. I have watched venture capitalists try to run a startup from their board seats when the founder had never run a business before. They wrecked it. The CEO became a puppet on strings, performing for the board of directors. That is not a good life. It spells doom for a startup.

Great people are required because they will be expected to do impossible things, immediately. They have to be free of office politics, have strong self-confidence and be willing to change job positions and titles week after week without complaining. The challenges they have to overcome rise from aggressive competitors, roadblocks coming from engineering, disappointments from business development and surprises as stealth competitors grab the buzz before your company does.They have to be amazingly flexible and extremely fast learners on the job. They have to be great.

Large corporations compromise on people because they need so many of them. The hierarchy of control enables top quality people to manage a lot of less able people who manage even less able people. The result is a ship that moves slowly but steadily. It is not the stuff of which great people come from in large quantities. Top performers often look outside and are eager to find a startup where the people are great and so are the opportunities to do something more challenging than mastering the art of internal corporate politics.

Serial entrepreneurs are constantly recruiting for their next startup. They have radar that is tuned to search for great people. When they spot one, they immediately make contact and start a relationship. That is how they got successful as startup veterans. They take people with them as they move from success to success. They are magnets for great people.

Good people make mistakes, too many for startups to bear up under. Giants can absorb a lot of blows. Startups can die from one bad one. Startups are fragile infants. They need great people able to avoid that lethal mistake.

BOTTOM LINE: The special part of people managing in a startup comes from the need for great people. from the top down. Board members (investors) to the first level in the organization, all have to be great. Experienced CEOs do not compromise when they hire managers. They insist on only great people. When you can do that, you'll understand one of the most important elements of building an unfair competitive advantage for your startup.

STARTUPS ARE HARDER THAN THIS: Watch and think before you leap

Do you think you have what it takes to do a world-class startup?

Watch this and decide. Startups are harder to do than this:
Download Descente_surf_de_dingue-mau

BOTTOM LINE: World-class startups are VERY difficult to do. Think before you leap.

MANAGING A STARTUP (One in a series): It's like building a bicycle while riding it

"Managing a startup is like building a bicycle while riding it."

Startup managers get used to it.

It is awkward and never gets more comfortable.

It is just how it is.

Large corporate officers do not like it. Serial entrepreneurs are comfortable doing it.

Classic MBAs are taught to "Plan your work and work your plan" so that financial forecasts for 12 months result in numbers plus or minus 3 percent, so that everyone gets a nice salary raise and bonus for the year (3% salary increase plus 9% bonus). Accuracy is their sacred word.

Serial entrepreneurs know their startup plan is outdated by the time is comes out of the printer. They are sketching a picture of what might happen over five years as they seek to build a great company that goes IPO on NASDAQ worth billions of dollars of wealth creation. So much changes so fast that their plans are dynamically adjusted daily. Change is their sacred word.

Corporate managers climb the ladder by reducing risk. They analyze until they are very confident little can go wrong. They assemble the entire bicycle before making a big move. Then they launch the rocket, a $100 million marketing campaign to support a new gel toothpaste or broadband router. And they continue selling ten or twenty other similar products so their risk is diversified. They have thousands of bullets in their huge guns.

Startup managers win by taking maximum risk. They focus on a single idea aimed at a single market. They get started with less than a million dollars and have only a single wheel to begin with. They start making quick adjustments as they begin building the bicycle. They do not diversify. They have one bullet in their single, small gun.

Corporate managers are careful, yet can be very bold. They do best taking on huge projects they understand intrinsically in domains they are masters at. They are giant sumo wrestlers competing in well defined spaces. Three percent annual growth produces billions of dollars of sales. That is how giants like Oracle and Cisco get stronger year after year.

Startup managers are quick at assessing risk and are not foolish gamblers. They are excellent spotting fresh business opportunities and jumping onto waves that are beginning to rise, precurors to the creation of a new industry. They are surfers trained to ride fresh waves to success.

The psychological impact of building a bicycle while you ride one is very intense the first time. And it never goes away. It is intense, like jumping on a forty foot wave on a surf board at Mavericks for the third year in a row: your gut still drops and you are terrified once again. Corporate hearts stick to predictable, less risky surf. Startup managers look for the next giant wave.

BOTTOM LINE: Think of managing a startup as building a bicycle while you are riding it. That is tricky, risky and unnerving. Large corporate managers are not prepared to manage that way. The skill is learned by managing in a real startup. It is also fun, a great adventure and rewarding. I'll discuss this more in coming blogs. If you grasp this concept, you can add it to your plan to build a great unfair advantage.

STARTUP LAYOFFS: Be bold before it is too late

Every startup hits the wall sometime and has to cut its burn rate in order to survive. No new enterprise is immune.

There is a good way and a poor way to do a startup layoff.

Here are some tips from veterans of the startup battlefield.

• You never cut headcount too early. You will always be late. Entrepreneurs are genetically overly optimistic. It is in the genes. They believe they will figure out a way to avoid the painful cuts of employees. So they are always late for the layoff.
• You never cut headcount too deeply. You will always cut not deeply enough. The cuts will seem to produce a company impossible to manage, unable to compete. So you "save" the best of the best and you end up with more than you should have.
• You will react to pressure from your board. Your investors will especially be quicker than you to tell you to get going with the cuts. They have seen this before. One reason they are on the board is to give you perspective and wisdom. Listen to them, even if you don't want to.
• You will end up with a different company to manage. It will seem strange to you. The surviving set of employees will behave differently, will be able to do less and will respond to you in different ways. Their psychology will be changed because of the layoff. It may be good ("At last we got rid of the deadwood!"). Or it may be bad ("We are so lean I can't see us surviving for much longer.").
• You will need twice as many months to turn the corner. Your expectations for a return to the good days will be too optimistic. So use The Rule of Two: double the number of months you expect to need to get to the upward turning point. Plan on that and you'll not be disappointed.
• Your process is as important as the act. You must proceed to tell all the stakeholders and do so in a concerted, planned process that is very professionally managed. How you treat those laid off will be as important as how you treat the those that are not. You cannot avoid the pain but you can reduce it. Everyone needs to know about the layoff at the right time. Plan it in detail. Execute it with precision. An experienced HR professional can be an invaluable asset in dark times of a layoff.
• Your personal support group is important for success. It is lonely at the top. You are not excluded from the human race, believe it or not. You will feel depressed, disappointed and defeated during the process. To avoid dangerous compensation behavior (alcohol, drugs, co-dependency sex, rage outbursts at people you love, or other acts of foolishness), gather family and friends around you. It is a good time to check in with your religious leader. Tell all of them to assist you during the layoff process. They must meet with you, be brutally honest and available on short notice. You are not superman, you do not walk on water, nor are you expected to.
• You must be realistic. Your planned layoff may not succeed. You may end up having to shut down the startup. If you look at your modified company plan and think it will not work, then it may be time to skip the layoff. Just shut the business down, now. Avoid the pain of six more months of agony and the inevitable funeral.
• Your character will emerge during the process. The pain of a layoff will show you who you really are. The real you will show up, loud and clear. That will be who you are deep down inside. Your core values and beliefs will be what you reach for while you do the layoff. What you see may surprise you. Or even scare you. That is one reason for gathering your support group around you while you go through the layoff.
• Beware of dangerous people. The true character of employees will be triggered by the layoff. Some people go home, get guns and return to shoot CEOs. Others less violent will be out to get you into deep trouble. That includes sabotage of software and websites, theft of strategic plans and equipment, and much more. It can happen in any company. That is why you must wisely plan the security aspects of your layoff.
• Talk to CEOs who have done layoffs before. They are the best sources of the how-to part of this painful process. Listen, digest, plan and act, using their tips to do a better layoff. Their experiences are priceless.

BOTTOM LINE: All startups face sudden moments of rude confrontation that signal that a layoff will be needed, ASAP. It never comes at a good time. It is always very painful to a lot of people, including the CEO and core team of a new enterprise. It is deeply psychological, testing your character to its core. It can determine the life or death of your startup (and your position as its leader). Yes, your objective is to be so successful at planning and executing that plan that you'll never have to arrive at a moment of layoff. But you are not going to get there. That is magical thinking. So get ready. Get the people you need to assist you lined up, ready to act. When you can do a great layoff, you'll  have added a powerful element to your personal unfair competitive advantage.