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The Company You Keep

Why treating your employees fairly, trusting your instincts, and documenting everything are essential to a start-up's survival

By Frans M. Coetzee

Editor's Note: This is the sixth and last installment in Frans M. Coetzee's series "Here Be Dragons: Managing a Tech Start-up," which discusses the pitfalls and glories of starting up your own tech company.

In this final installment of my start-up series, I'd like to review some general concerns that I haven't fully addressed thus far and offer advice on how to avoid these problems. I believe that these issues are among the most important in defining your start-up's culture and ensuring its success.

Creativity is not undisciplined. A well-run company appears at first glance to be one of the most boring places on earth. Yet periods of productive calm are essential to your company's health and growth. Beware of managers who insist on always stirring the pot, and curb these tendencies in yourself.

Make sure the company remains balanced. In particular, the nontechnical component of the company should not heavily outweigh the technical component in spending or decision-making authority, or vice versa.

Be fair, especially with compensation. Unfortunately, salaries on the nontechnical side of corporations bear no relation to reality, since they are set through self-evaluation by people who seldom suffer from lack of confidence. Even a newly minted MBA is often convinced that a fraction of his or her time is worth the same as years of work by a technical staff member with a mass of credentials. Sadly, in most companies, this happy view of the MBA's supposed worth is confirmed everywhere he looks. There is currently no feedback cycle in business-function compensation. If necessary, expend major management capital to ensure balance between technical and nontechnical salaries. Once inequities surface in the open, it will be too late to resolve the problem.

Not everyone can be trained to do a job. Tutorials cannot replace experience or innate understanding. A start-up is not for educating people, nor does it have the resources to carry nonperformers. So make peace with the necessary evil of having to fire some people—including your own friends if need be. The issue is not about the person being fired; rather, it is about the other employees who are killing themselves and shortchanging their families to make it all work. You are also not doing people who cannot hack it a favor by keeping them around.

Get rid of toxic employees. Some employees generate storm clouds of distrust and conflict as they move through the corporation. They can generate so much enmity from even the most equable colleagues that all work eventually ceases in favor of all-out sabotage. Such performers often come with glowing recommendations, crafted to move the problem on to another company. Get rid of toxic workers fast, whatever their supposedly indispensable skills. Then throw a party and rebuild team spirit.

If necessary, downsize the right way. Downsizing should never come as a surprise to the people being downsized. Ideally, it should involve a friendly farewell to contractors who understood the stakes. Downsizing of permanent staff usually means that management messed up in estimating the functionality needed to generate revenue. If you do have to downsize, make sure you can provide more resources for the remaining workers. If you are forced to cut your resource budget simultaneously with downsizing, you are sunk. When you cut, cut deep enough to solve the problem, and cut only once.

Give credit where credit is due. Ideas are seldom common property. Staff members will kill for a manager who doesn't steal credit for their work—or allow it to be stolen. Protect yourself as well: when some other manager presents your own work as his or her own in front of other staff or in public, cut that person off at the knees. Some people like to say that "it doesn't matter who gets the credit, as long as the work gets done." That's rubbish. Failing to give due credit hides weak performers and flies in the face of everything we know about motivation. Remember: it takes no more time to give proper credit than to obscure it.

Frequently, the same colleague who is comfortable with absconding with others' credit will be your own adversary in a later dispute. By condoning his or her theft, you are also loading your adversary's gun for the time in the future when you disagree. This advice holds doubly true when you are not located at headquarters, since your absence makes it that much easier for some hotshot self-promoter to place you in the crosshairs as part of a career advancement strategy.

Learn to trust your instincts. When you see that employees in a division cannot work through a simple joint assignment, they are probably messing up on other important things that you can't see. Do not hesitate to act. As a senior manager, you have a duty to investigate and ask questions, even if you are not familiar with every detail of a project or if you naturally feel deferential to another's turf. No component of the company should be beyond question. For example, have the operations staff write the product manual: you'll quickly learn whether they are capable of any real productivity or organization. You'll also quickly discover what they consider to be a complex problem—before your customers do.

Control your own budget. Never let your budget be controlled by the chief financial officer, even if that person tells you the budget "covers most of the company" and "it will be easier this way." A major part of your job as a senior manager is to make executive decisions and break logjams; this requires cash you can access immediately and without permission. Therefore, I cannot overemphasize that each executive must be provided with a pool of cash and some freedom to experiment. If everything is budgeted and subject to sign-off, you will suffer a lingering death by a thousand paper cuts. Controls should be in the form of an audit process, not a permission slip.

Skills, not title, should determine a person's function. Beware when talk in the company turns to adopting "processes based on function." This mantra frequently comes from outside consultants brought in to try to structure undisciplined companies. Their idea is that a company should be forced into an existing business model, where skills are found only in little boxes of titles connected by an archaic flow of responsibility. On paper, the boxes interact smoothly, and the people can be ignored. This does bring a form of discipline, but in a start-up, where people matter and business models are new, this approach is a poor fit. Or as the sage said, it provides rigor, but alas, also mortis. Before you know it, the CTO will be reporting de facto to a 23-year-old "product manager" with a lofty title based on his supposedly close relationship with the customer. Fight this battle early. Fight it bravely. Fight it ferociously. Fight it publicly. Otherwise you will never recover.

Just say "no" to PowerPoint. In PowerPoint, it only takes seconds to dress up a few inconsequential notes in a large font with a glorious background and special effects. Yet such a slide might still convey no real meaning. Worse, such a slide often serves as a Rorschach test onto which meeting attendees project their own misinterpretations and then leave to strike out in divergent directions.

Place a cap on the number of PowerPoint slides that your company generates and embarrass people who use them as a substitute for thinking. The best way to discourage PowerPoint mania is to print out the slides in ASCII and hand them out at a meeting in which the LCD projector had to leave early for personal reasons. Lack of thinking and empty buzzwords show up clearly in 9-point type.

Consultants are often a scourge. A large part of the consulting field has as its primary goal to produce further engagement contracts. These extensions are often guaranteed by leaving work incomplete, creating proprietary solutions, and delivering discussions about the product—rather than the product itself. Consultants masquerading as outsourced workers are an absolute disaster. They will cause you to miss deadlines while you wait on their development cycles and will also distract your productive workers. If a consulting firm loves you more than you love it, get rid of it. Consultants who deliver reports in PowerPoint format should be shot from cannons.

Document everything. Never join a company where the staff, especially the management, do not document decisions, or where intellectual property and strategy exist as phantoms sustained by hallway conversation. You cannot keep more than five people on the same page (as it were) without good documentation. Be wary of executives who never disclose deadlines or plans—or worse, hide deviations in a deluge of minor updates or annoying daily FYI bulletins.

Know thyself. In writing this series, I wanted to share some hard-won lessons from my own and others' experiences as tech start-up executives. In closing, let me offer a few last words of advice for those of you who, after all I've covered, still think you'd like to start up your own company. Being the CEO or CTO in a tech start-up is a unique experience and one that can be extremely rewarding. You are involved in the company at a time when you have in-depth knowledge of the company's products and technical issues, as well as insight into its financial challenges. You're there when the impact of your decisions is still clear to see.

I would, however, caution the person who undertakes such a role to think carefully about the pressures and ultimate costs. Do not underestimate the amount of work or the difficulties of living on borrowed time. The lack of real understanding of your market (an all-too-frequent fact of life in a start-up), as well as the scarcity of hard variables data to work with, can be frightening. Ask yourself truthfully whether you have the skills and temperament to work on the business side. In particular, the CTO position is a business position as much as a technical position. Business is not trivial or simple, and if you're not suited to it, you may just turn out to be the next pointy-haired, evil boss-in-waiting.

And here is a special caution to technically trained entrepreneurs: small companies grow extremely fast and carry you forward and upward by the momentum. However, few companies will make you rich enough to retire in a few years. Be sure that you really want to end up in that exalted management position, and that when you do end up there, you will have sufficient control to create the job you want.

It is especially important to consider what you want if you ever wish to return to hard-core tech work. Inevitably, as you rise up the ladder, you will find yourself struggling more and more to retain your hard technical skills. Years can stretch into a decade. Companies change and move target areas. When handing your soul over to the business side, make sure you can be happy and productive when the company moves into technical areas that do not mirror your interests. If you're unable to do that, the interests of the company should, and inevitably will, come first.

About the Author
Frans M. Coetzee received a Ph.D. in electrical engineering in 1995 from Carnegie Mellon University, in Pittsburgh. In 2000, after stints as a researcher at Siemens and NEC, he cofounded Certus International SA, a security software company, which was later acquired by GenuOne Inc. He served as CTO for both companies through August 2003. He currently works as a quantitative analyst on Wall Street. 




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