About Control Again

Over the last several weeks I have been posting about dilemmas that new entrepreneurs face when starting a venture. We have been delving into Noam Wasserman’s book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Expert experience has shown that early business decisions in the areas of cofounders, hires, investors, successors, and other factors generally have predictable outcomes and rewards (Wasserman, 2012).  Much of the outcomes and rewards are dependent on how much control a founder is willing to give up. Wasserman (2012) states, “A founder who knows whether wealth or control is his or her primary motivation will have an easier time making decisions and can make consistent decisions that increase the chances of reaching the desired outcome- Rich or King” (Wasserman, 2012, p. 14). Founders that keep control generally have less financial success than those that relinquish control. Team building can also be dependent upon how much control a founder is willing to give to others. In order to be able to build the team needed, entrepreneurs must trust their team with a certain amount of control, which means that giving up some control will be necessary (Herrenkohl, 2010). Have you noticed how important considering control is? Control does play a major role in multiple decisions and outcomes. Deciding whether to self-fund or seek outside investors is also related to control.

Self-Fund or Outside Investors?

Self-funding one’s business is an option that entrepreneurs can choose from. By self-funding, the founder is able to keep more control over their company.  To obtain outside investors, entrepreneurs must give some percentage of the company in return. The less percentage of the company that the founder owns, gives the founder less control. One issue with self-funding is that money can run out quickly. Outside funding presents a better chance of receiving an appropriate amount of funding which could launch the business into success at a much faster pace (Wasserman 2012).

All of us have probably seen an episode of Shark Tank.  New entrepreneurs arrive and pitch  their companies to the investors asking for a certain amount of money for a certain amount of ownership in the business venture in return. There can be quite a bit of negotiation around the percentage the founder is willing to give the investor for the money invested. From my personal observations, founders often have a difficult time giving the investors higher percentages of their companies than they had originally planned.  I have more than once observed that the founders would walk out without making any deal at all because they did not want to give more control away. This scenario is an illustration of the dilemma that entrepreneurs face.  Control or wealth?  It seems that control or wealth follows the entrepreneur all along the path of a start-up.

No matter how much one plans, there will be challenges to face. Doing your best, from the beginning, to design your new venture, while keeping the end results in mind, is all that you can do. There may be unexpected consequences to every decision.

I am reminded of hurricane Florence that just passed through North and South Carolina.  I listened with great interest many days prior. I made sure to heed the warnings and to stock up on food, water, and gas. I tied down what might fly away.  Right before the hurricane was to hit, we had a thunderstorm and a lightning strike came in and damaged our home. I mean leave it up to me to have a disaster before the disaster!  We lost all of our TVs, Cable Equipment, phone, router, and Internet. Come to find out, the Cable was not grounded so the lightning traveled throughout home.  It required an emergency electrician. Several family members, in different rooms, were actually shocked.  While I had made preparations for the hurricane, I had not prepared for a lightning strike to flow through my home. There isn’t anything that I could have done or any way for me to know that an error had been made during installation. My point, we can plan for things we know are coming in the best way we can, but there will always be surprises and unknowns to face.  It’s been a week and I still have no phone or Internet so my online classes have been a real challenge.  There is no way to prepare for everything.  It is the same with a new business venture.  Outside circumstances may surprise you!

Nevertheless, the journey is exciting!  Do your best and begin!

Here’s a short video I found interesting:

Mark Cuban: Only Morons Start a Business on a Loan

https://www.youtube.com/watch?v=KYneLGRTgy8&t=281s

References

Herrenkohl, Eric. How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department. John Wiley & Sons, 2010.

Mark Cuban: Only Morons Start a Business on a Loan

Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.

Selecting a Team

There are many hiring dilemmas that entrepreneurs must face when staffing their new venture. Founders can be tempted to use family and friends as part of their start-ups.  Noam Wasserman’s book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup discusses dilemmas to elements of entrepreneurship including whether or not one should hire family and friends. This is an interesting topic. Wasserman (2012) uses real life examples of start-ups that have used the “commitment” blueprint of a “family-like culture” and a “bureaucracy” blueprint for outside hires based upon skill and experience (Wasserman, p. 211, 2012). Wasserman (2012) notes that many of the family and friends were volunteers, those willing to commit time to the start-up without pay solely because they believed in the cause. Hiring family and friends mostly looks negative in light of Wasserman’s book.  However, I would argue that no venture is without its difficulties and many ventures would not get off the ground at all without support of family, friends, and interested acquaintances.  If the cause is great enough, is it worth the risk to begin with family and friends who are willing to give it their all alongside you?  I think that it is. As a Christian entrepreneur, the cause is central to me. There are those that are likeminded. The right team, whether or not they are family or friends, hired from outside sources, or volunteers, is imperative to the success of the venture. There will be obstacles to face either way.  Many of my team members for my new venture are family and friends (a vast array of people from across the country) that I have met along the way. Most of my starting positions are volunteer positions. Having traveled with other organizations for many years, I know the value of volunteers. Good volunteers are a vital part of a great team. It can and it does work.  I have witnessed it firsthand.

Keeping Top Performers

Eric Herrenkohl, in his book, How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department, discusses how to keep top performers.  You have the perfect team selected and everything is going great, how do you keep your team? Keeping top performers will help keep your venture moving in the right direction. Herrenkohl (2010) suggests some ways to keep top performers including being a strong leader. There are many different leadership theories each with styles, characteristics, and behaviors. Researching how leaders effect followers would be a starting point.

Consider Existing Research

As a doctoral student, I am working on my doctorate of Education in Organizational Leadership with an Emphasis on Christian Leadership. To assist in considering existing research, I am sharing a part of one of my recent papers from my doctoral program. The excerpt follows:

Existing research of leadership behaviors proves that leaders have a positive effect on followers’ outcomes. Organizations can utilize research to evaluate and hire the correct leaders that would be the best fit. For example, the Path-Goal Theory of Leadership has been linked to positive follower outcomes and expectancies. Directive leaders provide employees with clear and concise directions which enhances performance. Supportive leaders provide employees with understanding, promote well-being, and treat employees as equals. Participatory leaders incorporate employees within decision-making and listen to employees’ thoughts and opinions. Achievement oriented leaders show confidence in employees and provide employees with standards and challenges at a high level while seeking improvements (Hayyat Malik 2012). The Servant Leadership Theory has also produced positive results. Servant leadership provides followers with experiences that satisfy and that are positive within the work environment. Employees are encouraged to openly share ideas and to develop within the work environment (Lapointe & Vandenberghe, 2018). Transformational leadership may help employees to work within diverse groups more efficiently and to identify with organizations and to feel valued and included (Moon, 2017). Both transformational and servant leadership are linked to follower engagement in work and organizational commitment, in addition to, effecting influence and satisfaction. (Van Dierendonck, Stam, Boersma, De Windt, & Alkema, 2014). Ethical leadership contributes to positive follower outcomes and is linked to organizational citizenship behaviors (Wand & Sung, 2016). Knowing that specific leadership behaviors have certain outcomes, organizations can assess needs of followers and employ the correct leadership type. Hiring practices could target specific leadership qualities to promote the exact results organizations are looking for. In addition, leaders that are already working in organizations could be trained to learn desired leadership behaviors. Producing positive follower results is in the benefit of both leaders and organizations. Positive follower outcomes are worth the time and effort to apply the leadership style that best suits followers’ needs. (Excerpt From: Effects of Leadership Behaviors, Patricia Kay Reyna p. 4-5, 2018).

I think that Herrenkohl (2010) is on to something when he mentions strong leaders as a part of a plan to keep top performers. Thoughts?

References

Hayyat Malik, S. (2012). A study of relationship between leader behaviors and subordinate job expectancies: A path-goal approach. Pakistan Journal Of Commerce & Social Sciences, 6(2), 357-371.

Herrenkohl, Eric. How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department. John Wiley & Sons, 2010.

Lapointe, É., & Vandenberghe, C. (2018). Examination of the relationships between servant leadership, organizational commitment, and voice and antisocial Behaviors. Journal Of Business Ethics, 148(1), 99-115. doi:10.1007/s10551-015-3002-9

Moon, K. (2017). The effects of diversity and transformational leadership climate on organizational citizenship behavior in the U.S. federal government: An organizational-level longitudinal study. Public Performance & Management Review, 40(2), 361. doi:10.1080/15309576.2016.1216002

Van Dierendonck, D., Stam, D., Boersma, P., De Windt, N., & Alkema, J. (2014). Same difference? Exploring the differential mechanisms linking servant leadership and transformational leadership to follower outcomes. The Leadership Quarterly, 25(3), 544-562. doi:10.1016/j.leaqua.2013.11.014

Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.

Wang, Y., & Sung, W. (2016). Predictors of organizational citizenship behavior: Ethical leadership and workplace jealousy. Journal Of Business Ethics, 135(1), 117-128. doi:10.1007/s10551-014-2480-5

Role Dilemmas

Noam Wasserman’s book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup discusses dilemmas of entrepreneurship. Last week’s blog post discussed building the best team possible for the success of your company.  This week’s discussion will cover how role dilemmas must be considered.  Wasserman (2012) discusses what happens at the beginning of a start up with multiple founders. If there are multiple founders, there can be some conflict over what founder will obtain which role. Often more than one founder will desire to be CEO. Wasserman (2012) discusses the need to make roles expressly clear so that there are less issues in the future over major decisions for the company. Even at the risk of conflict, founders should make clear decisions early on about who has decision making power (Wasserman, 2012).

How Many Founders Should be on the Board of Directors?

In discussing role dilemmas Wasserman (2012) also discusses the issues of having more than one founder on The Board of Directors. Through his research of many companies, Wasserman (2012) notes that having more than one founder on the Board can cause decision making issues. Having only one founder on the Board of Directors could be beneficial versus having multiple founders on the Board. This decision alone could cause some disagreement within the founding group. However, most likely the CEO will be the selected Board Member and if roles have already been expressly made clear, there will be understanding in this area. Making it a priority to discuss and come to clear terms on issues that may cause conflict will be beneficial to lesson conflict and misunderstandings in the long run.

More Considerations

Some other considerations include the size of the board, whether or not to have outside directors, diversity to cover areas of expertise, and respect among board members. These considerations and more are covered in the Forbes article found at the following link:

https://www.forbes.com/sites/martinzwilling/2015/06/30/mistakes-to-avoid-with-a-startup-board-of-directors/

Skills That You Can Teach and Skills That You Can’t

Eric Herrenkohl, in his book, How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department, discusses the need to find and hire the right people with the skills that your company needs.  Employees that have the correct skills are necessary for success.

Herrenkohl (2010) lists skills that can be taught and skills that can’t be taught. Skills that can be taught include “…technical knowledge, product knowledge, understanding of a particular client.” Skills that cannot be taught include “…motivation, leadership, commitment, the ability to sell, and the desire to achieve.” (Herrenkohl, p. 99, 2010)

Herrenkohl says, “There are skills you can teach and skills you can’t. Find a large pool of people who already have the fundamental skills you want, interview a lot of them, and hire the best of them. This is a simple formula for creating a team of A-players. (Herrenkohl, p. 110, 2010)

Do you want to have “A-players”? Consider taking Herrenkohl’s advice.

Recognizing and Appreciating the Less Obvious People

While looking for your prospective employees Herrenkohl (2010) lists some people that businesses may not initially think about. Some of those people include women such as those who are entering the workforce again after having a family, those who are relocating with their spouse, and single mothers. The point of looking in areas not thought about before, is finding unexpected talent in unexpected places.  Taking the time to look into unexpected places may help businesses to find the perfect employees.  Business owners who look outside of the box may find the best treasures! Happy treasure hunting!

References

Herrenkohl, Eric. How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department. John Wiley & Sons, 2010.

Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.

Zwilling, Martin. “Mistakes To Avoid With A Startup Board Of Directors.” Forbes, Forbes Magazine, 30 June 2015, www.forbes.com/sites/martinzwilling/2015/06/30/mistakes-to-avoid-with-a-startup-board-of-directors/.

Hiring the Right Team

New entrepreneurs have the task before them to hire the right team to launch a successful venture and then to keep the venture a success. When choosing a team, how does one begin?  What are the basics?

Eric Herrenkohl, in his book, How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department, discusses the need to hire a quality team that he calls “A-Players.” Recruiting the right team to build your business is essential. In order to be able to build the team needed, entrepreneurs must trust their team with a certain amount of control, which means that giving up some control will be necessary (Herrenkohl, 2010). My first blog, Control vs. Wealth, covered the need to make decisions regarding this issue.  Some entrepreneurs have a hard time giving up control.  Giving up control and trusting your team will be an easy task if you hire “A-Players” to begin with. Taking the time to interview numerous people for positions will allow you to choose the correct person (Herrenkohl, 2010). If you get into a hurry in the beginning stages of your new venture, you could hire the wrong people which will not be beneficial to your business. Founders must take the time to interview and select the very best. Do not settle for just anyone, keep looking until you find the perfect fit.  Your business depends on it!

Homogeneity: One Consideration

Hiring a Team with Homogeneity. Homogeneity is “the quality or state of being all the same or all of the same kind” (google.com). Taking this point into consideration, one can see how new entrepreneurs could view this as a positive element for their team. However,  there are benefits and there are risks according to Noam Wasserman’s book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Wasserman (2012) mentions the following benefits and risks:

Benefits of Homogeneity Include:

Easier communication, easier decision making, similar tolerance for risk, mutual appreciation, and alignment of thinking are all considered benefits (Wasserman, 2012).

Risks of Homogeneity Include:

Skills may be missing due to similar overlaps within the team, diversity may be limited, and you may not having the proper counterbalance… all are risks to be considered (Wasserman, 2012).

Much to Think About

Starting a new business is so exciting and multifaceted. Taking the time to recruit the best team members to help launch and keep your business successful takes targeted time and effort. Considering candidates that have the best qualifications, as well as, characteristics is imperative. Knowing that the stakes are high, doing your research, and delegating enough time is essential in developing the best team possible. May you have every success in developing your team. Go Team!

Further Resources:

An interesting 60 second video on building your team. More to consider!

https://www.youtube.com/watch?v=wbJaEM-yDtw

 

References

“Elon Musk’s 60-Second Guide to Hiring the Right People.” YouTube, YouTube, 1 Sept. 2017, www.youtube.com/watch?v=wbJaEM-yDtw.

Herrenkohl, Eric. How to Hire A-Players: Finding the Top People for Your Team- Even If You Don’t Have a Recruiting Department. John Wiley & Sons, 2010.

https://www.google.com/search?q=defintion+Homogeneity&oq=defintion+Homogeneity&aqs=chrome..69i57.5255j0j7&sourceid=chrome&ie=UTF-8

Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.

The Importance of Social & Financial Capital

Social Capital Defined

Noam Wasserman’s, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup, is a great resource for entrepreneurs.  Wasserman (2012) defines social capital as “…the durable network of social and professional relationships through which founders can identify and access resources” (Wasserman, 2012, p. 47). Perhaps being able to access resources is one of the most important components of beginning a new business.  After all, resources are needed to create.  Whether or not we realize it, we spend our lives building social and professional relationships. We are not living on an island alone. And even if we were, we would still need resources to survive.  We would begin searching the island for them! A list would be made and we would begin searching until we marked off the items on the list. We know we cannot live without certain resources and we would either find those resources or die trying. Our lives would depend on it.

Businesses also rely on resources.  Social capital is one of them. Focusing on social capital has many important outcomes including the ability to be competitive, to improve business performance, to improve growth, to improve satisfaction with suppliers and employees, and to have a larger reach with consumers (https://balancedachievement.com/areas-of-life/social-capital/). Point blank, paying attention to and building social capital is important especially for new entrepreneurs.

Financial Capital Defined

Social capital is not the only item that should be on our lists.  We all know that financial capital is also needed. Financial capital is defined as “…economic resources used by businesses and entrepreneurs to start.” (Building Your Social Capital, 2017, p. 1) The importance of financial capital is easily understood.  After all, everyone understands that in order to have a business, one must have the financial capital to start one.  Again, the search for resources becomes important.

A Link Between Social and Financial Capital

There is a link between social capital and financial capital. Wasserman (2012) expresses studies have shown that entrepreneurs that have more social capital in the beginning often are able to gain the financial capital they need at a faster pace than those that do not.  New entrepreneurs should not neglect the building of social capital, but should realize the importance.  Some ways to build social capital include networking and making a point to meet diverse people (https://balancedachievement.com/areas-of-life/social-capital/). Building relationships should be an important priority.

Considering watching the following videos:

The first video highlights the importance of social capital in the lives of everyone.  According to the video, those with disabilities were shown to have only 25 social contacts in their lives compared to the average person who has at least 150 connections.  From personal experience, I know that the disabled struggle to live full lives; they rely on others to help them and if they do not have others…what is their life like? There are those that are left behind because they do not have the social capital they need.  With social capital, life is so much fuller.  Now consider how your business is affected by social capital and how much it will struggle without it.  It’s worth the time to build social capital.  Your business may depend on it.

Social capital and the power of relationships: Al Condeluci at TEDxGrandviewAve

https://www.youtube.com/watch?v=qaBUV2J0ax4

The second video provides four ideas for building more social capital for your business.

4 Steps to Building Social Capital with Dr. Ivan Misnera

https://www.youtube.com/watch?v=9qSwD7RAw1g

References:

Building Your Social Capital. (2017, January 13). Retrieved September 03, 2018, from https://balancedachievement.com/areas-of-life/social-capital/

Condeluci, A. (2014, June 03). TEDxTalks Social capital and the power of relationships: Al Condeluci at TEDxGrandviewAve. Retrieved September 06, 2018, from https://www.youtube.com/watch?v=qaBUV2J0ax4

Misner, I. (2011, November 23). 4 Steps to Building Social Capital with Dr. Ivan Misner®. Retrieved September 06, 2018, from https://www.youtube.com/watch?v=9qSwD7RAw1g

Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.