Leadership Team
Wearing many hats may be a great skill when starting a business, but over time, a short period of time, other people need to be able to take on responsibility for getting things done. Selection of the leadership team as well as how it is organized is a critical responsibility of the CEO. If you are forming your own company, you make all the choices. If you are stepping into an existing business, the leadership team is often in place and operating according to existing plans. To be successful as a CEO, you need to be able to handle both situations equally.
This section explores how to structure a leadership team so that it complements your strengths and weaknesses. We also explore how to work with an existing team with a goal to avoid the desire to change things for the sake of change (although change is needed at times). Given the goal is to achieve success, the leadership team, driven by the CEO, is critical to get right.
The First Choices
When first forming a business, the founders often assume the various leadership positions. There is almost always a founder leading development/engineering (it might even be the CEO) and less often a founder to focus on sales and/or marketing. If the business is externally funded (e.g. VC's), the management team selection plays a key role in deciding if the business is fundable -- a team with experience is more valuable to an investor than one without experience.
If you plan to sustain your business over a few years (you should be), you may also want to consider whether or not the first leadership team choices will hold up over that period of time. Choosing a founder (a business or personal friend) who may be an excellent software developer as the VP Product Development may not be the right choice if that person has no experience building and scaling a quality product development team. You may be faced with effectively demoting them down the road or even letting them go altogether if they are unsuccessful (damaging the product reputation). Sometimes starting founders in mid-level management roles is best (e.g. Directors) where they can grow into a VP role if appropriate.
Some roles are not really needed until the Company is ready to go to market with its first product. The following defines some of the first leadership team roles to establish (in order):
- Product Development -- probably the first primary leadership role to establish. Without a product, the Company has nothing to sell (unless you are in the services business). A leader in this area should have a clear picture of the requirements for the first generation of product and have a deep handle on how to get it done. It is also common for the development leader to be fully hands-on, often the senior developer in the group.
- Financial Controller -- not always second to be hired and often outsource as a part-time role, you will need someone to manage the Company finances. Although you can buy simple-to-use accounting tools, getting the finances right can take time -- valuable time away from other aspects of the business. In the first few months and perhaps even the first year you primarily need to make sure payroll is managed properly, the bank statements are accurate, the bills are paid and the Board has its needed financial reports.
- Sales -- the second primary leadership role tends to be sales. A strong sales representative with credible experience ideally in or near the market you plan to sell into. As mentioned elsewhere in the CEO discipline, the CEO will work hand-in-hand with the sales leader to achieve the first strategic goals of the Company, typically the reference accounts needed to validate the value proposition of the business.
- Product Marketing -- not a full marketing team but a mid-level manager capable of getting the message out about the first product offering. This leader should be a competent communicator, experienced using on-line marketing tools like the Web, know how to draft press releases, create brochures, organize events, etc. Supporting marketing resources can be outsource or insured as budget allows.
All of the above roles should report directly to the CEO during the first year or two. You need to have the right pulse on things operationally and be able to step in and take charge if something goes astray. Even if your personal experience is slanted towards one role or another (e.g. development versus sales), you should take on management of all the roles at the start.
Managing Failure
Choosing wrong is never good for the business, choosing wrong at the leadership team level is often very damaging. Some key points of impact include:
- it's often a past colleague or friend who you have to deal with. This makes the challenge of managing more difficult right from the start, letting someone go with this level of personal history is tough. Very successful leaders understand the need to make difficult business decisions, experienced leaders also know how to avoid putting themselves in these positions from the start. If you are working with someone who you have a past working or personal relationship, make sure you are both prepared to professionally handle what happens if it does not work out.
- team loyalties need to be addressed. The departing leader has likely built up a rapport with the team. Even poor performers often have some supporters. Keep in mind that most people see the need to make a change within a few days of making it, so charge ahead, don't hesitate. Be open and communicate with the team. Make sure the replacement understands the situation being stepped into -- is it a rebuild or just a need to take reigns of something running well. There is little that is more damaging to overall morale than having a new leader step into to replace an under performing leader but appears to be even worse than before.
- be prepared to run the operational area for a while. Never find yourself stepping into a replacement scenario and not knowing what is going on. The team counts on the CEO knowing about the key projects as well as the top performing team members. Given that you will not likely have enough time to spend equivalent to the outgoing leader, you will be dependant on that knowledge and relationships to manage from a distance. You need to be able to rely on the key employees to run the ship until you find a replacement -- know who they are, entrust them to provide the day-to-day management, this may lead to finding a replacement candidate from within (even if temporary).
If you reach a point where someone is not performing to expectations, there is often a few reasons you can explore and learn from so that the next choices serve the Company better:
- did you interview properly? Senior leadership team members require more due diligence than the typical hire given what is at stake. A few phone calls and a face to face meeting is not enough. You should have them do some work for you -- perhaps prepare a presentation, write a 1-pager on a topic relevant to your business, engage in a roll-play activity, critique an aspect of the Company's strategy, etc. Given you typically learn the most about someone once they are on the job -- put them on the job as part of the interview process. You can even have them join a management team meeting to see how the interpersonal dynamics would play out (make sure an appropriate NDA is in place). A quality leadership candidate should not hesitate to prove to you their value.
- did you check references thoroughly? Did you only check the ones they provided -- no surprise they were positive. What about some cold calls into their past employers to see if you can find someone to talk about them? If your role is a promotion for the candidate, you really need to dig well into the issues to make sure they can handle the responsibilities. Ask direct questions to get direct answers -- pose simulation questions of their former managers to hear how they think the candidate might handle them (e.g. "Bob will need to retool the team, will he be sensitive to handle the people issues properly or is he a my-way or highway type leader?", "How did he handle firing people in your organization?").
- where expectations properly set? You hired the candidate into a role -- what is properly defined? Did you provide sufficient leadership and coaching for the candidate to be successful or hire them and assume everything was understood? Maybe your style needs to change to make sure the leadership team has clearer guidelines and objectives to achieve Company goals.
Repeated leadership team failure starts to turn back on the role of CEO. Do what you can to make sure your leadership and coaching style is conducive to success for the people that work for you.