Company You Keep
treating your employees fairly, trusting your instincts, and documenting
everything are essential to a start-up's survival
By Frans M. Coetzee
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.
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
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.
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.
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.
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
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.
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
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.
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.
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
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
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.
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.