Team Building versus Bread Making (by Denny K Miu)

Editor Profile - Denny K Miu is the Founder and former CEO of two companies, Gigamon Systems and Integrated Micromachines (now Touchdown Technologies). Denny has extensive experience in developing technology, products and business relationships. He has been a Professor, an engineer, an entrepreneur, a team leader as well as an individual contributor.

Denny is currently the Executive Editor of LoveMyTool.com, his third start-up. He can be reached at denny (dot) miu (at) gmail (dot) com.

It takes a lot to build a successful startup. You need to start with a good product idea. And if it turns out that your initial (or even subsequent) idea sucks, which is often the case, then hopefully you possess the tenacity and the credibility to continue to evolve your business such that you eventually come upon a good product idea. Then you need to build a good team. Finally you need good execution and good timing.

And that’s pretty much the order. In other words, if you start with a bad idea, then even a top-notch team can’t help you push a square peg through a round hole (without hurting something or someone). And if you have a great idea and a great team but bad execution, then good timing simply makes it more obvious that you have completely squandered your early-mover advantage (while wasting a lot of blood and treasure along the way).

Of all the elements that are important to the success of a startup, the most important human element is the CEO. A good CEO does not guarantee success of a startup but a bad one will undoubtedly contribute to its failure.

Most bootstrapping entrepreneurs (like myself) take the title of Founder/CEO.

A Founder is a shareholder of the company, pure and simple. However, one can be a Founder (especially a co-Founder) without being the CEO. Or one can be a CEO without being the Founder (which is theoretically possible but unlikely for a bootstrapping startup except at a later stage).

It is easy enough to figure out what it takes to be a good Founder, but what does it take to be a good CEO? Or more preciously, what does it take to be a good Founder/CEO?

Unfortunately I know a lot more about what it takes to be a bad Founder/CEO than what it takes to be a good Founder/CEO (which doesn’t stop me from writing as if I am the expert, for the same reason that not knowing how to build a successful startup never stops me from building them in the first place).

CEO is a curious title.

First of all, the position was not always required. In the old days, if you wish to start a company and you wish to incorporate in the State of California, you don’t need to anoint a CEO. Instead, the law requires that you assign a Chairman, a President and a Treasurer, all of whom could be the same person.

This structure is simple enough to understand. The Chairman is someone who represents the Board of Directors, the members of which are elected by the shareholders (i.e., the owners of the business). The purpose of the Board is not to manage the business but to provide oversight. As a decision making body, the Board is capable of making only one decision, which is to hire and fire the President, who is a paid executive entrusted to manage the business on behalf of its owners and serve at their pleasure.

Along with the Treasurer, the President is an “officer” who is granted the mandate, in exchange for accepting the fiduciary duty, to protect the collective interest of the shareholders. It is this separation of responsibility between the owners and the management team that allows the corporation to have a legal personality distinct from those of its members (thus limiting the legal liability for its owners who own but choose not manage the business).

In more recent time, CEO has become a much more common title than President. If someone is a President but not the CEO, then he/she is usually the President/COO, another executive and a fellow officer who also serves at the pleasure of the Board. In a startup, it is highly unlikely that you would have a President who is not also the CEO; if you do, you are in deeper trouble than you realize.

Before we could talk about what makes a CEO a good CEO in a startup, we need to talk about what a CEO does in a startup.

A CEO is someone who connects the dots.

As with mature companies, there are many dots in a startup, some outside the company (customers, vendors, resellers, partners, service providers such as lawyers and accountants, etc.) and some inside the company (investors, co-Founders, executives, employees, etc.). The difference here is that in a startup, none of these dots exist in the beginning and if they exist, they are not connected.

A Founder/CEO is someone who starts with a single dot, and successfully creates a constellation of connecting dots.

In a previous article, I have talked about dots that circle in and out of the company (namely VC’s). In a later article, I will talk about how to manage some of the external dots (initial customers). In the following, I will focus mainly on the lessons that I have learned in connecting the most important dots inside the company (i.e., building the initiate team).

10. Take charge and take responsibility

Years ago I had an idea for a startup (one of many) and I traveled everywhere and talked with everyone about starting a company. One day I met an older gentleman who obviously had a lot that I could learn from and I was excited that he was willing to listen. But he told me that he was busy that day and asked that I returned the following week.

When I returned, he said he had studied my presentation and thought that it had potential. More importantly, he was interested in taking a closer look. Then he reached back to his bookshelf and grabbed my business card. He tossed it across his desk and said, “If you want me to help you, you need to change your business card. Why do you call yourself the VP of Engineering?”

I could feel my face rapidly getting red and I couldn’t be more embarrassed. I was obviously caught in a lie. I had never even been a manager, let alone being the VP of anything. This was awful.

Then to my surprise he said, “You are not the VP of Engineering, you are the CEO. If you don’t believe in yourself, how do you expect others to believe in you? Don’t waste my time if you are not willing to take charge of your dream. If you think you don’t have what it takes, you can wait. There is nothing wrong with waiting. You can always find someone with more experience but you can never find anyone who is as passionate as you are with your dream. If your dream is important enough to you, then you need to take charge and make it happen.”

That was my first lesson (and many more to follow) where I learned that building a company and building a team have a lot in common with making bread. No one makes bread by talking about it or by reading about it. Breads are made because someone is willing to take charge. Standing around waiting for a potentially more qualified bread maker to come to your rescue is not how breads are made.

In building a company and building a team, you have to commit and you have to take charge. On the other hand, just because you commit and you take charge doesn’t necessarily mean that you will build a viable company, let alone a successful one. But bread never makes itself. The first step in successful bread making is to plant yourself firmly in front of the workbench, take charge and make it happen.

However, taking charge is not the same as taking responsibility.

As the Founder/CEO, you are both the owner and the chief executive.

In fact, in the beginning of the startup, being the Founder means that you own 100% of the company but at the same time, you are also its first employee. Interestingly, these two distinct roles provide two different and potentially conflicting sets of responsibilities.

As an owner, your responsibility is to yourself and your family. There could be any number of reasons why as an individual you are motivated to start a company: wealth, fame, power, and satisfaction being just a few possibilities.

Your motivation often extends beyond your own needs to include the needs of your family: your spouse, your children, your parents and your siblings, etc. As the sole proprietor, you could easily decide to build a company solely for the benefits of your family, not to make money for the shareholder (i.e., you) but for example, to be sure that your kids have a meaningful outlet to fulfill their potentials.

On the other hand, being an executive means that you have accepted a fiduciary duty and the mandate to protect the interest of your shareholders. But if you continue to own 100% of the business and your goal is to build a “family” business where the interest of your company and the interest of your family coincide, then there is no conflict.

But if your purpose is not to build a family or a lifestyle business and your goal is to build a team consisting of co-Founders and early key employees who are NOT family members, then you need to be conscious of the potential conflict between your personal responsibilities (as an owner) and your fiduciary responsibilities (as an executive).

Without getting into the specific legal definition of a fiduciary, basically as a CEO, you must NEVER put yourself in an orbit where your interest and your duty could potentially collide. In fact, as a CEO, you must always serve the interests of your shareholders, subjugating your own preference for those of your shareholders.

In summary, as the Founder/CEO, your duty as the “executive” always comes before your personal responsibility of being the “owner”. As a fiduciary, you must never find yourself in a situation where you have to choose between your family and your company; if you do, you must choose your company over your family or you must resign.

Moreover, your state of mind is irrelevant here; that is, it does not matter much to your shareholders whether you have any ill intent or dishonesty in your heart. What matters is that you are both in fact and in “appearance” serving the interest of those who have granted you the mandate.

Doing any less would mean that you are violating the trust of the most important people in your universe, which are those who have entrusted in you and have joined in to help you build your company; thereby forcing them to do something that they don't like to do, which is to catch up to your sin and make you pay for your shenanigans.

The bottom line is that people are smart, you can fool some of them some of the time, but you can't fool enough of them enough of the time to help you build a company. Eventually enough people would come to agree that you are a fraud and a hypocrite, and you could no longer convince anyone of quality to be part of your team.

This sounds simple and easy in theory but it turns out to be extremely difficult in a bootstrapping startup. If you choose not to bootstrap, chances are that you are starting your company with someone else’s money (e.g., VC money), then the relationship between your role as a Founder and your role as a CEO is very clear from the beginning (and if it is not clear, the VC’s will no doubt make it very clear for you).

When you bootstrap, it is all about survival and everything becomes more ambiguous. When things get tough, you might gradually have to ask your spouse to take care of the finances while you are busy concentrating on product development or sales. Or you have recruited a few co-Founders and one of their kids happens to have skills that you need and they are willing to work for free (or for very little).

My point is that in a bootstrapping startup, you will inevitably find yourself on a slippery slope where everyone around you have become a partial owner of the business (which by the way is a good thing since they would be highly motivated) but as owners, their primary responsibility is to their family, not to the company. If they are owners and they behave like owners (as opposed to behaving like executives), then there is no reason why they can’t continue to put priority on taking care of their own needs and the needs of their family.

As the Founder/CEO, you must set an example. Your must reverse the priority and put aside the fact that you are the owner and concentrate on being the “chief” executive. You must always remind your fellow executives (who are also owners) to put the interest of the company before the interest of the individuals. You must never allow anyone to put themselves in situations where they have to choose between the company and their family. You must never hire your own family into the company and you must convince your co-Founders to never hire their family.

In other words, you must convince everyone that they are also a “fiduciary”, that they do in fact share the same mandate to manage the business on behalf of the shareholders in exchange for a total dedication to protect their “collective” interest.

Unfortunately, in the past, I have failed to anticipate this slippery slope. It was a mistake that I could have avoided had I have more experience. I consider this my most egregious personal failing in my journey as a Founder/CEO.

In summary, your job as the Founder/CEO is to connect the dots. To succeed, you must take charge and you must take responsibility.

Much like a bread maker, you are in charge of finding the right raw ingredients, convincing them to join and to be part of a fledging startup, performing the magic touch so that the individual constituents can mend and become one, and ultimately taking responsibility (but not necessarily the recognition) for providing a financial exit for everyone so that they can share the fruit of their labor.

The last point is particularly important. If everyone eventually receives a financial reward, all is forgotten. If not, every mistake you have made along the way as the Founder/CEO will come back to haunt you.

9. Start with common but high quality ingredients

When VC’s talk about building team, they talked about recruiting A players, with the idea that A players would recruit more A players whereas B players would recruit only C players, etc.

First of all, it is never clear to me what A, B and C means it comes to people. Having been an academic for nine years, I believe I know what A, B, and C students look like and I doubt that the classification has any relevance in a startup.

First of all, my experience is that there are two kinds of A students, the first kind are nominal A students who on occasion receive A+'s and the second kind are really B+ students who on occasion receive A- or A.

The A+ students tend to be extraordinarily smart. Some of them are genetically smart and interestingly, most are also extraordinarily generous. They don’t worry too much about competition and they don’t mind others in their class also receiving A’s, doing well along with them. In other words, they have no problem sharing oxygen.

If you could find someone like that who is willing to become your Co-Founder, you are a lucky guy. You should build a company around them even if their talents have nothing to do with your original product idea. You can always find a different idea but it would be a long time before you could find such an exceptional individual again.

However, while the A+ students are high quality, they are also uncommon. So don’t plan on it.

The B+ students who work hard to get A’s are smart as well but they tend to be very competitive and in comparison less generous. In other words, they are passionate but not necessarily compassionate (like me). My experience is that they tend to carry more emotional baggage and they are high maintenance (like me). They are good team leaders, but bad team players. In other words, they play only if they get to build their own team. The good news that they are also uncommon so it is unlikely that you will have so many of them to choose from that you have to worry.

My point is that if you are trying to build your company using only A students/players, you might as well forget it. You can’t find enough of them and if you do, you will be spending your time herding cats. So whenever you could find one, it is an exception and if utilized properly, they can make a huge difference. But they are both a bug and a feature.

B and C students are much more common and ironically, they are also much more common among your customers. I hope this does not come as a shock to anyone. But being more like your customers is a very good thing in a startup.

In any case, many A students that I knew when I was a faculty member would make very bad entrepreneurs anyway because they just don’t have want it takes and they have nothing to offer beside their academic records. So my experience with picking team members has nothing to do with A, B and C but rather on their desire to make a difference in their own lives. And the desire has to be so strong that they are willing to “eat raw meat off of live buffalo”.

In short, in the beginning of the startup, you cannot afford to have team members who are willing to accept status quo. So instead of ABC, I pick them according to the four R’s.

The first R is Rebellious. In the beginning, you want to be surrounded with people who have a burning fire in their belly and are willing to take some chances to make a difference. They must want it so badly that they are willing to do whatever it takes for as long as it takes. By the way, age and experience have nothing to do with being rebellious. Even an old guy like me can still be rebellious.

The second R is Respect.

The following was what I wrote on a plaque for my first startup.

“Entrepreneurship is all about creative destruction. Entrepreneurs exist for one purpose and one purpose only which is to destroy status quo, complacency and mediocrity, thereby giving renewal to excellence. But the successful entrepreneurs are the ones who actually respect the environment that they do determine to destroy. Without respect, they can never levitate themselves by the forces embedded in their hearts. Without respect, they can never learn from the mistakes of their elders. And without respect, they can never stand on the shoulders of the giants who marched before them.”

A rebel who shows no respect is no entrepreneur.

The third R is Responsibility (or willingness to take responsibilities and determination to fulfill them).

The last R is Resourcefulness.

Being resourceful is very important since by definition money is always tight in a bootstrapping startup. Money that you don’t need to spend today is simply money that remains in your pocket (so you can spend them for a better purpose tomorrow). To these days, I still open envelops to search for loose paper clips and I still print on both sides of papers before throwing them in a shredder.

But being resourceful is also important in a different respect (perhaps even more important than saving money). In the beginning of a startup, during the product development phase, it is all about solving problems. Those who are less resourceful tend to solve problems by beating them into submission. Those who are more resourceful tend to solve them by avoiding them in the first place.

Guess who can get the product out of the door faster.

8. Introduce the ingredients methodically, mix them up gently and gradually, micromanage every detail until there is texture

Building a team is not the same as collecting action figures. You don’t need one of everything and you definitely don’t need to display them all at the same time.

Timing is very important in team building and members have to be introduced to the team at the right place and at the right time.

In the past, I have followed a simple three-step procedure when recruiting potential team members.

I first imagine myself in a room meeting this person for the first time and suddenly it is completely dark. I ask myself if I would step away from the person, step towards the person or stay where I am. If I step away from the person, then something subconscious in me is telling me that I don’t trust this person.

In startups, it is all about trust and trust is in fact a far more important currency than even money. But trust in a startup has a different meaning than trust in everyday life.

I am not talking about trust as in trusting someone hoping that they won’t stab me in my back. But trust as in if I were to ask a person if they could catch me as I am jumping off the baloney during a fire and they say yes, do I trust that they are in fact capable of catching me? And do they even know what it means to catch someone in free fall reaching terminal velocity?

So by trust, I am talking about trusting a person’s judgment and their abilities. When you are building a startup, you need to trust that when someone agrees to a schedule or proposes a budget, they are in fact doing so knowing what they are capable of delivering and understanding the consequence if they don’t. Hope is not a strategy in a bootstrapping startup.

Having that trust from day one is important and it is best that you rely on your instinct. In summary, life in a startup is like a marriage and your first meeting with a potential team member is your first date. If there is something about a person that makes you uncomfortable, it is best that you go home alone that night. Someday you will find out why but it is best to safe than to be sorry.

If the person passes the first test, then I proceed to the second test which is to ask myself if the person has the skills that I need. And it has to be skills that I need NOW, not tomorrow. People are smart and they are flexible and they can learn. So the temptation is to bring in smart people and figure it out later.

This works great for Google which collects Ph.D.’s by the hundreds to build a brain trust. But for a bootstrapping startup with lots of moving parts, having a smart person wondering around hoping that they find their own spot is a luxury you cannot afford. So if they are not the right person now but they have a skill that you think you need down the road, just keep them interested but don’t bring them into the team.

Bringing the wrong person into the company at the wrong time is not only bad for morale but unfair to the person since they are not given a chance to show what they can do.

The last test is the most important test. If your instinct tells you that the person’s judgment can be trusted and that they have the right skills, you need to ask if they are at the right moment in their life to join a startup? So it is a timing issue. If the answer is no or even maybe, forget it and move it. You can’t convince someone to join a startup; they have to do it on their own. You can encourage them, but you can never make them.

So my experience is that sometimes you need to throw the fish back into the water. Find some excuses to tell the person to go away, even if they have the right skills. If they take your advice and in fact go away, then their heart is not in the right place to begin with. If they jump right back into the boat, then the fish is meant for you to catch.

So in summary, when you build a team, not only is quality important but timing is as well. And that’s both timing from the company perspective (do they have the skills that we need now even though we have no money to pay them) and from the potential team member perspective (am I really ready to put my hand in a piranha tank). There has to be a perfect match.

Once you bring a new person into the team, play close attention to their interaction with the existing team. Now is not the time to be a hands-off manager (if you don't feel the lumps between your fingers, you are not making bread). Even if the person is highly experienced, they could be inexperienced in this new environment. If two team members never work together, they need to gain each other’s respect. If they have worked together in a previous job, they might have to undo some of their previous baggage.

You job is to be a fly on the wall and the listener and interpreter of all conversations, listening to all sides and making sure that everyone is communicating properly, using the same language and using the same meaning even if they are in fact using the same language.

The key to gradually developing texture in the early stage of a startup is to let everyone knows that it is OK to have arguments, but only arguments on the assumptions, not on the conclusion. In other words, let everyone have a say on why we are doing what we are doing but once everyone agree, then they have to learn to live with someone else's decision, even if they feel strongly that the solution is suboptimal.

On the other hand, if someone makes a mistake. It is your job to remind everyone so they don't do it again and others can learn. You do that with humor but you do it publicly. Most managers prefer to criticize in private. Fragile people don't survive long in a startup. Everyone needs to learn to have thick skin. So I typically criticize people in public, make it clear that there is consequence.

But I also make it clear that making mistakes is not a sin. It is often best to do it wrong and apologize than to do nothing at all. In fact, I often explain that once a mistake is made, it is like putting money in the bank because we don't need to do it again. There is no bad decision in a startup, just decisions that are executed badly. A startup is like a small child. Making mistakes is part of the growing and maturing process, painful but necessary.

The following are more lessons which are equally important but somewhat self-explanatory. It is best that I leave them to your imagination to maximize entertainment values. Good luck.

7. Hands must be firm but never harsh

6. If you spill, clean up the mess quickly & continue

5. Once there is texture, simplify the message and emphasize consistence

4. Focus on success criteria and stop micromanaging

3. Must know when to stop, stand back and let it rise on its own

2. Keep a constant eye but don't let them know that you are watching

1. If it doesn’t rise, start over & hide the mistake

--Denny--

Other chapters finished or in progress ...

10. Why Startups Fail and Why Gigamon Should've Too
9. How to Turn Your VC into Your Worst Enemy
8. What I Learned From My Dad Who Taught Me How To Ride A Bicycle
7. Make Money Then Make Meaning
6. Team Building versus Bread Making
5. Middle Management Gone Wild
4. Marketing is to Sell Shit that You Don't Have
3. How to Turn Orange into the New Black
2. Entrepreneurship and Love Making
1. The Nail that Keeps the Air From Leaking

Continue reading other “Startup-for-Less” posts by Denny K Miu »

Comments

[Tim]

Denny - WOW...just WOW !!! Great to read, fun and educational. Thanks...keep these coming....I want to be the first to get the book....Super, Thanks....Tim