The Management Team – Guest Post From JLM

Next up on our guest posts on the subject of The Management Team is AVC community regular JLM. For those that don't know, JLM runs a public company and before that built and sold a large real estate operation. He's also written one of the best guest posts ever on AVC. With that intro, here's what JLM has to say on the topic. I love the way he ends the post.

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Congratulations, you have built a prototype.  Got it to work.  Debugged it.  Even sold a few copies.  Have some real customers.  Now you are ready to scale up and make some real money.

 

You have crossed that Rubicon from having an idea to having a product and customers.  Now you have to build an organization, a real company, to manage the entire process.  Or your fledging little company has to evolve from crawl to walk to run.

 

You may look yourself in the mirror and say — “Well, I know a lot about my product, even its market and competitors but what the heck do I really know about building a company?”  Can I do this?

 

The simple and truthful answer is “Yes, you can!”  If you don’t think so, here are some tips to take you from the garage to the executive suite.

 

Bad news — your generation did not invent sex.  It does not have to invent the crafting of companies either.  Someone else has also done this before.

 

Create a clever and insightful graphical representation of the business model which will become your company.

  1. Identify who the customers are and why they will pay money for your product.  This is the revenue side of the model.

  2. Identify the elements which must be incorporated into your product to create it.  This is the expense side of the model.

  3. Identify all the management functions which are necessary to transform the ingredients into the product and to educate the customers and to make the sale and to manage the money.

  4. Identify the competitive forces that are lurking in the darkness wanting to destroy you — the ones that are real and the imaginary ones.

Make a drawing of all of this on a single very large piece of paper and then marvel at what you have done.  Do it about ten times until you have perfected it.  It keeps getting better each time.

 

This is the company you will have to create.  The one that can operate this business model.  The one which can deliver your product to the marketplace and make a buck in the process.

 

Make an organization chart which shows each of the functions that are necessary to operate the business model.

  1. Make it a functional chart and don’t worry that it turns out very close to what every company ever created looks like.  That is good.  Remember, you did not invent sex.

  2. Identify the functions which are “essential” and those which are “nice to have”.

  3. Now identify what you can afford and what you can stretch to afford and those which are simply out of reach for the time being.

You have now identified your immediate, short term and long term organizational imperatives.

Take the business model and the organization chart and color code it to identify your own personal strengths and weaknesses.  If you have a co-founder, put his up there also.  Now you have identified those elements of leadership and management that you can provide and those you will have to hire from the outside.  Be tough on yourselves; don’t undertake a task you hate just for the ego enrichment of it all.

 

Be prepared to hire people who are fabulous in their fields.  Hire a Chief Financial Officer you cannot possibly afford and tell him he is the “financial conscience of the company”.  Meet with him weekly and never miss a meeting.

 

Now take the business model and the color coded organization chart and create a schedule of how you will build the organization.  Which functions will be added first and why?  The business model will tell you what and the color coded organization chart will tell you who and the schedule will tell you when.

 

That is really all there is to it but you will want to consider the following considerations:

  1. It will not be perfect out of the chute.  You will do some stuff that does not work.  Just re-engage and do it over.  It’s going to be OK.  Really punish yourself — just kidding.  Learn to laugh at yourself.

  2. Understand that everything in life is iterative.  You do something.  Get better at it.  Get better at it some more and one day you laugh to remember how naïve you were when you started.  Ever learn to ski or snowboard?

  3. Do the formulaic and fundamental stuff and get it done but only do what you really believe.

Vision, Mission & Values

  1. Vision — big dreams and little dreams all cost the same, so go with the big ones so that if you only accomplish fifty percent, it will still make your Momma proud.

  2. Mission — simple, direct and jettison every extra word.  The mission of the Infantry — “Find ‘em. Fix ‘em.  Kill ‘em.”

  3. Values — sweat this one because you will have to live this one.  If you are going to take risks and run with the bulls, this is where you let everyone know.  Don’t be afraid to say that “frugal” is a value.  I like frugal.

Every new employee hears the values part of the company from you and only you.  Wear a suit and a crisp white shirt and a tie and tie shoes.  Do it in the first five minutes of their employment.  They will never forget that.  Don’t discuss them, tell them.  Difference between a tattoo and magic marker.

  1. Job descriptions — don’t hold out for a Pulitzer but put some thought into it.

  2. Copy the absolute best exemplars you can find out there.  They are out there.  Be a copy cat.  Read Drucker.

  3. Make all your decisions about equity upfront and don’t be afraid to say that you have to “earn” it.  Understand that equity is an element of compensation and sometimes it is not even in the top three.  

A good comp plan includes: 

  1.     Salary;
  2.     Benefits;
  3.     Short term incentives (measurable performance based bonus);
  4.     Long term incentives (equity); and,
  5.     Something special (work from Colorado two weeks per year).
    1. Develop a philosophy of management.  Write it down.  Try it out on some folks whose wisdom you admire.  Put it to work.  Live it.

    2. Get a mentor, a rabbi, a gray haired eminence who is willing to work with you.  Golfers get swing coaches but great swing coaches work on the golfer’s head as much as his back swing.  Get a professional coach.

    3. Do not be surprised that everyone in the company does not share your passion.  That is the curse of being an entrepreneur — you see and care about things other people don’t even know exist.  I would rather be a Captain of a rowboat than the second in command on the QE II.

    4. Do not make changes, conduct experiments.  Nobody can resist an experiment.  Experiments that work well have a thousand fathers and mothers.  It becomes their idea.

    5. Brainstorm at least once a month.  Honest to God, uninterrupted brainstorming.  There are no bad ideas.

    6. Learn to critique yourself.  Learn to talk yourself down off the ledge.  Be thoughtful.  Take the lowest echelon of the company to lunch once a month.  And then talk to them.  Listen to them.  Make one change they came up with and you will become a legend.

    7. In any organization, you rarely receive power.  You take power.  You wield power.  The most powerful people will things to be done they don’t order them to be done.  That is real power.

    Ooops, I see the hook.  So I must go.  Good luck.  Remember — you can do it.