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Category Archives: People Management

Is your Startup Ready for Titles?

3 Comments Posted by on December 11, 2012

In a startup things move constantly, roles change and within a few months people swing from one side of the spectrum to the other depending on their immediate needs. This works well when the team is small and people feel ownership of the whole project.

I’ve had multiple roles in Mirametrix, being the product manager a marketing manager and a sales manager when needed. The same happens with my sales team, who sometimes gets stuck creating landing pages or doing technical support. My engineers don’t only develop products, but do customer support and social media networking.

This creates a perfect balance of tasks for each person, which keeps their job interesting. It also adds a lot of value during discussions because everyone is involved and understands what’s happening. The feedback loop is much richer in ideas and suggestions.

So what happens when there are major organizational shifts and titles are assigned?

Spoiler alert: Potential synergy crashes ahead.

Titles are roles that come with expectations and meanings that vary between people and organizations. And they can cause stress and friction in places it didn’t exist before, getting in the way of your team’s interactions. If software developers are told that they should focus on product development for the next few months and that the product manager will be supervising the execution and deadlines, that can translate into something like: screw all the social media work that I’ve been doing!; if I’m going to get asked about every task I’m doing, I will just code from 9 to 5!

OOPS! Now that official titles are assigned, people are Googling titles and only doing the tasks that are listed under them. This will kill your startup energy!

This happens in relationships too! Transitions between dating, to serious relationships, to moving in together, to marriage can makes things and people behave in an entirely different way because of their notions and definitions of what these things are. I’ve been in relationships for years where everything was working perfectly, and we both took our share of responsibilities, while being very flexible with the other person and what they wanted to do.  It was like we understood each other without even talking and things just happened (this is the same feeling you want to have in your startup!). And then for some reason when ‘marriage’ comes into the picture, you start hearing job descriptions like: “As my husband you should be paying for the house” and “as my wife you should be doing the dishes”. You know this relationship is in for trouble!

But titles are given for a reason (they provide a communication roadmap), and especially as a company grows, it is something your team will need to deal with.  How do you navigate through this?

Communicate. Don’t be so naïve as to believe that your team won’t be affected by this shift.   This is where communication is critical to keep your startup alive and successful. Make sure you carefully chose your words and instead of ordering things to be done as a dictator, engage in a discussion where everyone is welcome to bring their ideas and opinions to the table. It’s important to also listen to others and make decisions that are informed by your team’s experience on the ground. The most effective problem solving starts with a clear understanding and analysis of the current situation, followed by a single question “What can we all do to achieve our objectives.”

Don’t let titles define your team. Titles don’t define who you are or what you can do, and they don’t define other people either. You might think that a specific person should do a specific task because of their title, but that may not be the best way to get things done. Don’t forget that every member of the team ultimately has the same goal in mind “building a successful company.” Be clear about what needs to be done and let the synergy happen.

Recognize that roles change. Titles may not change often, but roles do. Even if responsibilities change, act under the same principle that you did before: when you see a problem, fix it, as you always did. Encourage your team to do the same. If you have a good team, you can trust that people will want the business as a whole to be successful. They will take on the tasks they are more comfortable doing, but they will also do what needs to be done even if it’s less appealing to them. They did before, so there’s no reason they can’t now.

Take the time for team building.  Find a way to remove the stress and electricity from the situation. Before being titles, you are people and need to remember that not that long ago, everyone got along. Do something that will allow people to connect again on a personal level. Not everyone needs to be best friends, but people need to see the human in each other. It will help your internal communication when you are speaking to a person, not a title.

Oh and you might get requests to hand out new titles now that people realize that they’ve been doing more than what their Googled job description includes. Avoid doing it. Inflated titles become a danger to your startup. Do make sure every job description includes: ‘Additional tasks and responsibilities as determined by the company’s needs.’

People Management , , ,

Why does hiring feel like dating?

1 Comment Posted by on October 23, 2012

You are managing a startup. It is growing quickly and you have personally become the entire human resources department. And admit it, you under estimated the time it takes to find the right person who will understand the business vision and fit in with your culture. Are you meeting one candidate after another? Asking the same questions over and over again? Are you wondering if you are too picky? If it would just be easier to just hire at random?

Ask yourself, would you decide to marry someone at random? At the size of a startup, finding the right employee is really like choosing a life partner.  So here are my tips for making a good choice in hiring and dating.

Advertising – Putting yourself out there

The first step is looking at your startup’s needs. If you don’t know what you’re looking for, how will you ever know when you’ve found it?  What are you willing to make concessions about and what are the deal breakers? Make sure that you can separate the skills and experience you absolutely need, and those you can train them on.

Being clear about what you want and need will help you figure out where you need to look for this person, and how you communicate about the position.  Meeting someone at a club is not like meeting them through mutual friends, just like there is a difference between getting a standard response to a kijiji ad versus a colleagues’ recommendation.  Sitting in your office and waiting for recommendations, on the other hand, won’t get you any results.

It’s also important to send the right message.  Showing cleavage might get you a one night stand, but may be a waste of your time if you’re looking for a serious relationship. If you’re recruiting for a demanding startup environment, don’t make it sound like everyone has a casual 9 to 5 workday to attract more people. Set the right expectations so that you don’t waste your time on people who aren’t interested in the opportunity you are offering.

CV review – Do I call them back?

You don’t have time to date everyone, so some pre-selection is required.  The first screening criterion is always interest in you. Check if the applicant actually made an effort to understand the position and the business, and impress you. If they don’t care enough about making a good impression, they probably don’t care enough about your company.  And if they did, they don’t know how to communicate it, which will be a problem in itself. I always fall for someone who took the time to read my blogs ;)

Does the applicant’s history and career goal make sense for the startup?  The serial large company IT employee will add little value to your startup of five if all they are interested in is a salaried job managing the company’s IT infrastructure. You are looking for someone who can meet your needs, and whose needs you can meet as well.

Are they currently in a relationship/job? Why are they cheating?  Do some background research on the company, and try to investigate their policies. The reason they are leaving their current job can give you valuable insight into what they are looking for in their career. You don’t want someone cheating on you in a few months.

Are they stable, or have they been jumping around from one relationship/job to the other? Have they been able to keep a job for more than 6 months at a time? Red flag this as a question for the interview.

The Interview – AKA Dating

At this stage of the game, you are trying to find out where the CV description and reality meet. How much leadership experience have they had, and how much do they want? What are their ambitions and goals? Are they aligned to yours? Do they want children, how many, and when?

What personal values do they have? Do they show integrity and respect? You want your business culture to be built on the right foundation, and the people on your team, especially in a start-up, are that foundation.  Talk about your company’s objectives and values.  Do they show sincere interest, or seem disinterested or skeptical?

Can they communicate clearly?  Everyone will tell you that communication is the key to a good relationship. Believe them, it’s true! You can never over communicate things to your team and you need someone who can understand and communicate back effectively.

Will they be there through the ups and downs, or just bail out at the first obstacle? Determination is really important in a startup.  There is a lot of work, a lot of risk, and you can’t count on a short term payoff. You need someone who will be motivated by the long term vision alone and not ask you for recognition every time they pick up the dishes. Walk them through your work environment, introduce them to other members of your team, and show them in as demonstrable a way as possible what their day to day work will be like.

Are they smart and challenging? Will they teach me things? You want the business to grow, which means you want someone who can help you grow it. No one will be perfect, but it is essential that they will push you and the company to the next level.

Does my team like them? Can they work together effectively? In a startup your team is like your family, and they may spot warning flags you’ve overlooked.

So you’ve made it through your battery of questions and man, this one is a keeper! You’re both more excited by the end of the interview than you were to begin with, a clear sign that there’s some real chemistry here.

So why are they still single? Ask all the hard questions, and make sure to check their references. Did they quit or get fired? Why? Does their interpretation of their abilities match their coworkers’ perspectives? Beware of those that would accuse others for all failures and credit themselves for the successes. This is not the sign of a team player or effective leadership.

Happily Ever After

Recruit for the best, hire the best, and invest the time to build the team your startup needs to succeed.  A startup team can be like family after all, you just get to choose them ;)

People Management ,

Building the Future of Ladies in Science

Leave a Comment Posted by on October 16, 2012

The issue of women in entrepreneurship and technology has been a bit of a preoccupation for me in the past few months, largely because despite our company’s commitment to diversity, we get very few female applicants.  Where are all the ladies who want to build businesses and work with cutting edge technology? For whatever reason, at the intersection of VC investment and tech women are underrepresented.

And so, as the academic type that I am, this weekend I had the good fortune to find myself at the McGill Women in Science, Engineering and Medicine Symposium in celebration of Carrie Derick, who became Canada’s first female professor.  The event seemed all the more a propos given the recently published US study finding that both male and female scientists rate CVs with a female name lower than the same CV with a male name on applicant’s perceived competence, hireability, and mentorability. The starting salaries respondents would be willing to offer the CVs with female names were also significantly lower. Ouch.

But I think the challenge for everyone, in and outside academia, is to understand how to tackle these largely unconscious biases we all have.  Because ultimately, in the words of NSERC President Suzanne Fortier, “The future is not for us to imagine, but for us to build.”

The female scientists who spoke at the symposium generally did not feel actively discriminated against, and all of them felt they were able to have successful personal as well as professional lives.  But, if I dare lean on the anecdotal science of Julie Payette (Astronauts are the best), the struggle is no longer for the top 10%, it is for the majority of people of average aptitude, and it is for the very definition of ‘normal’.  Our prejudices (gender or otherwise) actually have a whole lot to do with what we have learned from experience is ‘normal’. Until we approach gender parity in any group, our idea of the ‘norm’ for that group will be biased towards the dominating characteristics. The further a person is from that model of the norm, the more questions will be raised about how well they fit into that group, whether those differentiating characteristics are relevant to goodness of fit in that group or not.

Diversity has to be part of our reality before we will fully overcome our biases.  For those of us with influence over norm defining decisions (hiring, for example), that means we really need to be on our toes if we are going to create this kind of diversity. And why shouldn’t we?  There are very real benefits to diversity, from more intelligent organizations, to access larger talent pools.  We also need to prepare each other for the reality that overcoming these biases means work.

What appears to be the biggest problem for women in the more male dominated science and engineering fields right now is that while those females who make it into an undergraduate program tend to drop out along the educational trajectory at roughly the same rate as male students, very few enter into undergraduate degrees in technical fields to begin with.  You can’t help but wonder what that says about what girls are experiencing in the formative years leading up to their higher education decisions, and what inadvertent biases lead girls and boys to have very different learning experiences and opportunities. Things like recruiting boys for robotics, without approaching any girls (Don’t worry young Katie’s like me will butt in and volunteer themselves, but they’re not the only ones that could benefit from the opportunity)?

An especially poignant moment for me during the question and answer period following Payette’s talk, a young woman in the audience asked her how she dealt with self-doubt.  Payette’s response was one I never expected any human being to give; she said she never doubted herself, she just focused on her goal.  She largely credited this self-confident to very supportive parents.

Remember the stencil days?

That’s the self-confidence I want every child to grow up to have, so that they can take the risks achievement in business or academics requires, accept failure as part of the learning process, and spend their energy where it matters most – on being awesome (as an astronaut or otherwise).

Oh yeah, and make sure your daughter is proud of her grade 1 science project, even if she doesn’t get 1st place.  She was more interested in kaleidoscopes than competition anyway.

Entrepreneurship, People Management , , , ,

Working Towards a Project Launch

1 Comment Posted by on August 21, 2012

When Kennedy said “By the end of this decade, we will land a man on the moon and return him safely to earth,” he should be: Concrete.

Goal

He could have said “We should aim to dominate the space race.” But what would that mean? Sending a monkey to space? A human being? An ant colony? For how long? And how far up exactly?

So, which of the two statements remind you more of your project charters? Chances are the latter. People have a tendency to avoid details whenever possible, because it means they just committed to something: “Better keep it light.”

But by “keeping it light” and avoiding details (“I can always fill them in later”) you introduce room for ambiguity. You may know (or think you know) what “space race” (or the equivalent) means. But so will everybody else on your team, and what you will really end up with is 24 different definitions of “space race”.

Kennedy gave a clear definition of WHAT needs to be done (putting a man on the moon and bringing him back – I’m sure the crew of Apollo 11 was especially glad about the second part of the phrase), using unambiguous language: There’s no ambiguity about what “man” or “moon” means.

Imagine one of your employees at a BBQ at a friend’s place (Really. Do it.). When a friend walks up to him and asks, “So, Mario, what are you working on?” What will your employee answer? Does he have an answer? And when Mario answers, will his friend understand what on earth he is talking about? If not, you sucked at giving a concrete project goal. “I am working on the space shuttle toilet that will bring a man safely to the moon and back by the end of this decade” – that’s what your employee should be able to say.

Timeline

JFK also gave a clear WHEN: “By the end of the decade.” Not much time to build a space program, but at least the engineers had a clear goal in mind. Giving your team a very specific, detailed goal is a huge motivator. “Winning the space race” might sound like an Olympic discipline, but you will find plenty of things to distract you from making the 2012 Olympics if you think that being ready for 2016 will do fine.

After the WHAT and WHEN, the last thing to drill down to is the HOW. JFK didn’t say anything about that, so here’s your chance to out-do JFK (and how many chances to be better than Kennedy do you have? Exactly.)

Guidelines

Now we’re getting into project plan territory: translating those terrifyingly concrete objectives into an actionable and achievable plan. Yes a good project plan should specify how many people you need to work on this project, but also if they are senior or junior employees (This will make a lot of difference for what your execution expectations can be). Also, does it provide clear measures of success? What color must your product be? What size? What weight? Add as much details as you can. You can ask early, and come to an agreement on your project’s criteria for success, or you can find out later when you haven’t met people’s expectations. Discussions are not bad. They are a sign that everybody is paying attention.

Beware of project plans that are accepted by everybody without a question. In fact, beware of project plans that were written without asking a million and one questions.  If that groundwork dialogue has not happened, chances are that the people involved have, or will, “customize” the specs to what they THINK, which is, I can guarantee, NOT what was originally in mind.

  • If you describe the WHAT, you give your team members a goal and open a source of motivation.
  • If you tell them WHEN, they know what is expected of them.
  • And by clarifying the HOW, you give yourself some peace of mind, and everyone involved actionable guidance.
  • And always, always, be as concrete and detailed as possible.
People Management , , ,

On Communication, Dentists, and Project Management

2 Comments Posted by on July 24, 2012

Cartoon by Pablo Helguera

A couple of weeks ago I found myself in a situation that we all fear and try to avoid as much as possible: I was lying in a chair while a complete stranger poked around in my mouth with instruments that seem to have their origin in a medieval torture chamber (and not having had evolved much since). No matter how much reassurance my mom gave me as a child, I still can’t help but think that visits to the dentist should be reserved for one of Dante’s seven circles of hell. But there I was, so in order to distract myself from the scrapping, poking, drilling, and hissing coming from my general mouth region, I tried to figure out why people hate going to the dentist so much. Surprisingly, my conclusion has a lot to do with one of the most important parts of project management – communication.

I’m sure you have all heard tales of projects drifting off due to miscommunication between the stakeholders involved. Every project manager gets drilled on communication from the very first day on the job. However, there’s a difference between knowing and doing. Some might think that communication isn’t such a big deal – emails are being sent, meetings are held, so, therefore, communication is taking place. But that’s what your dentist thinks too.

In my case, the dentist mumbled something of “root canal” and “don’t worry” and “tell me when it hurts,” and merrily started to drill away. I had no clue what was going on, what the plan was (if there was any), what I should be expecting, and what exactly the problem was that the dentist tried to solve. And the tubes coming out of my mouth, combined with a mechanical device that kept my mouth open, kept me from asking questions – all I could do was raise an eyebrow and wait for the pain.

Chances are high that I am committing the same mistakes as a project manager. As I’m primarily responsible for planning and goal setting, the plan is always crystal clear for me (just as the treatment is clear for the dentist, hopefully…). This does not mean it’s clear for the rest of the team however. As a project manager, it is your duty to make sure that all stakeholders have the information they need to make informed decisions. Here are some tricks that are hopefully helpful:

1. Be open

Don’t assume people ask questions when they have questions. I’m sure you know this phenomenon from your High School days: You had no clue what the teacher was saying, but you didn’t raise the question for fear of being considered stupid. The same happens with your team. Make sure to create an environment of trust where people feel free to ask questions when they have them… and are encouraged to speak even when they don’t.

2. Over communicate

In my experience, people will tell you very fast when they know and understood what you tell them. However, they won’t tell you when they don’t (see above). A very basic tool is to just repeat information in different formats, for example via mail and in a 1:1.

3. Focus communication

Not everyone has to know everything. The sponsor, for example, doesn’t need to know about every single line of code that has been written. Make sure to have a communication plan in place that helps you identify the different levels of information required by and from receivers and givers, and validate that all team members are receiving the information they need in an appropriate way.

4. Get personal

Nothing can beat a personal conversation. Try to talk to your team members face-to-face as often as possible. If your team is spread around the globe, have video conferences (emphasis on video). Miscommunications are often more readily identified and clarified in person.

5. Choose the right channel

Not all tools of communication are interchangeable. Distributing meeting minutes via phone makes as much sense as giving someone a performance review in a public meeting. These examples are exaggerations, but chose communication channels carefully. The “Who? What? Why? What priority?” questions are a great help to define the right way to spread information.

People Management ,

How Incentive Models Skew Behaviour

4 Comments Posted by on July 19, 2012

I have been on a bit of a kick about employee incentive plans lately, and observed an interesting trend earlier this year while we were looking to hire a CFO here at TandemLaunch Technologies. Based on the limited sample of a few dozen finance executives who I interviewed, it appeared that such people in Montreal receive fairly large base salaries, but very little equity (in many cases none). Now, the bulk of the candidates had all worked in start-ups from 10 to at most 200 people so this surprised me a lot. I started my entrepreneurial career on the west coast and the model that I’m familiar with is a blend of low compensation and high equity stakes. A start-up might pay their junior level people at market because, well, they have to eat, but at the mid and senior levels salaries are usually substantially lower than market rate in big companies. Offsetting this are meaningful equity stakes. Out west, I would expect a CFO or comparable executive in a tech start-up to own 2% to 5% equity after having raised meaningful initial financing. And yet (from the sample of people that I talked to) that seems to be very different in Montreal where very few of the candidates had any material equity and almost all had substantially higher salaries than I was paying myself at TandemLaunch!

So why do I find this interesting? It’s interesting in that if this is truly a local phenomenon (and it seems to be) then it might just be an explanation for the results or behaviour of Quebec tech start-ups. When you look at the statistics, Quebec has somewhere around a third of the Canadian population but only 5% of the listings on the Toronto stock exchange (a fairly good measure of the IPO volume of Quebec compared to other provinces). Other indicators, such as the lower rate of exits by population indicate a similar trend: For example, Montreal and Vancouver tend to go head-to-head in the number of early exists except that Vancouver is almost a third of the size of Montreal. While the entrepreneurial ecosystem in Montreal is as strong as it ever was, the city is clearly not seeing as much entrepreneurial action as other parts of Canada.

There are lots of possible explanations for this but I suspect that executive incentives have much to do with it. If the senior executives of your company have no meaningful equity stake but a very high salary then why would they push the company to an exit or IPO? A CFO is probably one of the first positions to be eliminated in most acquisition anyhow, so there is even personal downside to such a move. Much more so than on the west coast, I have observed that status and security are paramount in the Quebecois psyche. So why risk all that when there is no upside?

Thinking about this more broadly, what role do incentives play in an organization? I firmly believe that at the end of the day, even the nicest people will act mostly out of self-interest. At least within the boundaries of legal, ethical and credible actions, people will attempt to maximize personal benefit. So the goal of any incentive model should be to ensure that the natural outcome of individual behaviour leads to the strategic goal of the company. If that’s not the case then you might still achieve the strategic result, but only if you constantly badger people to pursue avenues that are not in their own self-interest. It might work if you have strong enough leadership skills, but you’re really stacking the deck of cards against yourself.

 

People Management

Linearity and Employee Incentives Plans

2 Comments Posted by on July 3, 2012

In my last blog post I talked about the fundamentals of effective employee incentive plans:  Proportionality, Transparency, Appropriateness, and Certainty. To my mind of thinking, creating linearity in your employee incentive plans is essential to achieve Transparency and Proportionality, and I’d like to elaborate on that a bit using the TandemLaunch incentive plan as an example. My upfront disclaimer though is that TandemLaunch enjoys a few luxuries that make it a bit easier to come up with these solutions than it is for many companies. We are privately held, have no outside investors, and have a large enough scope with 30+ employees for it to be worthwhile to do some of the legal work that underlies this type of incentive plan.   As a result, all of this might not map onto your startup or company.

Transparency and Proportionality really go hand in hand.  Proportionality ensures that effort is fairly recognized, and transparency means you can see and, therefore, act on the incentive mechanism.  We achieve this with the TandemLaunch incentive plan by eliminating a lot of traditional nonlinear aspects of incentive plans. There are two different areas linearity or non-linearity can exist: in allocation, or in vesting.

Allocation Linearity.  Those who receive equity, usually founders and investors, have several inherit advantages over employees who usually receive stock options. Stock options, apart from the legal rights and tax disadvantages associated with them, have a strike price and that immediately introduces non-linearity.

Let me give an example.  Two employees join a startup. The first joins a day before a small investment round (share price of the last round at $2/share becomes his strike price), the other starts the day after (share price of the seed round at $4/share becomes her strike price). Afterwards they both work the same, they have the same title, they hold the same role, and they perform at the same level all for 4 long years. Even though the single day difference of their employment is virtually trivial after 4 years, the later employee will get significantly less money during a liquidity event. A hugely successful exit will wipe out this difference but most deals don’t achieve that. More commonly, the exit will be a modest multiple of the last round which can result in the second employee getting completely screwed (a $6/share liquidity event will yield $4/share vs. $2/share – doubling the stake for the person who joined a day earlier).

At TandemLaunch we avoid that non-linearity by issuing reverse vesting shares to all employees. This is a relatively easy way to overcome the tax and strike price non-linearity. Reverse vesting restricted stock is becoming quite popular for this purpose and I would encourage everybody to consider them as an option for incentive compensation.

Vesting Linearity. The next non-linearity that you get in non-traditional incentive plans lies in the vesting period.  Regardless of whether you vest stock options or you reverse vest shares, you have the problem of long cycle vesting periods. Things like vesting on an annual basis, vesting over a fixed time period, or having a one year cliff that your vesting only starts after (e.g. after the first year of service). There are some rational reasons for all these things, but they all introduce non-linearity.  That’s a problem because the guy who holds un-accelerated stock and whose one year cliff period ends three days after the acquisition of the company gets nothing, while the guy signing up three days earlier gets a payout, which intuitively just does not seem fair.

Accelerated and non-accelerated stock can introduce further non-linearity. I was recently interviewing a candidate for an executive role who, in her past company, had only received non-accelerated stock options with a 4 year vesting period. After a year she was tasked with negotiating the sale of the company. Her colleague at the negotiating table had a similar amount of stock but with acceleration. Talk about a recipe for disaster. Half of the negotiating team wants to close as fast as possible, the other gains personal wealth for every month that the negotiations are stalled (at a 4:1 gap if you are in the first year of a four year vesting period). This just screams misalignment of interests, and misalignment is what kills companies.

The TandemLaunch incentive plan overcomes some of these vesting issues by using a very straight forward, linear vesting mechanism (in our case a reverse vesting mechanism).   We base it on the assumption that all the shares belong to employees anyway, and the buyback of these shares occurs just before the liquidity event, regardless of when that event may be. The number of shares employees keep after the buyback are proportional to the time in weeks that they spent employed at the company, at whatever full time equivalent rate, divided by the total period from founding to liquidity event for the company. This creates a perfectly linear system. While there are some issues here around share buybacks, like forced drag along and the like, you can paper over these with the appropriate documentation [*].

Introducing linearity this way does not imply the risk profile of the company necessarily needs to be the same.  It just means that you are adjusting the risk profiles in the magnitude of the grant rather than the mechanism of vesting. So somebody who joins a startup later might very well receive a smaller equity grant than somebody who joins early, but their vesting mechanism is same. That means their reward for their service should be linear to their service, relative to the duration of the project or the company.

[*] This model works because TandemLaunch incubates new companies on a frequent basis and our employees receive equity in those ventures rather than TandemLaunch (thus allowing us to frequently issue equity at nominal value and to new hires). Your mileage may vary in a traditional “going for decades” venture with monotonically raising share price.

People Management ,

How to Create Meaningful Employee Incentives

1 Comment Posted by on June 26, 2012

The purpose of incentive plans is to do exactly what the name implies – incentivise the people in your company (both executives and employees) to contribute more than they normally would. In other words, you want them to work harder, move faster, take on more ownership, and generally make as great a contribution to the overall success of the company as possible.

Usually the incentive is to share in the company’s upside in some way.  A common mechanic for that is a stock option plan that coordinates payout directly. There are a variety of options though, including bonus schemes, commissions on sales, and so forth. More recently, there has also been an emphasis (rightly so) on non-financial incentives, such as work conditions, opportunity for professional advancement, and so forth. But, in general, a major component of the incentive model for startups remains dollars. This is especially the case for mid to senior level employees where upside is a significant portion of their overall compensation.

How you structure your incentive plan depends a little bit on your corporate culture but the fundamental challenge is always the same: How to translate the reward of real dollars into better performance of your team.  For that to happen, your incentive plan needs to achieve Proportionality, Transparency, Appropriateness, and Certainty.

Proportionality.  There should be a pretty tight correlation between the company’s success and personal payout for the employees. You want to have a system that can’t be gamed easily, and that really rewards meaningful advancements with meaningful payout. So if somebody does more, they should get more. If the company is more successful, employees should get more, and so on.

Transparency. Employees need to understand and see the dynamics of the incentive plan. While nobody can predict the final payout in advance, employees should see that they get more if they do a bit more work on something. Incentive plans should not only be transparent enough that the employees can see the impact on their own behavior, but also be able to see the impact on other employees.  They don’t necessarily need to know who owns how much of the company, but they should have some general sense of what it will translate into if they get promoted, and, based on their peers, what their reward will be if they do some certain extra. If employees don’t understand these dynamics, the incentive plan is less likely to influence their behaviour in the desired way.

Appropriateness. Appropriateness is a bit more of a judgement call. On one hand, you want employees to have a large enough stake in the company that the payout has a meaningful impact on their life, and, therefore, creates a true incentive. On the other hand, you clearly don’t want to create a social collective with employees who own the entire company, because (presumably) you have to leave some room for investors and other major stakeholders. In North America, that usually means you end up with an incentive pool for employees somewhere in the range of 10-30%, usually hovering at about 15%-20% unless you have significant elements for founders in the pool.

Certainty. More recently, certainty has become increasingly important. When you make an incentive plan, you are making a promise. You are telling people that when they work for less pay, or work harder for normal pay, they will be considered when it comes time to divvy up the company’s benefits. Employees’ certainty that you will keep that promise is critical, because their belief in the outcome has to be very high in order for an incentive to exist. Everyone will understand that the company might fail, but everything fails if there are scenarios when the company succeeds and employee payout evaporates despite the promised incentive.

In my opinion this is the hardest problem to solve in an organization because certainty is the only factor that does not depend entirely on the company itself. If you are in a market or demographic where employees have been routinely screwed in incentive plans (read my post on ethics and employee equity for example), it lowers employees certainty in that entire industry or region. The best way to counteract this industry effect is a mixture of ensuring the personal integrity of the leadership team, and, most importantly, going to the effort of putting in place a solid legal structure for your incentive plan to ensure that arbitrary last minute changes are less likely, or unable, to claw back employees promised reward.

Ultimately, Transparency is the foundation for any employee incentive plan: if your employees don’t understand how the benefit mechanism works, they won’t have the motivation or understanding to make that extra contribution you are looking for.  Proportionality and Appropriateness need to be taken into account to ensure that you are incentivizing the right people, for the right reasons, in a way that won’t compromise the company’s health.  But no incentive plan will give you the desired results if employees’ trust and certainty that they will actually receive their benefit is compromised.

People Management , , , , ,

Month One as a Company’s New CFO

Leave a Comment Posted by on June 20, 2012

Getting a new job is risking the adventure that allows me to rise up to new challenges and meet my potential, but also the possibility of failure. I bet on the company, the position, the team and the ups & downs that are part of the change.  The entrepreneur bets on me.

It has been a few months since I started at TandemLaunch, and one of my coworkers asked me to write about how my first few days went. I thought I would describe my first month at TandemLaunch my way – chronologically – hoping that it will inspire some other risk-takers who believe that jumping into the unknown is one the most wonderful risks we can take in life.

Day 1 minus 3: It has been a couple of weeks since I signed on with TandemLaunch and there is not one single day where I have not been talking about my new workplace, how proud I am to be part of a team who truly believes that betting on young entrepreneurs is the key to success. I went out for dinner with a friend of mine who mentioned a contest based on innovation launched across Canada. Armed with my enthusiasm and carelessness, I registered one of our entrepreneurs and managed to create a video for the project proposal. As if starting a new job wasn’t a challenge enough, I consciously signed up to lead a project that required half of the company’s employees! When I woke up that morning, I honestly wanted to cancel the whole project, but remembered how important it is for a new leader to accomplish and fulfill their deliverables. What I just said is crucial, especially within your first few weeks working with new people. A new leader only has a short period time to gain the trust and respect of their team and the management. Trust is all about consistency between words and actions. And ‘Remember your colleagues’ names!’ I kept thinking to myself as I visualize each of their faces in my mind. It is Friday afternoon; the office is now a movie set. Talk about an entrance!

Day 1: The day. I climb the 2 flights of stairs to the office. I am a bit nervous since it’s my first official day. My agenda is wide open, except for a meeting or 2 in the afternoon. Every time I have to start a new job, my worst fear is not having work to do. To avoid that, I always plan 2 or 3 tasks in advance that I can do on my own with minimal support. I plan to meet my employees and read the financial statements to get a better understanding of the company. I walk in my office to find everything set up for me, but I can’t open my emails with the password that I have. First obstacle: understand the IT system. Coming from mid-size and big companies I instinctively try to get some help from someone in the IT department. I was told, with a smile, that here I am the IT department! I smiled back and took a mental note that from now on, I have to forget what I’m used to. Apprehensive, I wonder in what mess I got myself into. Upon reflection later that evening, I conclude that the key to success is your ability to adapt to your new environment.

Day 4: As a CFO, one of my functions is to represent the company during corporate events. I see that as a huge challenge. I am young, but I also look young! The energy, authenticity and joie de vivre that people see in me are key factors to my success, but can be perceived negatively as not fitting the typical CFO profile. I had not even spent a week at TandemLaunch yet and I was going with Helge to an event organized by Capital Innovation in Montreal. Before TandemLaunch, I was working in the technology world, but only on the operational side. Furthermore, it is the first time that I’ve worked for an investment company. Here I am mingling with several financiers from the City of Montreal and players from the industry way more experienced than myself, explaining a unique business model that generates a lot of interest… and questions! My action plan is simple: ‘Just focus on not saying anything stupid.’ I’ve seen new employees too often in my career join a company and try to impress others by talking without taking the time to listen. Whether it is internally or externally, you have to analyse, understand organisational dynamics, and other people’s challenges, in order to sell your ideas within a short time. I went home relieved that I was able to talk about the company and its vision with enough confidence. I felt the same satisfaction of a student who just passed their first exam.

Day 10: 2 weeks have passed since my first day at TandemLaunch. I’ve been in several meetings and my responsibilities are increasing more and more. Did I mention that I started on April 4th and that our fiscal year was end is March 31st? Silly me, thinking that I was not going to have enough work to do! During the last few days, I reorganized the project management department, worked on processes, hired a new employee, and started the year end process. I work hard but I see every day as a new learning experience. Today, Helge is leaving on vacation for the next 3 weeks and left me in charge of the company’s operations, and it is the first time in TandemLaunch’s life that the CEO is leaving for such a long time. Even if I describe myself as a risk-taker, so is the entrepreneur! But when you start a new job, you count the points, not the hours. I believe that leadership is an inner talent, but it can also be developed fast with the right amount of judgment and the ability to seize opportunities as they come.

A blur: The following 3 weeks were a real roller coaster of emotions. 8 active projects, one presentation to prepare for a client, a leadership role to fill and a bunch of financial, organisational, and operational decisions to make in a completely new environment. TandemLaunch is the live version of Aerosmith’s “Living on the edge” for me. But when I trip, I get back on my feet and I consider these 3 weeks a success. I was able to accomplish what was most important in a management role: getting to know your colleagues, develop strong relationships, gain co-workers’ trust, and be perceived as one of the team.

Day 30: I climb the 2 flights of stairs to the office. Yesterday’s papers are still lying on my desk. The post-its where I write everything I can’t forget have crept across a wide section of my desk. I open my computer, and remember my password. I have a 3 hour-meeting in the morning, a meeting with an employee, 3 deliverables by the end of the day, and 50 unread emails. I’m overwhelmed, but happy. I made the right choice. The next 100 days will all be different from one another, unpredictable and filled with successes and failures. When I think back to my first day, I can’t help but think to myself ‘and to think it has only been a month’.  It feels like I’ve been here for 2 years already.  This is when I realize that I have won my bet.

General, People Management , ,

The CTO Role Broken Down

Leave a Comment Posted by on May 22, 2012

The CTO fills a critical role in a technology startup. The title is really broad, and people tend to cling to different aspects of it, but what do you really need your CTO to do in a startup? Here’s a quick breakdown for aspiring Chief Technology (or Technical) Officers.

 ‘Chief’ communicates hierarchy and seniority. A chief, by definition, is a management role. There is a big misconception about who should be a CTO. A CTO shouldn’t necessarily be the smartest code developer because, as a CTO, they must by definition be an integrator and a manager of people. CTO’s have to understand the entire organization.  Specifically, they need to understand what all of the technical parts of the team are up to, what all the players in the organization are up to, and what the programs are that are underway. Moreover, this must be done in a way that allows one to zoom into the individual details while keeping the overall technology strategy in mind. As a CTO, you must know the vision for the company’s IP. You must avoid being pulled down into the weeds and stay at a high enough level to maintain the strategic level vision.

‘Technology’ or ‘Technical’ is the obvious part of the job description. The CTO needs to understand the technology. But there’s actually more to it than that; The CTO has to have the ability to share his opinion while engaged in any major business activity.  The CTO is someone you do not want to have hidden in the basement, but rather someone to have front and center applying the technical vision of the company. It’s important for the CTO to be able to project that technical vision on the spot, by going into a meeting or strategic discussion either internally or externally, be hit with a new set a parameters “Would this work with x?” or “Would this work with application y?” and, at the drop of a hat, have a sufficiently broad understanding of the technology and operating details to not only answer the questions but extrapolate: “Yes, and this is how we’d do it.”  That kind of knowledge is unique, and as your company reaches any kind of scale it becomes more difficult. The ability of a CTO to do that will give you the ability to advance the development agenda by leaps and bounds, not just by setting a direction, but responding well to shifts in the landscape. Nothing restores more confidences in a strategic partner or investor than a technical leader who can, not only articulate what has been done, but seems to have a clear command about what needs to be done in the future given the variability and uncertainty of that future.

“Officer” means liability and responsibility across the organization. Like a board member there is a certain amount of governance required. The ideal CTO should know the business strategy and operational strategy to an extent where he can be a functional participant and contribute outside the technical domain to the executive. CTOs use knowledge of the technical domain to inform strategic decisions while understanding and being comfortable with the other core areas of the company. Ideally the CTO should be able to take over core preparations, engage, and possibly close a commercial relationship while stepping in for the CEO. Having these skills makes one a much more effective CTO.

People Management , , , , , ,

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