Last Year’s documentary, “Poverty, Inc.” asks if the global approach to addressing severe poverty has unintended consequences and asserts we could be inadvertently damaging the ability of people in those countries to better themselves through internal economic development.

The framework for addressing human suffering from disasters (natural like earthquakes and unnatural like wars and many famines) has been the same my whole life. Driven by heart wrenching media reports and championed by celebrities and public figures from all walks, well intentioned people give money through tax receipts, charitable donations, and feet on the ground to addressing suffering and to longer term developmental programs. We do this through transfers to governments and NGOs who are supported by armies of consultants and volunteers of all stripes. More conservative elements argue with the adage “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime”. But there are critics to both mindsets, arguing that giveaways and the ‘teach them to fish” approach are not the best mindsets for supporting developing countries becoming developed countries.

Global Poverty

There are many entities from governments, NGOs, charities and even celebrities involved in the global effort to reduce suffering

We want to believe this is helping, and of course it does, but it comes with a not-so hidden cost that perhaps substitutes treatment for cure. This is the focus of “Poverty, Inc.” the most thought-provoking documentary I have seen all year. Please consider watching it. You can stream it on Netflix or rent it from YouTube, Amazon. It argues that everyone from celebrities and our governments to NGOs and charities to the peoples of both the developing and developed worlds have bought into a system that only now we are realizing does massive, sustained harm even as it does good.

The 2010 Haitian Earthquake Case Study

On January 12^th 2010 a 7.0 magnitude quake hit just outside Port-au-Prince affecting 3 million people and destroying or severely damaging almost the entirety of Haitian infrastructure including emergency and medical services, air sea and land transportation, communications and supply chains. Corpses rotted in the rubble and the government resorted to mass graves. Over the next few years there was a massive Cholera epidemic affecting 6% of all Hattians. Although the numbers are highly contested, between 100,000 and 160,000 probably died.

The global community reacted almost in unison and at massive scale to the devastation, sparking talk about a new, global approach to disaster recovery. Money, donated goods and people flooded into Haiti Clearly a lot of good was done and Haiti has a lot of ongoing needs. The government estimates 10,000 NGOs are operating in Haiti, many continuing programs started as earthquake responses. Temporarily supplementing private enterprises that have been devastated is one thing but consider how long that goes on before you are denying these local businesses the markets they need to prosper, grow, provide jobs and so forth. Subsidies are designed to create market distortions. But distortions of giving on a large, sustained scale have consequences. When humanitarian aid becomes a way of life with programs and giveaways sustained over years it displaces or even prevents the internal development of the country.

Case in point is rice. For decades, the US government has subsidized American rice farming. During Bill Clinton’s presidency the US began a new, sustained hunger program of delivering highly subsidized American rice. US farmers have received $ 13B in rice subsidies and very low import tariffs when selling to Haiti. Haitian farmers have received no subsidies. This was intended to address hunger and also designed to supplant inefficient and environmentally damaging local agriculture techniques. Plus, it promoted US agriculture and the President, Congress and many others celebrated a great program. What has happened is that the Hattian consumer now consumes rice offer at 3 meals a day, destroying domestic rice production and the businesses and jobs that supported them. The documentary shares a clip of Bill Clinton himself explaining how he and others was wrong about this program and he sees now the damage it did. American rice growers have benefited from the expensive taxpayer subsidies but this sort of sustained corporate welfare causes its own distortions in the resources and techniques applied to food production as also demonstrated by corn subsidies from Ethanol fuels.

Even well intentioned social programs. At least 80% of Haitian orphans have at least one living parent. Most are arguably ‘poverty orphans’ whose parents gave them up thinking that the institutions would raise them better. Doing so costs them their parental rights and effectively dismantles any hope of the child being raised or reunited with its parents. Well intentioned, prospective adoptive parents often don’t know they are adopting a child who has a parent who actually wishes they were raising them. In essence, the program actually CREATES some orphans.

African Cheetahs

After the Rwandan genocide a church in Atlanta organized an effort to deliver free eggs to suffering villagers. They flooded the market with free eggs. This drove local egg producers out of business. They shared the story of a chicken farmer who was focused on egg sales. Since nobody would buy his eggs the farmer sold his hens only to then see the church stop the program and move on to new causes. Now the community has to import eggs

One argument for programs like these is that if you free up local economies from subsistence farming they can focus development on higher value-added industries and develop their economies faster. Herman Chinery-Hesse is a software entrepreneur called “the Bill Gates of Ghana.” He tells of a time that he and other local techies bid on a government software contract. They bid against a European country. The home government for that European country gave Ghana a loan for the project and their software company won, telling Herman that nothing beats free money. The Ghana firm ended up subcontracting to the European firm doing as he says “the hardest and least profitable parts.”

Even respected and cool social entrepreneurs like Tom’s Shoes gets some treatment in the documentary. It raises the issues of what happens when free shoes (for example) enter a market on a large scale but often unpredictable schedule.

The documentary references a George Ayittey TED Talk on Africa’s Cheetah and Hippo generations whose criticism of “Swiss Bank Socialism” by their society’s slow moving, ‘hippos’ in the government and entrenched business interests at the expense of their at the younger, more entrepreneurial generation of ‘cheetahs’ I recommend watching this. Ayittey is unflinching in his criticism of African governments and leaders and argues that aid subsidizes these rulers and disincentives them from creating an environment that promotes local economic growth.

If you have ever traveled to a developing country with extreme poverty one thing you notice is that they are not universally poor. Some development exists in all places at varying levels and with varying support. All people have the ability and right to improve their lot and the question is what role can the international community and the people and institutions of the wealthiest countries play in supporting and encouraging that.

“Poverty Inc.” effectively argues that there are unintended consequences from the aid-centric approach to global poverty and argues that these have developed into a “Social Fact” that reinforces continuing with a given approach.

Our approaches to global poverty have become entrenched and habits and vested interests reduce review of the overall effectiveness of the approach.

Instead it argues we should shift to promoting development of the local economies by pressuring governments where needed and supporting efforts to improve rule of law, land property rights, right to start a business, links to exchange ideas and trade which are lacking in many places.

The best outcome for is for local countries to create the circumstances for a sustained ‘economic miracle’, the rapid economic growth in an area. After World War II much or Europe including and especially Germany along with Japan, aided by the Marshal plan began long, transformative processes that took them from shattered, starving states to economic powerhouses. In many different forms this later occurred in Taiwan, Hong Kong, Singapore, South Korea, China Brazil, India and many others. All of these examples include aid and plenty of examples of richer countries “teaching them to fish” (perhaps best illustrated by W. Edwards Deming’s efforts in japan). But the critical ingredient that may separate these from Haiti and the poorest states in of Asia, Africa or the Americas is that the conditions for growth were developed. Step one may be repositioning recipient nations not as ‘victims’ of disasters, natural and unnatural, but as partners who have the right and ability to create their own miracles.

Here is why it won’t be.

100 newspapers have disappeared since 2004. Get ready to start hearing how this election will be good for newspapers.

Now, I two years ago I didn’t actually say “News Is Dead.” But ‘misquoted me’ may have been more correct than the real me was at the time. In 2013 and 2014 I was quoted pretty publicly that I felt that traditional editorial and entertainment media were simply not going to transition their existing model to digital revenues and something much more serious was needed. Like many, I was critical that sponsored content had been something developed by the publisher’s sales department and then was published to mimic editorial content. This was by placid agreement by sales & editorial which have decades of avoiding each other in the company lunch room. So what is the update?

Newspaper revenues are shrinking and digital ad revenues are growing much slower than the drop in print advertising and subscriptions as seen in this Pew Research Chart from 2003 to 2014.

Newspapers are designed to be ‘inefficient’ producers of content. By that I mean they produce some of the costliest original content possible. Produced in medium-to-short-form but with a lots of research, interviews and fact checking, the news business has always depended on subscriptions plus healthy advertising rates to survive.

Election cycles have historically been fantastic for local media. Newspapers will see a blip in an otherwise downward collection of trends. This will lead the PR folks in the print news industry to try to use it to argue that the long term trends are actually neither. Unfortunately for them it isn’t true. Digital is taking a larger portion of a rapidly shrinking pie.  The Pew Research Center’s annual report tells the tale. In 2015 their circulation fell by the greatest amount so far this decade. Advertising revenue dropped even faster than overall circulation diving 8% last year.

Young people are ignoring newspapers in droves but the bleeding is occurring much faster than aging. The Pew Research report says that only half of the elderly read papers now.  We are probably past the point of no return. Let’s hope the news industry can pivot better before misquoted me turns out to be right.

eCommerce is a critical marketing battlefield between brands, and though it is true that pioneers and early venture capitalists will enjoy the low bearing fruits, newcomers have the advantage of hindsight — they can rely on the mistakes of early adopters and learn from them.

At Cloud Commerce we preach that it is good practice to establish some ground rules before embarking on any venture like eStartups for instance. Let’s get started.

At first we’ll talk about failure, specifically; how you can fail as an eCommerce startup.

HOW TO FAIL IN NEW and EMERGING MARKETS

Once an e-Startup has established the countries that are ripe for growth, and the ones that they want to target, their next step is to develop the strategy for entering new markets. Let me introduce the five ways that can assure you a failed attempt at expanding or even entering in the overseas market.

Replicate Your Business Model

The most well-tested business models are simply experiments with high repeatability, under specific circumstances. The slightest change in market conditions, demographics, and buying choices can force the startups to review their model, scale it, and make amends to remain market competitive.

These tested and proven models will fail in emerging countries.

Why?

Primarily because the whole market landscape has changed. A lot of companies, founders, CEOs, and executives believe that their U.S based business models (or based in any developing country for that matter) can easily be tweaked, and their processes scaled or morphed according to the local laws and business practices.

I’ll be severely blunt here: read modern history and learn from it. You cannot simply try to colonize another landscape (the market in this case) and impose your values or model one way or the other, and believe that it will work. It will only generate anomalies; ones that we’re still trying (and failing) to control.

The marketplace is no different.

Your existing business model is targeting a specific consumer group existing in a specific market niche that has grown out from realizing the needs or wants of the consumers in the market as a whole. You can profile them and understand them while assuming certain similar/overlapping values, behavioral traits, and certain marketed and propagated perceptions about needs, wants, and consumption.

Your current business model isn’t good enough, and there are a lot of hard facts to be researched ahead before you can start thinking about the new business model. You’ll need to understand the new culture and their ingrained values, the marketplace and how their culture affects them, and then re-profile your target audience.

Testing the new model that emerges from this endeavor is a thought on the horizon.

Assume Recognition and Entitlement

Your product may be a household item in every home of your target audience, and your brand awareness campaigns and stellar service may have changed your brand name into a verb or an adjective even, but you cannot (must not) assume that your brand is known in the new markets.

It’s just another local brand with a local product in a country on the globe.

So, it’s back to the drawing board for your marketing strategy and campaigns.

Set Unrealistic Expectations

This is a corollary of the previous point. Remember your initial days of marketing campaigns where you had to spend every waking hour thinking up creative ways to get it right. Remind yourself that it will take time to establish yourself (leave growing for the moment) in the new market within a new country. Avoid creating KPIs that compare the progress of your established business with the new one.

Choose the Wrong Local Partners

Maybe you’ve pulled together a great team at home, one that has conducted exhaustive research on the new market. You may even believe that you know the market more than the locals do, that you have better insights into its working, and now you have created a business strategy to take the market by storm.

Many will miss the end point-of-effort in this whole picture. It will be the local partners in that market that will play an integral role in properly executing your business strategy.

Have you found the right local partners to take your business through the tough times? Unless your feet are firmly planted on the market floor, and you actually have built a local team in the emerging market of choice, you cannot hope to accomplish much.

Avoid Investing in a New, Country-Specific Website

Google translate is a good tool for translating foreign websites, but just for the fun of it. Translating saps the message of the actual, local, and culturally entrenched language, metaphors, and expressions. There is no marketing, just plain communication of a non-engaging message.

A lot of companies are simply investing in creating a website and simply translating their original message into the foreign language. What is actually needed is original content for your marketing campaign, in the voice that the local people understand, can relate to, and engage. Hence, having a simple “.in”, “.cn”, “.br” as a domain suffix will not make your business become part of the market environment. eStartups vying for local masses’ attention need to add more original content (created locally and targeting the local populace) to their content strategy.

Let’s get into the surviving and thriving mode for your eCommerce startup.

A TALE OF TWO STRATEGIES

I’ll start with the two blunt, battle-tested rules of thumb. Call them strategies to avoid failure if you may. They are:

#1 — Put Working Systems at the Core of Your eCommerce Model

Build your eCommerce model around business functions, rather than people.

Yes, when it comes to developing your eCommerce strategy, your focus should be on defining your business functions and developing long-term systems for your eCommerce venture. Your focus should be on building a structured system organized around these business functions so that your startup departments can work at optimal levels. For example, prime departments could include tech, HR, marketing, finance, etc. As a result, you’ll have a business model where systems run the business while people run the systems.

While defining these systems, their workability should address their sensibleness (and hence ease of use) by employees and potential investors. This is where developing integrated CRM, POS software, and relevant APIs for integrating other business systems into a holistic unit come into play. Furthermore, it facilitates your startup launch by increasing viability and dramatically cutting time to market.

Though it may sound a bit mechanical and representative of the caricature idealization of business centered execs, but Michael Gerber did hammer the point just right:

“Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.”

It’s harsh, but true.

No other tech startup’s success is more enslaved to technology and robust business systems than eStartups. You need to have a great team, but you also need sound, well structured, and lasting systems representing well defined business functions. You need seamless automation and transparency across all systems to boost your data collection for your Big Data bank and hence increase the power of your analytics.

Your company cannot begin to grow unless you have built a team.

It doesn’t matter how strong an idea you have, how committed you are, or how many hours you are putting in. It really doesn’t:

Because a startup cannot grow over the founder’s shoulders alone.

Because eventually, the fate of every startup (hoping to turn into a growth company) rests on the shoulders of the team you have built.

Build a team of people who have the required skill set, who can deliver what you are looking for, and who are more experienced than you who can empower you. As a founder you must forget the idea of wading your way through the growth landscape on your own and learning along the way.

Generational Gap and the Myth of Team Learning

Startups often fall into the trap of empowered learning i.e. believing that they (the founders or the original team) can outgrow themselves at every stage of the growth phase. As a consequence, they hire people who they believe will learn and be trained to do a great job tomorrow. Hence, they waste energy and effort into creating a resource.

Empowered learning is a trap, primarily because the task of a growth company is to aggressively overtake market opportunities, and in the process scale its management and systems, restructure its organizational model, and re-establish a new company culture.

Plus, all that you are hoping to learn on your own (mostly hoping to avoid delegating responsibilities and/or leadership to a better person), is already available in the form of hard-learned wisdom of experienced people, and mentors. In the world of growth companies, you do not get a generational gap when it comes to mentoring and leading startups into the growth phase.

Hence, my first advice: Avoid wasting your time, efforts, and finances, on your amazing idea — on your own, or with the aid of a lousy team.

Build a team of executives, from scratch. By doing this, you can dramatically reduce your time to arrival at your expected destination.

This post is about aiding you build from scratch a team of executives capable of handling the complex territory into which your growth company is moving into, or you want to move into. Here’s a 5-tier plan for putting together your executive team:

1. Figure out roles
2. Recruit
3. Measure performance / quality of team
4. Identify gaps
5. Debate the right structure

Let’s get started shall we?

Figuring Out Roles and Positions

When it comes time to hire an executive team, there are certain roles that you have to find the right people. Here are three prime roles you should be scouting:

Chief Executive Officer (CEO) — The two facts of the matter are: that the CEO is the boss of everyone and is responsible for everything, and that Founders cannot always be the CEO as the startup moves into the growth phase.

If you’re mired in the day-to-day details of the business and can’t yourself out, then you know you need a professional CEO. A CEO thinks about where the organization is going, where it has to go, and hence the people and processes that are needed to get it there while wading through the current market.

Chief Financial Officer (CFO) — CFO is the guy that handles the money. She/he creates your budgets and develops financing strategies so you can stop moping about not getting the latest upgrade on your servers. The CFO is that bad guy busy figuring out the most profitable products, business lines, and target audience to get that server upgrade next year. Avoid wasting your money, try moping, and hire the right CFO.

Chief Marketing Officer (CMO) — If you haven’t noticed yet, many startup battles are battle of marketing. As a result, many startup strategies are hinging on their marketing strategies. Hence, if your business’s success depends primarily on marketing, then you need to hire a CMO — the guy who owns the marketing strategy (and at times the sales strategy), and overlooks its implementation.

CEO Michael Zammuto leading an internal meeting at Reputation Changer in West Chester, PA in 2013

The Required Skill-sets

One of the biggest mistakes startup founders make is that they assume that a title comes with self-explanatory job descriptions. You might think that it would be pretty self-explanatory that a Chief Marketing Officer should be a person would be someone with strong marketing skills. The job description varies from industry to industry and business to business e.g. B2C vs. B2B, marketing vehicles, etc.

It is your job to make sure that you are hiring someone who has (first and foremost) experience in successfully scaling up a business in your category (budget, tactics, etc.), and secondly has a deep knowledge of your specific industry.

Past Startup Experience

Know your budget, and hire accordingly. An experienced CMO who has had experience in scaling/leading a company with a $2 billion budget is highly unlikely to be able to lead a start-up with a budget $10 million.

A person involved with building big brands may not see organic and guerilla tactics (take viral as an example), and various low-budget engagement marketing opportunities (e.g. SEO, social media, responsiveness) in as bright a light as the SME niche might be seeing. She/he is also highly unlikely to make them as a major part of their marketing strategy.

You should be looking for someone who has demonstrated past success in leading early-stage businesses, operated a budget “on fumes”, and lead it from an “acorn into an oak”.

A Shared Vision

You are hiring someone to aid your startup achieve its goals founded on a vision for your business. You may be grateful to them for expanding that vision, but not changing it or creating frictions as your startup starts to scale. The growth phase is known to be tumultuous and the last thing you want on your plate are executives bent on leading the company in a completely different direction.

Hence, an equally important trait you should be looking for is that each member of your team shares a consistent vision on exactly what you are building. This ranges from the target market, and target audience, to the market dynamics you are hoping to engender through your startup.

Personality Fit With Team

Accept it, deny it, hide it, or try to make it as politically correct as we may, the truth of the matter is that startups are a 24/7 job.

So, you are going to be spending a lot of time with the team you have hired. This makes it critical that you find a candidate who has a good personality fit between the team. You seriously don’t want someone who gets on your nerves late into the night, or worse someone with whom nobody wants to work with.

You’re trying to win a startup race. You seriously don’t have time to work around this issue.

Surround Yourself with Mentors

Surround yourself with individuals who are much more experienced than yourself. It is important that you hire people who would empower you and the company to dramatically grow and succeed.

Here’s the deal: identify the people which you believe have (and can give you) what you need. Reach out to them, or gain an introduction and invite them to coffee or a lunch. On the occasion, briefly explain to them what you are doing, and ask them relevant questions. Once the conversation is over, ask them for a another follow-up meeting after 2-3 months.

Follow up, and you will automatically fall in the select few who have ever done that, and as a result would have shown them that you are interested in the matter.

Conclusion — The Importance Of Quickly Letting People Go

I’ve already discussed the importance of employing topgrading as an essential hiring device for the executives http://michaelzammuto.com/?p=101, but once again, nothing is more detrimental to the cohesion and optimal working go your team if people aren’t working at top performance.

Hence, it is important for you to keep the strategic vision of the company in check by continuously grading them with feedback, frequent job performance appraisals and immediate and proactive response in case someone is not working up to par with the performance needed of them — in a phrase let them go.

In the end, while you are building this team, remember that to be empowered, you yourself have to acquire a practical and growth oriented attitude — a defining character allowing you to make the decisions required of you. (Here is a good starting point for this: HBR’s article on Building Personal Character.)

I wish you all the best!

What are the traits of a successful startup executive?

Here are my top picks:

1. Bold. Adaptable. Lifelong learners.
2. Culture builders. Great Executers. Great Hirers. Superb Firers.
3. Passionate. Great Communicators. Team Builders.

1, 2, or 3, or all of them combined?

Whichever road you choose, the next question will always be the same: how do you become one?

It’s the question that a lot of younglings (graduates), new entrepreneurs, and people planning to become startup executives ask themselves, and experienced and successful startup executives. The answers can be divided into two primary camps:

1. Joining a startup, and wading through birthing hell to understand the problems and realize opportunities firsthand
2. Joining a large tech firm and gaining experience and building connections in its talent’ network pool

Andy Rachleff informs us of a mid path. He literally advises the younglings to join mid-sized private companies. However, I will not be going in that direction. And though I’d rather not conclude so early, I do believe that one should not learn how a startup culture is built by being part of a startup. It be learned, but it’s too formulaic. It curses one, forevermore, to finding the right formula for success instead of consistently evolving and testing and rebuilding the business model and organizational structure as they progress ahead.

On the other hand, I believe that a stint at a large, established firm is sure to bring you face to face with the reality of how to handle the top end — managing people, allocating talent, boosting morale, staying abreast of market changes, and keeping teams together. I believe “culture” will always remain something that you will have to found again at every new startup.

So without further ado, here’ what I had learned at my stint at Microsoft, and how it has shaped my executive career ever since.

It taught me to take action without discussions

The first aspect of management I learned was a lesson in management hierarchy. I found that involving others is not always the best job. I saw people and teams get stuck into what I’d call the think-tank loop. Everybody pitches in an idea and everyone wants to find the problem with it, you know, “be sure” that it is the perfect idea for the business.

It’s overly cautious, and it gets you nowhere.

You’ll always be taking a pilgrimage around the team leads, the department head, and other managers to get the big O.K.

If you really want to do something, then you have to take the action, believing that it is the right thing to do. I mean if you don’t make a complete ass of yourself from time to time, you’re either not doing anything or doing something seriously wrong. In hindsight, I realize how each of those teams (those that progressed and those that died out) was nothing less than a startup in their own right. I have already written on building startups for scaling, where I consider each team as a small startup, and now I caution people to be cautious of this attitude.

At a large firm, you have more leverage for taking bold (albeit thoughtful and reasonably calculated) decisions. Given that these firms are highly dependent on innovation, you have a higher chance of breaking through the chaos and leading something with backing of the entire structure. All the more training to work on the model and build a team to pad your decisions.

Allow, Nay! Value Screw Ups

The next lesson I learned was how to react to screw ups. I saw people getting worked up over small things and as a result made everyone in their team cautious. In hindsight, I see that many of those “mistakes” had no bearing in the next 5 years. It taught me to separate the things I don’t need to care about and the things that really need my attention.

I mean, unless employees are breaking things, or trying to bend the rules, how do you expect them to back your strategic and risk-laden decisions? How will they grow? How will the company grow if everyone would just stick to what they know?

It taught me to know when it was time to leave a big firm. Let me share it with you too: If the place where you’re working with has pin drop silence in meetings; if everyone is afraid making mistakes, and If the manager is too focused to bring your smallest of transgressions in your performance review, leave. Leave and find a different firm for your stint.

Being Proactively Engaged

You have to gain the trust and respect of your team. But how do you measure it? By your level of engagement.

Look for people who are seeking you out.

If they are not doing so constantly — ranging from discussing problem and ideas, or seeking things from you — then something’s a miss. The corollary from this is that you need to be engaged in all key aspects — ranging from checking mailing lists, the latest builds, and more.

You have to be proactive, because unless you’re plugged in, or turn away people seeking you out, don’t expect to be involved when the key decisions are being made. One way of being proactive is through part timing.

Part-Timing

One of the best things about the culture at Microsoft was that one could try doing a different job for a while, all the time. It was quite easy to be a part-time Program Manager, or a part-time developer. People always love all the help you can give them.

Executives need to realize that the best way of tapping into someone’s potential is by letting them give a try to something they want to do. That they believe they want to do. Give them chances, yes multiple times. Give them some leverage, allow them to build onto their skills. Shooting them from the first miss-go will not only re-enact the cautious atmosphere in the office, it will also demoralize your resource pool.

Keep Trying Out Stuff

The tech industry is one that changes every few years or so. Hence, the worst thing an executive can do is to not keep up with the latest changes and let themselves stagnate.

I’m not saying you need to have your smartphone buzzing with apps, or have profiles on every new social networking site. I’m saying that you should be playing with whatever is receiving attention and is popular. Get the gist of it. Discuss possibilities for its use, and the like.

Let People Know

Executives have consistently underestimated the value of letting someone know that you appreciate what they’ve done. Praise them in public, and in case you have an issue with someone’s attitude and performance, have the conversation behind closed doors.

A little email goes a long way in making everyone happy, and a Public Display of Disappointment (PDD, for humor’s sake) can sink your talent pool like a flush tank.

In Conclusion — Don’t expect everyone to be passionate about the Organizational Goals

Executives are tasked with leading the company, strategically. That means they always have to see ahead (the bigger picture). It’s like dreaming; new possibilities may arise and appear, and causing waves of enthusiasm, which coincidently and unfortunately cannot be all shared with everyone else. And everyone else (the majority) is most likely to have other priorities from life — other than creating a better product or putting in the extra effort to eke out that small flourish in the product.

In the end, your career at a startup comes down to you knowing, working with, and dealing with the right people. Because remember, you have to scale the startup into a growth company, and that won’t happen if you have no idea, or have never experienced the culture and lifestyle of a company in its post-scaled years looks like, how to work with people in those circumstances, and how to lead them.

Maybe it is a sign of maturity (or simply aging) but I have a newfound respect for days off. There was a long period of time where I took minimal time off and tended to work through all of that. To be fair, there were times when I was in ‘startup mode’ where I clearly overdid it and it and acknowledge that it led to worse results not better. As my roles have become more strategic I realize that I need these periods to really think about the business and the team. I can also see the positive effects on our folks who need time off to recharge and prepare for the great sacrifices ahead.

2015 Headshot for Michael Zammuto, internet and software executive.

But I do worry about the messages we send people earlier in their careers. Young, ambitious people need as many opportunities as possible to build skills and credibility. For these folks, I think a more rigorous schedule makes sense. I don’t think a lot of young people get the message that they should outwork their competition. I remember at most early stages in my career I would make it a goal to beat the boss to the office and stay until he/she was gone. This wasn’t a substitution of effort over efficiency so please don’t send me messages about working smarter. I am dedicated to that too. But as anyone who has read Malcolm Gladwell knows, effort is a critical part of success.

“Practice isn’t the thing you do once you’re good. It’s the thing you do that makes you good.”   – Malcolm Gladwell

So of course you should work smart. But never underestimate the need to gain as much experience as possible and that means working hard and working long. In fact, I would argue that a lot of skill building early in one’s career benefits most from trial, error and repetition. For executives the skillsets are different and they way you apply your skills are different. Being bogged down in repetitive, tactical execution is detrimental to successful leadership. So the main point I would argue is we should think about what drives the outcomes that makes us successful, acknowledge it changes as we change roles and adjust our work styles and schedule to get the best results. It isn’t sexy but the young do need to outwork the old.

“In fact, researchers have settled on what they believe is the magic number for true expertise: ten thousand hours.”   – Malcolm Gladwell

Extensively Budget Training and Development

I’ve already discussed the inflation model for scaling businesses where scalability becomes intrinsic to your startup team. This involves continuously empowering your original team members through training and development programs, and utilizing all those newly instilled skills as abilities to complete various tasks, and as a result making them amenable to agility and mobility.

Mike Zammuto appearing on Varney and Company on behalf of Reputation Changer in 2013

According to the WorldatWork report that surveyed 20 fast growth companies in the U.S’s West Coast, all surveyed leaders believed that offering training and development opportunities to their employees, decreased turnover rates, empowered them to take initiatives, and increase work engagement. These trainings (just to un-limit your budgets) also included sponsoring advanced degrees (Master’s and Ph.D.s) apart from work related skills such as customer service, new products, and technologies.

The simplest reason why training and development programs should be an integral part of your HR strategy is because you have to keep your talent pool market competitive.

BECAUSE, even in the ideal scenario where you have somehow recruited the most loyal talent in the world — one that would never leave your company no matter how stellar the deals are from other companies— their skill set would still become obsolete in a matter of years.

Training and development is crucial for building a flexible and prepared human capital, one that is cross-functional and can be deployed across your company.

Grow Inter-Organizational Career Opportunities

How long can you reasonably expect your top talent to find meaning, pride, and fulfillment from the same job description? Your top talent is looking for opportunities to exercise its talents, to break out, to create or build something on their own, to achieve something they can value, to lead, and more.

And they want to do them fast. Perhaps even now.

Unless you can offer them the fast career growth opportunities as you phase through growth stages, you will experience a talent drain. The most oft employed strategy is to offer accelerated careers proportional to the value these people bring to the table, and offer them new responsibilities and accountabilities. A cheat-strategy can be to consistently compare their growth with competitors (during review meetings perhaps) and demonstrate specifically how their growth at any level is several times faster than any other large competitors.

This obviously requires that you keep your top talent a step ahead of career-growth opportunities, as well as offer parallel career paths in managerial roles reflective of their experience and skill set.

Increase Communications

As leaders, your task is to communicate openly, constantly, and clearly. Integrate HR evaluations with company’s strategic goals and communicate them to the employees. Successful growth companies link messages by relying on their HR’s data. As a result, they are able to integrate the career demands of their employees with their business’s strategic goals.

Streamlining communication processes requires building a common medium for communication. Two common mediums include the intranet, and manager-employee face-to-face communication.

TOTAL COMPENSATION STRATEGIES

Another method of boosting talent retention for growing startups is by relying compensation methodologies in your HR department.

Pay for, and hence encourage, creativity and innovation. This results in an HR model that is based on, and pays strongly for performance/results. As a result, you’ll be encouraging poor performers to leave. A holistic and robust compensation strategy involves employing the following areas:

• Paying Competitiveness
• Cash Incentives and Variable Pay

• Side Stepping Stock Options
• Recognition
• Benefits
• Metrics and KPIs

Paying Competitiveness

Recruiting competitive talent is crucial to sustaining the often exponential growth of the company. When coupled with other career opportunities and training and development programs, it automatically increases retention rates. Monetary incentives for high performers allows your talent pool to dedicate efforts knowing that they will not only be recognized, but will also be rewarded and receive a monetary share for their efforts.

Cash Incentives and Variable Pay

Variable pay allows employees to leverage their contribution and added value to gain monetary recognition, and in turn increase productivity of your organization. Furthermore, variable pay and cash incentives are a great way to supplement your performance plan, and keep morale and retention high especially in case stock options run their course. Such incentives, when tied directly with performance metrics (individual, based on team performance, functional, or organization wide), are a great way of bonding people to the company and linking performance results.

Side Stepping Stock Options

A key issue in managing human-capital is that fact the non-scalability of stock options. The transition of the startup towards a full-fledged growth company is impacted by signing bonuses and non-bespoke stock options for a plethora of reasons. Some of the most common problems include:

• The Reloading Dilemma — Often the best people leave the company to get new signing bonuses or because they’ve found better stock options at another company. This normally occurs because the HR does not realize that their original hiring package was based on the perceived value of the individual to the business, and not their current value
• Unpredictability — Then again, many leave because they are not confident if the company will be able to sustain its growth at its startup or current pace. It is a common occurrence that as the startup continues to grow, fewer stock options become available for the taking. Given that the value of the stock is dependent on market forces outside of company control, such as the general economic climate and overall performance of the market niche, unpredictability sets in as setbacks may occur.
• Entitlement — Many high performers leave because of employees who had valuable stock options, and have (or are likely to become) become entitled during the course of the transition. Think of it as a “last straw condition” for your high performers.

The best course of action is to task your HR to plan mitigation strategy into your startup before it gears into the high growth phase. In case you already are moving into the growth phase, shifting the focus to better retention incentives through due recognition of contributions, additional benefits, and finding the right metrics and KPIs for reviewing performance and contributions.

Recognition Programs

Recognition becomes increasingly problematic as the startup scales into a growth company. However, establishing sound recognition programs is crucial to the success of the company. This is evident when one compares the WorldatWork reports from 2005 and 2013. The latest report on recognition titled “Trends in Employee Recognition” surveyed over 470 of its member respondents and found that 88 percent had robust recognition programs in place.

What I find interesting is the fact that the 2013 report included metrics for peer-to-peer programs and programs for motivating certain employee behavior. The 2005 report did not have considerations for either, pointing to the evolution of the industry.

The fact of the matter is that reward and recognition is becoming an integral part of the HR strategy, where rather than simply rewarding someone at the end of the year for achieving goals, the company simply makes incremental rewards throughout the year (think quarterly or bin annual reviews, appraisals, recognition, and/or rewards). The purpose of these recognition programs is to reward significant contributions, inventions, breakthroughs, unexpected contributions to income growth, new projects and clients, among others. This makes it easier for employees to reach their goals and receive higher rewards while motivating them to align their contributions with company goals.

Some of the most common recognition metrics include above-and-beyond performance, length of service, and the social component of peer-to-peer recognition and programs. All of this fits neatly with the current mobile society where employees can move within an organization, especially the social component of the recognition program that allows co-workers to know when an employee has received recognition.

In Conclusion — Facing the Challenges

I believe that the sustained growth of startups is highly dependent on how well the HR manages to scale its model for talent pool management and retention. The biggest challenge in this area, especially for the growth tech companies, is of defining the metrics and skills to measure the creativity, innovativeness, and contribution of its employees in terms of their impact on company’s performance and profitability.

Technologies continue to evolve, and the HR must continuously re-invent itself and consistently develop and test newer methodologies to engage the company’s talent pool and mitigate turnover rate.

The biggest challenge facing executives while scaling their startup into growth companies is managing their talent pool while suffering growth pains.

If you hope to remain ahead of the fast-growth curve, and tranquilize as much of the associated pain (and prevent the HR nightmare of a blow up or total meltdown) then here are my thoughts on the matter: completely re-engineer HR processes and systems.

It is crucial to making a smooth transition.

Chaotic Change — Problem at a Glance

You’ll have to abandon a lot of practices that worked for your initial startup stages, and replace them with new ones. Given that all the human capital practices and process have to play catch up with growth, you will be required to stabilize your workforce to one where you have more dedicated and “intra-preneurial” talent, ones who could be more creative and dedicated to the company goals. This should point to the need for changing the overall culture of the company and make growth intrinsic not only to the company but also of its talent pool (through personal development and career growth and opportunities).

I’m sure of one thing: It will be chaotic. Then again I’ve seen that during rapid growth, executives are more than willing to respond to changes, adapt to different challenges, and find opportunities that can move the company to a more sustained phase of growth.

The three crucial areas that I believe need consideration include your retention, reward, and compensation practices. Let’s start with the first round of primary growth oriented changes that have to be re-engineered in the HR department.

I’ll start changing your HR filtration system: its existing retention, hiring, and firing processes.

TALENT RETENTION STRATEGIES

Be selective. Identify and retain people who are essential to your business’s strategic goals and business model.

Many leaders would have already realized that the startup strategy of relying on career gamblers, transient, and free agents is no longer effective. It worked during the startup phase because the recruitment strategy was (and it normally is) of getting people into the empty seats and getting the engine chugging productivity. Growth phase demands selective empowerment and elimination from the current talent pool, while recruiting talent for core competencies.

Retain dedicated high performers closest to the organization’s core competencies. The retention focus of the HR should be on talent that directly affects core competencies and core business processes. This can be followed by marketing and other technology based jobs. Your goal should be to prevent talent drain to other larger companies.

Talent will always be magnetized by the best deals in the industry, and unless you offer them something that adds value to their work, they will get pulled to the ones that offer them or at least give them the perception of offering those incentives.

I believe two fundamental leadership actions for developing a robust retention strategy include:

Leadership Action #1

Understand the fragile balance between the talent that stays or leaves in terms of total rewards, i.e. the total deal that your company is offering them, including the company culture, the work environment and people, leadership, the terms of pay, career growth and development opportunities, and of course how interesting and creative the work is. (I’ll address relevant strategy in the next section)

Leadership Action #2

Appreciate key talent. Make your employees feel valued for the value they bring to the company, their contribution, dedication, and hard work. Reiterate the processes that show them that they count and are included in the company’s future. (I’ll address retention strategies and total compensation as another model for growth oriented retention strategy in the second section)

Total Rewards — Growth Oriented HR Road Map

Leaders in the surveyed companies provided their approaches to the elements of an integrated total rewards strategy.

Six core elements to forming a robust retention strategy include:

1. Employee Engagement
2. Company Culture
3. Improving Manager’s Role
4. Training and Development
5. Career Opportunities
6. Communications

Increasing Employee Engagement

A targeted study sponsored by Achievers (Harvard Business School Review, 2013) shows that employee engagement as crucial factor in achieving overall organizational success. Incidentally, efficient productivity was rated on par with employee engagement whereas the ability to innovate ranked lower than either. The most impactful factors driving employee engagement includes:

• Clear job descriptions
• How employee’s work contributes to the overall strategy of the business
• Recognition given to high performers
• Continuous and effective communication from the senior leadership
• Efficient and fair performance reviews
• Pay and appraisals directly linked to corporate goals
• Development and training programs linked with personal growth as well as linked to the corporate goals of the company, among others.

According to the 8^th iteration of the Gallup Poll, increased employee engagement has direct bearing on the important growth KPIs, growth sustainability, and integrity of the business model. From the poll, the following eight factors experience significant improvement due to increased employee engagement:

1. Turnover (for high-turnover and low-turnover organizations)
2. Shrinkage (theft)
3. Safety incidents
4. Quality (defects)
5. Profitability
6. Productivity
7. Customer ratings
8. Absenteeism

Renewing Values, Creating a Growth Oriented Culture

Finding a common ground definition of organizational culture for growth oriented companies is fabulous. You won’t find single culture or definition that has worked for all organizations. Some common cultural models include:

• Performance culture — that values high performers, contributors, and achievers
• Success-oriented culture — that links business goals and success of the business with the reward system, rewarding core competencies and top-performing talents
• Enabling culture — that relies on empowering people, growing their capacities, and encouraging new job roles
• Focused culture — that keeps re-inventing its core competencies and business processes only,
• Others — a whole post, for another time.

I believe that a growth oriented culture is an environment in where your team members can become owners of the business process i.e. they don’t have to wait for the CEO to be in the room to make a decision. I believe strong growth oriented cultures empower employees and makes them dedicated to the team in a different fashion. And for me, the two values that should be intrinsic to the growth culture as the startup is scaled include agility and mobility.

• Agility — the commitment to rapidly respond to change in market and company’s objectives, and hence, to always remain ready for stepping outside of their comfort zones
• Mobility — a commitment to company’ strategic goals, to remain un-rooted to a single job description, and have the flexibility to be deployed in various departments and teams according company needs.

I believe a culture based on agility and mobility will always value continuous empowerment of its talent pool, risk changes to job descriptions, realize their abilities, capacities, and passion, and empower them to take new roles in the organization.

Investing and risking time and effort in your organization’s culture is important, primarily because it has powerful momentum, one that overcome the shortcomings of your strategy, and beat better and more competitive strategies in the market — Every. Single. Time.

Improving Your Managers’ Role

“Employees leave managers, not companies”. I think we’ve heard it too often for a single lifetime. To give credit to it, I must say that it has had its impact, but still the fact of the matter is your manager still needs improvement. It involves improvement in leadership role and setting an example as a role model, training and coaching, and in their ability to direction for your business, engaging team members, and aligning their abilities with business objectives and strategic goals.

You have to make them accountable for talent retention, development, and motivation. And the only way you can do that is to reduce barriers to decision making by delegating greater administrative authority.

[Continued in Part 2]

Disclaimer

If academics are rearing to jump on a reference to Foucault’s “Discipline and Punish”, then now’s not a good time.

We know the market has moved out of its earlier discipline and punish model to a better (and less panoptic) model of management. Hence, in this post no harm was done, nor any punishment given to any theoretical business beings (except, well, some business practices).

Disciplining Businesses

Once the startup has reached into the “fun stage”, where customers start placing orders, executives face the herculean task of keeping their business under control. Since the business has gained a momentum of its own, and continues to run on the intake provided by the customers, it can start to move into unprecedented territories.

Unless the executives are able to leash it, chances of controlling the growing entity can dramatically grow thin.

From my experience, 5-systems have proved beneficial in overcoming disciplining problems. I believe, they will prove helpful for other executives in the same boat. These five systems include:

1. Balanced Scorecards
2. Strategy Maps
3. Strategic Job Families
4. Top Grading
5. Business Rhythms

Let’s see each in brief.

Balanced Scorecards (BSC)

The worst thing that executives often do is to hang their strategic plan as portraits, watching them every once a while during the quarter. It is crucial that executives establish a framework for placing all important KPIs into the right perspective and then measuring them accordingly.

The Balanced Score Board (BSB) transforms your strategic plan into an order churning machine for managers and employees on a daily basis.

Its power is often underestimated by considering it as merely a measurement system, but I’ve found it to be a complete management system capable of providing feedback for both internal business processes as well as external outcomes. It will allow you to continuously improve strategic performances and results.

The BSB forces us to view the organization from four perspectives (Financial, Customer, Business Processes, and Learning & Growth), and hence develop metrics, methods of collecting relevant data, and analyzing each perspective to figure how value is being created for the organization.

This is then communicated using Strategy Mapping (next).

Further Resources

Gain basic insights into the use of the Balanced Scoreboard, read “Using the Balanced Scorecard as a Strategic Management System” (Robert S. Kaplan and David P. Norton).

For a more fundamental understanding of the Balanced Scoreboard read Robert S. Kaplan’s original work “Conceptual Foundations of the Balanced Scoreboard” published in HBR (2010).

Strategy Maps

It is crucial to communicate the strategy of the organization, focus its efforts, and choose appropriate measures to report to an organization’s progress in implementing a strategy.

This is where Strategy Maps come in. They are a simple diagram that explicitly shows the cause-and-effect relationship between the four BSC objectives (Processes, Financial, Customer, and Growth & Learning). With this diagram, you can easily and thoroughly document the primary strategic goals being pursued by an organization or a management team.

They have allowed me to easily communicate strategies for the prime question “How we are to create long-term value for the shareholder?”

With a Strategy Map, the creation of shareholder value (the result in most cases) is exhaustively linked to organization’s core capabilities, innovation, organizational design, human resources, IT, connected learning, and processes, customer, and quality management. This graphic communication of the strategy among executives allows one to align resources for the successful implementation of strategy.

Further Resources

You can look up some examples of Strategy Mapping here.

Strategic Job Families

It’s never enough to populate the company with outstanding employees. Executives must use them effectively though good organizational design. This is where Strategic Job Families has arrived as a greater device for addressing workforce management.

Imagine being able to direct the organization’s strategy by knowing which positions will have the most direct impact on the execution of your strategy.

This would require making tough decisions quickly, e.g. releasing employees who don’t rise to the challenge. By creating strategic job families, executives are able to identify he positions which may be Entry level but prove essential to the strategic development of the organization. Examples include entry level positions such as book keepers etc.

A good method of doing this is to analyze organizational strategy, develop a list of selection criteria, and then ranking and scoring each position.

Further Resources

You can brush up on the technique from Peter Reilly’s paper published by Institute of Employment Studies.

Topgrading

“The fundamental driver of shareholder value is the talent of everyone in the organization on whom you rely to implement your business strategies.” — Such is the recurrent Wisdom of Executives.

All of us realize that our strategies will become a wasteland if we are not able to hire and retain high performers for our organization. As an executive, we are tasked with developing a team of A players for every position in your organization. This is where topgrading comes in.

Topgrading, in simple terms, is the practice of first collecting, and then empowering, the highest quality workforce. This is done by proactively seeking out and employing the most talented people available — while redeploying employees showing lesser ability or performance.

Topgrading allows this by ensuring that talent acquisition and management processes are solely focused on identifying, hiring, promoting, and then retaining top people. It also allows you to easily coach and empower the right people in the strategic positions.

I’ve found it to be the best device for promoting the right people, in the most strategic positions. And from experience, I’ve seen that organizations that topgrade are able to drive improvements or changes in core strategic value drivers including time to market, quality, innovation, productivity, customer service, etc. These organizations continued to show growth and success because they have the most competent employees in all job families.

Further Resources

Read the original piece describing the practice in a thorough problem-solution oriented manner here.

Business Rhythms

Predictability is the essence of sustainable business activity. As an executive, it is strategically essential that you are able to keep all aspects of the organization predictable, and hence achieve a unique business rhythm.

This can be spread over 4 different areas:

1. Vision — A preferable future that is consistently tested over time in face of new perspectives, and evolves. The clearer it is, and more connected it is with individual team members, the more rhythmic it becomes for them to work towards it.
2. Achievements — By strategically defining milestones and goals, and consistently achieving them, you create a sense of purpose, identity, dignity, and confidence. This is only possible by creating a simultaneous rhythm between defining, tracking, measuring, and adjusting your goals.
3. Meetings — A boon to productivity if they are not rhythmic in their recurrence, focus, engagement, and the decision orientedness.
4. Growth and Learning — Unless you are able to coach, empower, and aid employees in re-inventing themselves and continuously upping their capacities, you fail to create a rhythm for learning and hence growth. Learning corporations are the future, or haven’t you heard it yet?

Conclusion

Balanced Scorecards, Strategy Maps, Strategic Job Families, Top Grading, and Business Rhythms have been the weapons of choice for me to handle and discipline businesses over the years. If you have been employing others, feel free to share!

I love being parts of great teams starting and building businesses. For the last 2 years I helped launch Brand.com and its news media platform. That company is doing great and solves major problems for publishers and marketers alike. We built a great management team who have great technology and a proven business model and it is in great hands. So it is time for me to move on to a new passion.

Brand.com was about reaching people all around the world with content. It was focused on the premise that the way brands communicate and the way reporters source stories was not taking advantage of the internet, network effect and new business models.

Another long-term passion is globalizing commerce. Within many markets, ecommerce has revolutionized how consumers gain knowledge, make decisions and purchase goods and services. But, on a global scale, ecommerce has become a complex patchwork of inconsistent solutions that limits the collaborative and scale benefits of the internet. My new company Cloud Commerce is dedicated to addressing that need.

I will publish more when I can but what is great is the fun and excitement of starting with a blank slate and I am happy to have another chance to do that.