Are you running an ethical organization?
There is an obviously happy Apple customer on this picture.
A very simple question:
If the foundation of a business is human weakness, can this business be ethical?
Another one: forget the foundation! Can a business be ethical if it’s driven by human weaknesses as an operational principle?
Last one: would you ever consider eliminating your weaknesses?
Parlez-vous FINANCEE?
By Eric Bilginoglu
…continued from Corporate Language 1
Financial awareness and literacy were crucial to survive…while as almost always, we shifted to another extreme…
The long neglected control, planning and whistleblowing functions of Corporate Finance were slowly turning into the AIM, rather than TOOLS…
People were constantly receiving e-mail’s with huge Excel attachments, from Finance department, asking for reports, forecasts, comments for anything and everything they were doing. Marketing people who were supposed to make consumer visits to understand their habits and attitudes or Sales Managers (sometimes even supervisors) whose real job was to meet Customers on the field to SELL, had to stay in the office to crunch numbers for hours on excel sheets to hand in the reports or forecasts before the deadline, hoping that their difficult to satisfy Finance Colleagues would let them do things…
Having so many NUMBERS to compile, Finance departments were swelling, too. More analysts, more controllers, more auditors were needed.
Complaints were shared during coffee breaks or happy hours, about how people were paralyzed by Finance departments’ never ending demands.
Naturally, something had to be done about this…
“EUREKA!” said a smart HR manager:
“Why don’t we teach NON FINANCE people, some FINANCE?!”
Since then, probably this became one of the most universal training subjects in various companies.
But, as always, no one had that much time to dedicate to this kind of FUN; at the end of the day, it was always a Budgeting, Strategic Planning, Month Closing, Rolling Forecast revision, scorecard, etc…period. Neither Finance, nor others had more than a couple of hours to spend with this, so this had to be a short training.
They gathered in a nice room with cookies and coffee and listened to that Controller who taught them the components of P&L simply by stating and repeating the meaning of each line and most of the time no one really had the will or energy to go beyond the EBIT, anyway, so following a P&L exercise, they all went back to their rooms not to miss the deadline of that report!
Don’t get me wrong, here!
I am not against cross functional trainings. I value a lot, the financial literacy of anyone and everyone in today’s tough times…but, hey! Are we doing the right thing, the right way, with the right end products?
Let’s have a look:
Probably within the following 24 hours, most of the things learned during that training was definitely forgotten, simply because:
a) That marketing girl with her laptop was replying an urgent email from an agency about the fee they proposed
b) That sales supervisor had to take that call from his biggest client who wanted an explanation why the terms and conditions set were proposed to be changed
c) This was not interesting at all for the Customer Service girl.
Besides, why does not anyone talk about training the finance people about NON FINANCE, so that they could understand things which determine others’ and ultimately the company’s performance? Is COUNTING and SAVING the money more important than MAKING it?
I have not heard any such training, have you?
One note to those who think that all Finance People are having a sadistic pleasure from the way things are being done:
HELL NO!
Go and talk to a CFO or a financial planning manager who works overtime almost throughout the year.
His/her life more or less looks like this:
(S)he starts the budget process end August, collects tons of spreadsheets (usually received from HQ) filled in by others for months, to put together the Budget File to be presented UPSTAIRS (of course, after correcting time and time again, the mistakes made by others who were too busy to pay attention to what was really asked for) knowing already that inevitably all these efforts would go down the drain his/her boss coming out of the Budget Presentation to tell him/her that this was all to be changed, as the Executive committee wanted the budget to be revised, because they thought this “pre”budget (which was merely a consolidation of the inputs by people bottom up, who lived the real life) was far too unambitious based on the fact that…..on the fact that…..errrrmmmm…well, can we switch off the camera here for a second?!
Another tour of (this time top down) revision and here we are…end of December, there is a Budget AGREED, although with all the changes made, everyone knows that even January figures are totally bullshit, anyway.
Of course, during those months life could not and did not stop!
There were still monthly closings, ad-hoc reports, explanations/comments asked for, by the HQ.
Here we are in January!
A new year with many new year’s resolutions (this year I will see my daughter at least 1 evening a week!) is beginning…oh, what an excitement!
Then the wake-up call comes…
- Listen, we have a problem here! The HQ is asking for an urgent conf call about why we were below budget in January.
- But we told them that this budget was not realistic and….
- Don’t you think I told them? They simply say: Whatever… Budget is a commitment…”
- But this is ridiculous…
- Shhhh… Organize a meeting with Sales and Marketing to give me a couple of good arguments…bad weather, good weather, the conflict between the government and army, whatever…they should be creative and credible…well maybe if not credible, at least difficult to prove otherwise!
- But, shouldn’t we maybe…
- DIT DIT DIT DIIIIIIIIIIIIIIIIIIT!
- Hello? Hello? …..
Yes, the year has started…
Of course, right from March on, you start handing in periodic revisions (Rev 1, Rev 2, Rev3)…endless discussions, conflicts, top down number crunching…and yes, it’s BUDGET TIME AGAIIIIIIN!!!
People from all over the Organization, strangled by that long sentence in FINANCEE had started to be the slaves of endless reports and useless and absolutely UNREAL set of plans stuffed with crunched numbers.
The organizations were simply paralyzed…. (to be continued)
Eric Bilginoglu is a member of PRAKHSIS’ Executive Board of Advisers. He provides expertise and perspective in the FMCG sector for executive advisory, M&A advisory, executive search assignments. He may also be booked as a corporate speaker. Eric maybe reached at eric.bilginoglu@prakhsis.com
How I didn’t manage to launch startups in the middle of the dotcom boom
Sometime in the summer of 1999, late at night in my apartment in Toronto I spent hours with my friend Zar discussing an incredible idea: let’s say you watch Matrix (came out that year) on DVD, you like Neo’s shades, you click on it with the remote control and voila: you can buy it. I know: you also thought about this idea back then. Everybody did!!!
We of course didn’t stop there: we wanted to expand the range to the big screen and to television as well.
As we were analyzing how we could solve this on television ( our goal was to start with DVD, then television then the big screen by which time our smart phone dreams would sure become realities) we realized that we would need an additional device for the TV. I won’t bore you with the business model we came up with. The bottom line is that we also came up with the set top box idea. When I saw (still in ’99) that “they” launched Tivo I was freaking out: we’re running out of time!!!
We had to stop these discussions a couple of times: Zar had to go and do a gig somewhere in the world -back then he typically picked his assignment based on the proximity of ski resorts or surfing paradises – nowadays it’s all golfing, but that’s a completely different and even more interesting story.
I also had a business to run.
We never even made it to the fund raising process. Tivo made it. Tons of others made it in 1999. It was a magical year… for those guys. For us: just another one. And for that year: we were just another one of the million: two guys fantasizing about great things.
Less than year later and two weeks before the crash in 2000 when we were schmoozing at one of those parties with free drinks and fancy food in San Francisco where all you have to say is that “ I am from the VentureOne conference” and nobody asks you for any proof just lets you in, one guy from the Canadian trade development agency whose job was to schmooze professionally described us as: sex, drugs and rock&roll. He clearly referred to the sex appeal of the lady (also a good friend) who was our professional schmoozer as sex and he made it very clear that he means Zar when he says rock&roll. The crazy idea we were pitching at the time (a different one which also never made it!) probably really qualified me for the drugs part. So let’s just say we thought we had it all.
In retrospective we missed only one thing: GRAVITY. We failed to attract top people around our ideas from our own circles. If I assume that the tv / cinema commerce idea was good (and I don’t see this thing happening yet, so maybe it was a bad idea), it was simply not meant to happen through us. We had to move on to the next thing.
OR: maybe the idea was too far off for us to draw us into its field of gravity: I was doing poetry (consulting on leadership and strategy issues), Zar was doing prose (building enterprise software architecture): there was no irresistible pull towards this idea for us to dedicate ENOUGH time away from what we were doing to build a prototype.
As for Zar: he went on to build great things for the Fortune 50, while he also wrote a book to change how golf is played and another one that basically revolutionized the game of bridge.
The Gravity Problem, when good people don’t see big opportunities to be close enough to their perceived reality, is pervasive, I see it all the time in all imaginable situations:
- people not getting excited about great job offers because they perceive it to be too high for them
- guys not making moves for certain women because they perceive them to be out of their league
- companies unable to reach break-through because of the patterns that dominate their organization
- people not quitting their unfulfilling jobs because the gravitational pull of their CONDITIONS (good salary, kids, mortgage, lifestyle, whatever) is too strong
This is absolutely fine! The nature of conditions is that they don’t want you to leave, they pull you back: without you they are nothing.
We just need to be clear about this problem and work with it: organizing ourselves accordingly…and how to organize is incredibly interesting; coming up next.
The small things and death
…Amazon sells books from the greatest thinkers in recorded history for free or nearly free on the kindle store. Aristotle, Plato, Nietzshe, Lao Tzu, Seneca, Jacob Boehme, Julius Ceasar, Tabula Smaragdina and the Corpus Hermeticum from Hermes Trismegistus, even the Bible, the Koran, Bhagavad Gita, the Upanisads, and many others sell in the range of $0-$5. This is unbelievable!
I’d immediately downloaded some as soon as I bought the device (which I bought also because of the free roaming features by the way). I normally read a couple of things in the same time but nowadays I am mostly reading the thoughts of Marcus Aurelius (it was also free).
The key is death. Forgetting this is what makes life an illusion.
Lie down, close your eyes and try to die. Feel the body giving up and drifting away, gather the strength to focus, not to pass out, to stay alert so you can preserve yourself.
Maintain control in the face of the most elemental fear with an irrevocable determination to fight till the very end and not to succumb to nature. With the death of the body the significance of time becomes minimal – you’re still perceiving it but you know it’ll be gone, too. You realize that your life was nothing and that you got it all wrong.
You were dead and now you have the chance to live.
You remember only the small things now. The smallest things you missed; you realize how and where you screwed up. You realize: it was all about control. The control you need now to gather the power to survive this trauma. The rest was just a setting: parents, lovers, enemies, religion, kids, career, home; sogar dein Auto!
If only you had been aware of this!
You realize that this is your last chance to control your destiny. Not to forget! Not to let the experience overwhelm you, not to let it put you to sleep.
You understand: if you identify with what you experience, you are lost. To preserve yourself you must dominate your experience! You! Your mind screams: this is not me!!! Whatever you see and feel: this is not me!
You have always been alone!
And you remember the small details: the conflicts, the love, the hate, the anger, the pride, the shame, the guilt, the lies; …and the fear! That sneaky fear that remained under your radar but you always felt and that you let yourself get used to; all the instances when you forgot, fell asleep and let yourself be used by thoughts and emotions that you never owned.
You were owned!
You have been weak and stupid. You just didn’t know!!! The question of control never even came up. Your whole life was a void and now you see that it amounted to nothing. Only now that it’s gone it has become clear: this moment is the point. This moment has always been the point from the very beginning. What will you do? What can you do?
Are you going to fall asleep now or triumph?
Nobody really understands the greatest minds without this vantage point. Without experiencing this ultimate struggle, everything is just an abstraction, an illusion.
Marcus Aurelius starts his thoughts by taking stock of what he learned from whom. Taking stock of the “small things” where control and balance must be exercised:
Taking the time; thinking before speaking; not to speak unnecessarily; being considerate; not to get angry because of small things; not to be judgmental; not to daydream; not to be passionate; not to succumb to fame and fortune; how to receive compliments and criticism on an even keel; acting in accordance with one’s own nature; not to identify with others, not to be concerned with what others think, understanding and appreciating differences and many other things that require you to use all your powers to preserve yourself, just like on your death bed when it becomes clear what the stakes are.
The greatest lives and the greatest works all exude an intimate aura of death.
This vantage point is what turns mundane activities into rituals and this is what makes the differentiated man. NOT the 80/20 rule, not the ability to introduce balanced scorecards, not the brand message (God forbid: personal band), not executive education programs, celebrity coaches or books by Steve Jobs or Jack Welsh, not a dedication to perfection in product development, not the value investing “philosophy”, not anything in the business domain: these are just settings.
I have really no idea how to finish this one. Now I am going to write business proposals, have some business meetings, the usual stuff. Hopefully I’ll manage to bring an element of life into the whole thing.
L.I.F.E. KPI’s (Newborn Screening) for Startup Leaders
By Eric Bilginoglu
Last week, writing about “Why Corporate Startup’s fail too early in Emerging Markets”,
http://expatlifetoolkit.dinstudio.com/diary_6_2.html
I promised to come back with L.I.F.E. KPI’s with tested and proven correlation to personal and professional success of your Startup Leader in an Emerging Market.
So, you have your Startup leader in place and (s)he has passed the first 15 DAYS test by displaying determination and good signs of adaptability to the new country and the task, or at least, anything indicating the opposite was not diagnosed…now what?
Now, you are ready to further stretch him/her by giving the list of the KPI’s you will measure at the end of the 3rd month.
3 months may sound too ambitious or too soon to some. Let me explain why it is not:
Just like the life of a human, the lives of businesses also show the biggest number and speed of changes/development in the early days.
Drawing the analogy, I will call this First Quarter set of KPI’s, “New Born Screening” of the business.
For those who are not familiar with this term or those who have not yet gone through this nervous but rewarding experience of having a baby, let me give you the quote from Wikipedia:
“Newborn screening is the process by which infants are screened shortly after birth for a list of disorders that are treatable, but difficult or impossible to detect clinically. Whole blood samples are collected from the infant’s heel on specially designed filter paper and then tested for a panel of disorders. The disorders tested can vary from region to region, based on funding and the prevalence of a condition in the population.”
You see the analogy, right?
We are looking for “disorders that are treatable or fatal”.
NBS is done as early as in the first week of the life of a newborn and it diagnoses (if any) the metabolic, hormonal or genetic disorders that would affect all the rest of the life.
Similarly, the “test” you will carry out at the end of the 3rd Month of your Startup (Leader) will tell you what kind of problems might be waiting for the business.
Of course there are certain challenges in terms of measurability (interpretation) and standardization (country to country) of KPI’s I will list below, for now I will keep it simple and tell you some of the KPI’s which I throughout the years, found reliable enough to see if the Startup Expatriate you have parachuted to an emerging market, is good enough to live, work and succeed in a different culture.
Expectedly, my 4 KPI’s are related to 4 pillars of my Toolkit, this Blog is dedicated to; namely:
L anguage I nteraction F un E mpathy
For those not familiar with my L.I.F.E. acronym: http://expatlifetoolkit.dinstudio.com/diary_1_1.html
LANGUAGE (weight 25%)
KPI: The number of learned idioms/proverbs in the local language.
Give him 2 minutes to list the idioms/proverbs in the local language and the meanings thereof in English.
Anything above 7 is OUTSTANDING (4 points)
Anything above 5 is VERY GOOD (3 points)
Anything above 3 is ACCEPTABLE (2 points)
Anything below 3 is POOR (1 point)
OR
KPI: The number of local TV/Radio shows whose concept and presenters can be listed
3 is an O (4 pt.’s)
2 is a V (3 pt.’s)
1 is an A (2 pt.’s)
0 is a P (1 pt.’s)
INTERACTION (weight 25%)
KPI: The number of Locals (except colleagues, business partners, service providers (housemaid, gardener, etc…) whose names and relations (s)he can name in 45 seconds.
Anything more than 7 is an O (4 pt.’s)
Anything between 5 and 7 is V (3 pt.’s)
Anything between 3 and 5 2 is A (2 pt.’s)
Anything less than 3 is P (1 pt)
OR
KPI: The number of local traditional dish, listed
3 is an O (4 pt.’s)
2 is a V (3 pt.’s)
1 is an A (2 pt.’s)
0 is a P (1 pt.’s)
FUN (weight 25%)
KPI: The number of leisure time activities carried out in the last three months with the family (if applicable) with locals.
Anything more than 7 is an O (4 pt.’s)
Anything between 5 and 7 is V (3 pt.’s)
Anything between 3 and 5 2 is A (2 pt.’s)
Anything less than 3 is P (1 pt)
OR
KPI: The number of Local NAMES, famous (known) to be leaders of the field (s)he is interested in, listed. This may be anything from Music to Football or Cooking to Aikido.
3 is an O (4 pt.’s)
2 is a V (3 pt.’s)
1 is an A (2 pt.’s)
0 is a P (1 pt.’s)
EMPATHY (weight 25%)
One note here: Most of the clinical methods involve about 60 questions asked to be answered by the person to measure the Empathy level, while I find this pretty biased as most of these questions are easy to be manipulated (sometimes simply by the sub mind) to reach the “desired” result, so I will more focus on a “narrative” method. This way, you will not only have measured the level of digestion of the empathy as a concept, but will also see the level of efforts to learn and interact with the Locals.
KPI: The number of local habits, attitudes or believes (political, cultural, religious) which is culturally NEW, but the reasons to which are understood and explained.
3 is an O (4 pt.’s)
2 is a V (3 pt.’s)
1 is an A (2 pt.’s)
0 is a P (1 pt.’s)
OR
KPI: The number of historical events in the last 100 years, which one may think, changed the life styles or political landscape of the country and people, listed.
3 is an O (4 pt.’s)
2 is a V (3 pt.’s)
1 is an A (2 pt.’s)
0 is a P (1 pt.’s)
As you may have noticed, almost any of these KPI’s could be written under any other pillar of L.I.F.E.. There is nothing surprising about this. As I wrote in my introduction, all these pillars interact with and define one another.
Two important remarks here:
1) It is important to declare what you will measure soon, so that (s)he has the time to STUDY.
Yes, you hear me right…I want the manager to take his/her time to study and (YES!) manipulate his/her results. Let him/her go and talk to people or use google to come up with local idioms/proverbs or go and read some local history/culture books to come up with examples of areas the cultural differences/peculiarities exist or organize leisure activities to get to know more local people.
Don’t reveal the pointing system you will use, though, so that it will still depend on his/her will and efforts how many words, activities, people or empathy points he/she will come with!
2) Just as for the TECHNICAL Business KPI’s, these SOFT KPI’s should also serve not only measuring things at a given point of time, but more importantly developing performance of people and organizations through a gap analysis, so the overall result of these 4 KPI’s should also be shared with the Management along with a proposed action plan.
If the overall score is anything but 4, this means there is room to perfection, so the Manager should be told to focus on the relatively weaker areas to improve the performance.
If the score is less than 2, this is an alarm bell, so the following three months should be used for observation of the business results. If you see resignations in the team or complaints from team members and/or Business partners, you should be considering a change there before it’s too late and typically this is the first 6 months of the startup.
The more you wait “to see”, the bigger is the threat of a failure, so ACT in a robust and quick way!
Original post: http://expatlifetoolkit.dinstudio.com/diary_6_3.html
Why Corporate Startup’s fail too early in Emerging Markets
By Eric Bilginoglu
I’ve seen a dozen of Emerging Market entries by Big Multinationals in the last 10 years, which had to go through turnarounds or drastic management changes as early as in the first two years.
A pattern repeating so often cannot be a coincidence, can it?
When one analyzes the way these start-up’s were “realized”, a list of typical common points is easy to catch:
Mindset: Most of the time, Headquarters or Regional Head Offices see these “new offices” as “nice to have” ventures.
Leadership: With a mindset defined above, it’s not expected to see real movers sent to take the start-up jobs. Companies rather send to these “bumpy” roads, people who are bored or jammed in the corporate promotion ladder.
Team: A leader sent to “take care of” the businesses would simply end up being a “care taker”…doing trivial searches and bringing in people who have mainstream management skills, instead of looking for movers with “make things happen” approach.
Unbearable lightness of having excuses: Excuses are life vests of Emerging Market Start-up (mediocre) teams. It’s typical to hear the team –starting from the leader- constantly murmur about “how difficult it is to operate in this corrupt country”, “what a big challenge it is to overtake the legal/bureaucratic/cultural hurdles put on the track”, “what a bunch of lazy peasants they have to deal with”, “what a vampire the distributor/ dealer/supplier is”, “how difficult it is to educate the receptionist/secretary/plumber…”, etc…
Certainly, some or most of these excuses might have a ground; but hey, the job of the leader and the team is to “make things happen”, right? Wait…yeah, the mindset…
One of my ex bosses who had earned himself a rightful nickname of “pitbull”, used to say: “Once you start listening to excuses, start preparing a really good list of excuses why you failed or simply sit and write a resignation letter…”
I can hear some of you, shaking their heads, say: “What about support from Head Office?!”
NO! NO! NO!
If you are not a self energizer, able to do the right things yourself with your team (YOU have gathered) (yes, you DO need the best team!), without any mentors or instructors thousands of miles away, simply do NOT take the job!
Start-up’s are all about speed and efficiency.
You’re only as speedy as the speed of your hiring and firing in a start-up.
The most crucial phase of a start-up is the first couple of months, not more!
Being late for a date is bad. Being late making decisions during a start-up is fatal!
So, what are the key elements of success for a start-up?
1) Send the best, not the bored!
Make sure you send your best people to Start. If You think that venture in that exotic country is just a try or an adventure, simply do not enter that market and focus on your plate…If, you really want to create a sustainable and profitable business there, find and send the best! Make it clear and agree before giving the job offer, that you will accept NO excuses whatsoever for failures and the DECISIVE assessment will be as early as in the first three months. Whoever will sign under that is either CONFIDENT or DESPERATE and these both are great qualities for a Start-up Leader.
2) If you are not sure that you have the best person there on the job (you should have been, but anyway!) Schedule a 15 minutes (NO MORE) call with the leader you sent there at the end of the first month. Do not ask questions, just listen:
It’s BAD if he/she starts the MONOLOGUE with complaints about meals, traffic, polluted air or unhappy spouse… It’s WORSE if he/she mentions challenges only without talking about opportunities or ways of making things happen…
Well, if he/she gossips about skills and competencies of his/her team, just hang up and call the HR!
3) Once the 15 minute test is passed, give him/her a list of very clear KPI’s to be fulfilled till the end of the third month.
Do I sound cruel? Let me tell you what is cruel…
It’s cruel to waste millions of dollars of the corporate money to TRY something you are not sure you want!
It’s cruel to exit a market a year or two after your entry ruining your corporate and brand image!
It’s cruel to lay off people for simple management/leadership defects!
It’s cruel to send (and destroy the life and career of) someone, who is not able to use a water gun, to the front!
You want to know more and get a list of “out of the box”, S.M.A.R.T. and proven KPI’s? Then be back here on 14.11.2011 to read my next article…
Keep up the good work till then!
Original post: http://expatlifetoolkit.dinstudio.com/text1_4.html
Critical thinking & corporate jets. SAP’s head of HR steps down
When an executive leaves after one year, it means somebody failed.
In this case the official version is that Angelika Dammann left for personal reasons due to increasing criticism about her use of the company jet for personal reasons (to fly home to Hamburg).
Who or what (could have) screwed up?
The board?
The board hired her. Fact is: boards often hire people without any concept and/or for the wrong reasons. The reasoning maybe have gone something like this: our new vp of hr should have 20 years progressive experience at F500 companies. A woman would be ideal so she can lead our diversity initiative… The reasons are always easy to explain, the concept is almost always missing!
Maybe the board followed a herd mentality:
More and more DAX concerns are launching gender quota initiatives and the peer pressure is increasing: Angelika Dammann was the first woman on SAP’s board. Maybe the board felt it was high time to bring one in… this is certainly a reason, but not a concept!
Hypocrisy?
The F500 is hypocritical; paradoxical as it may sound, there is nothing wrong with facing this! There is no such thing as a perfect organization in a business setting. C teams are following their own careers and there is no such thing as “common good”; it’s a zero sum game. Employees with or without equity and no control over the company’s direction may certainly be pissed off when the VP of HR is flying home on the company jet while she managing layoffs; the fact that she’s making approximately half the money than other members of the C team doesn’t make them half pissed off. The definition of leadership in such an environment is somewhat adjusted to one’s own interpretation.
She brought defendable and applicable experience to the role and she cut a deal with the board. The deal with the jet for private use was supposedly for 1 year; barely enough time to create corporate videos about SAP’s female board member. Trying to extend it may have the last drop in a glass that was already full.
Renegotiating deals is totally normal and it always ends up positively when both parties perceive the value more or less the same way; this requires critical thinking! If one party is out of whack, there is no deal. It’s difficult to judge from where I am standing who was out of whack in this case, but this deal did not happen.
Although I am not aware of any scientific studies on the relationship between wanting to include the commute home with the corporate jet in the compensation package and over-estimating one’s own worth (commonly referred to as ego issues or princess syndrome), I think it’s not unreasonable to assume that her ego could have influenced her critical thinking in this case.
Official statements are always a coverup. This one is all about the corporate jet; the real reason is always much more interesting and important (especially for investors), although often much less colorful like not fitting in, not performing, being framed, personal agendas, etc.
What’s next for Angelika Dammann?
Quite fashionably: doing coaching and mentoring until her next corporate gig. That maybe tough considering that the market of potential clients who can afford to provide their coach or mentor with a jet AND think that they need coaching is not that big ….
Engaged but unbiased? the CrunchFund controversy
Quickly about what’s going on: TechCruch -acquired last year by AOL for apprx. $30M -is one of the most read blogs on technology and venture capital in the world. Michael Arrington started the blog in 2005 to cover tech startups, throw parties in his house for founders and VCs and build influence.
Now he raised $20M for a fund he’ll manage. Half the money came from AOL, the other half from top tier VCs (Sequoia Capital, Kleiner Perkins Caufield & Byers and Greylock Partners, all regularly covered by TechCrunch of course).
The move triggered tons of criticism obviously because of looming conflict of interest scenarios.
Arrington’s points:
- he’s not a journalist
- full transparency: they’ll note in the coverage if they are investors; things he has always done as an angel investor
- you don’t need to be an investor to be biased
Before I move on, a quick reaction to these points, noting that a lot of things have changed in the past week since I wrote this post, including Arrington being removed from his post at TechCrunch:
He is not a journalist. I think TechCrunc, like most blogging platforms never intended to challenge journalists, or investments analysts for that matter. BUT they are in the business of technology and startups, part of the scene. They are in the information business, which no longer belongs exclusively to the journalistic domain; and I think everybody’s clear about this, including their readers and advertisers.
Another important point: the Silicon Valley is tight knit community: everybody’s involved, so being a classical journalist who covers this ecosystem (reporting the facts objectively) must be incredibly difficult, if not impossible! And this pretty much takes care of the 3rd point Arrington made: I completely agree.
Regarding transparency: I regularly read blogs from (other) VCs, too who communicate their personal opinion on companies including the ones they invested in, always disclosing that they have a vested interest: I know: this is not supposed to be their business…but is this really true? Just because there’s no advertisement on their blog, it means it’s not their business (to influence)?
And now I am going to say something that is even more controversial:
I can’t help noticing analogies between my business and TechCrunch:
I believe that a consultant is much more credible if he’s engaged (financially, too) and if he goes beyond mere fact based reporting/analysis. I value executive search consultants for example who sit on boards of companies and/or are investors themselves (managing conflict of interest scenarios transparently, of course).
Talking about the Silicon Valley, a good example to mention is Ramsey and Beirne (now Kindred Partners, after David Beirne was brought on board by Benchmark Capital in the late 90’s) that accepted equity in the companies they searched for. But I believe that this can be taken to an even higher level, like search guys making angel investments or acquiring companies, etc. In fact the best value maybe realized by people in the leadership business exactly in such scenarios.
I think nothing of consultants (search, strategy whatever) who follow the “learn & repeat formula” everybody else is following from the time they are 23 until they retire: there’s absolutely no perspective they can add to any situation.
And now the philosophical part:
I am convinced that you can’t be fully engaged without being completely detached!
AND
If you try to be detached without being engaged, it means you’re dealing with abstractions you don’t understand – no matter how successfully you managed to position yourself as an “authority”, you’re not authentic, to put it mildly.
Image source: http://seocollege.org/news/?paged=2
The right view on peak leadership performance
For peak leadership performance it is imperative that the CEO brings perspective, independent thinking and qualitative experience into a synthetic whole.
Perspective means a vantage point above the system which includes the strategic environment as well as the company and its internal systems; independent thinking means the ability to connect the dots others can’t. Once these are in place we can talk about qualitative experience as opposed to one that is largely based on routine.
It’s easy to see that there is a hierarchical relationship between the qualities of perspective, thinking and experience in that there is no experience without independent thinking and vertical perspective and there is no independent thinking without vertical perspective. Perspective is defined by world views.
Today there is a uniform world view represented by the majority, which essentially makes independent thinking impossible and churns out almost exclusively quantitative experiences.
This uniform world view gave birth to the conventional career path: rise from the bottom to the top. The prerequisite for entering this path is to have the same world view, in the course of “rising” any remaining trace of independent thinking is liquidated and routine is pervasive even in the highest echelons of “leadership”.
I am only aware of one exception: entrepreneurship when the founder launches, builds, aligns and sets limits(!) to the organization based on an authentic innate vision.
If there is any compromise on any of the main principles, leadership is lost.
Also: as we can see, vertical perspective, independent thinking and qualitative experience are closely related with perspective/world view being the foundation.
This means for example that if the proverbial visionary founder/ceo has built up a successful company, he’ll have to recognize the exact point in time when he has to stop growth (set limits). If growth continues “indefinitely”, it means that his perspective has been compromised: it has been adjusted to purely quantitative considerations; we can no longer talk about leadership.
Radical, eh?! A child can draw the conclusions. So what’s the point in making this point?
Simple: to provide perspective.
With the right perspective acknowledged and “internalized” qualitative elements maybe introduced even into public companies, not to mention startups or mid sized businesses… who knows: some businesses may take leadership positions, going against the mass.
Even one drop of quality makes a huge difference.
Money can’t buy leadership – the airbnb case
Airbnb, one of the hottest startups coming out from the Silicon Valley, faced a very simple leadership challenge recently: one of their customers’ home was destroyed and her identity was stolen by another airbnb customer. She blogged about it and it went viral.
I’d like to stop here to offer some facts for those who don’t follow the startup scene closely:
Airbnb, an online rental agency that let’s people rent their apartments out to other airbnb customers, was seeded by the most innovative incubator Y Combinator, then the first round of financing was lead by Graylock Partners and Sequotia Capital and most recently by Andreessen Horowitz, Digital Sky Technologies and General Catalist Partners, bringing the valuation of the startup to an impressive $1.3B. Even Ashton Kutcher got in with some undisclosed money. ALL TOP TIER VCs (with the exception of A. Kutcher), investing a total of $120M (minus a few cents) into a team of 3 guys in their late 20s, early 30s, mostly with design and engineering background (not that age and background matters from a leadership perspective, of course).
Needless to say that with such celebrities behind it (and I don’t refer to Ashton Kutcher), the company has been a media darling from the start. This is important because they could have leveraged the media to manage the crisis that broke out….but they didn’t.
So how did this stellar team decide on the appropriate response?
One of the founders called the customer to explain the VC business to her and their concerns about the recent round of funding (over $112M) as well as about the company’s valuation and kindly asked her several times in the course of this conversation and subsequent emails to remove her blog post. Seriously! That’s the best they came up with.
In the meantime they managed to alienate the media, as well. Mike Arrington (founder of Techcruch) who is the designated tough guy in Sillicon Valley, picked up the story talking about airbnb not helping the victim.
What did they do?
Paul Graham (the very well respected y combinator guy) goes on to write a blog about Arrington bullshitting and the customer not being 100% truthful. I assume he made this move after pragmatically thinking about risks and options!
Arrington is a guy who loves such responses and he did what was expected of him: counter attack plus launching a story of another AIRBNB VICTIM.
I don’t continue with the chronology of the drama, just the last move: they came up with an official apology for letting the victim down, etc. plus introduced a new safety measure; standard stuff that reads like it was written (copy pasted) by a jr pr consultant then edited by somebody at the company; not important.
It’s funny to observe this very simple pattern: if there is no leadership present in an organization, the most simple stuff (what’s the right thing to do) triggers the biggest confusion. $120M can buy administrative power and of course fix problems like this disaster, but it cannot buy one instant of leadership.
Story source: Lawrence Aragon PEHubwire.