Transcript of "Ldb Ri-scosse_Letizia Custodero - How to build a winning team"
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965What do investorslook for in yourmanagement team?According to various studies,management team accounts for some40% of the performance variance ofany business, post investment.Unsurprisingly, therefore, this hasbecome an increasingly important issuefor investors.So what are they looking for and howcan you maximise your chances?When looking at a team, investors willask some, or all, of the followingquestions: Who is in charge? What isthe team’s focus? What is its strategy?What kind of people have beenrecruited and how does it measureperformance? A business which cangive satisfactory answers will stand anexcellent chance of securinginvestment. In this guide, I’ll look ateach point in turn and offer someguidance on how your business canensure it ticks each box.It’s all about youIf you are the leader of your social businessventure then you will be the main focus of anymanagement team due diligence. (If you arenot the leader please pass this to the personwho is.) In the end, the success or failure of theventure rests with you. No pressure. So, whatare great leaders like?Happily, great leaders come in all shapes andsizes and, while some leadership profiles aremore common, there is no absolute blueprint.However, there are some commonalities.1. Strong leaders knowthemselves and areauthentic.While it is still a good idea to address yourdevelopment areas, you will have aparticular style with inherent strengths andweaknesses. You are better playing toHow to build a winning teamJohn Sutherland,Owner, Strategic ResourceHaving run over 100 due diligence assignmentson management teams, for a wide variety ofventure capital organisations, private equityhouses and banks, John Sutherland hasextensive experience in helping companies buildan effective team. John was a highly ratedspeaker at the 2010 ClearlySo Social BusinessConference and is committed to helping socialentrepreneurs.
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965your strengths than trying to be all thingsto all people. This leads us to point two.2. Strong leadersdeliberately gather otherstrong and differentpeople around them.You need to ensure you bring in peoplewith a different outlook than you into yourmanagement team – people you can relyon to come in from a different angle or whoare more or less detail-focused andstructured than you are. That way they willcompensate for your inevitable blind spotsand will inject sufficient difference intodiscussions to enable true collaboration totake place.3. Strong leaders know theirown mind.The base skill in all leadership is knowingyour own autonomous thinking and beingready to express, discuss and, if need be,defend this against other forces. Youcannot collaborate or set hierarchicaldirection unless you are first able to knowyour own mind, based on your own directexperience (not someone elses pettheory).4. Strong leaders are drivenby passion.Whatever your passion may be, and weassume it is connected to being a socialentrepreneur, it makes a difference if youreally believe in the focus of the businessrather than just see it is an interestingproject. You are going to need high levelsof commitment to get this venture off theground. When something gets in the wayof progress – for example a colleague whohas not grown with the business or afledging project that is sucking upresources and needs killing off – you willneed the passion to help you take theuncomfortable decisions (and there will beplenty of those) to demonstrate to all thatnothing is going to stop you.5. Strong leaders establish a“drumbeat” of progress.No matter how complicated your plan orventure seems, nothing convincesinvestors more than seeing that youactually do something with tangibleresults. Even if those milestones arerelatively minor or simply representincrements towards more major objectives,it is vital that you, as an organisation,establish a habit of making things happen.6. Strong leaders have a gripon the numbers.Investors are, for the most part, datadriven and tend to talk in spreadsheets. Topresent yourself as someone they cancommunicate with and understand, youneed to become fluent in the language ofdata and spreadsheets. What is theforecast and why? More importantly, whatnumbers best represent your performanceto date? If in doubt, watch any episode ofthe Dragons’ Den to notice where theirfocus is placed.7. Strong leadersunderstand the purposeand needs of theirpotential investors.Investors need to demonstrate a return inorder to generate profit for theirstakeholders and attract more investment.They may have other fine human qualitiesand be genuinely interested in youramazing social business or enterprise, butthey are still investors. The better onesalso begin with an exit in mind. Thismeans you need to understand how yourbusiness opportunity will leave a positivemark on their investment fund. They alsowant to invest in a business where there is
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965a strong leader – give them reassurancethat you will tackle the tricky issues:otherwise they will have to intervene, andmost do not like getting their hands dirty.It’s all about thefocusOnce investors have satisfiedthemselves that there is a strong leaderin charge, the next question, from themanagement due diligenceperspective, is about the level ofcoherence within the business. AtStrategic Resource, we activelyencourage investors to examinecoherence in our due diligence workbecause it is this factor that makes thebiggest difference. Put simply, thehigher the level of coherence acrossthe business, the more likely you are tosucceed in your venture. The onlyexception we have found to this rule isin the early days of a start-up when youare still working out the details of whatyou are going to do. In this start-upphase you need to work towardscoherence, but be ready to flex yourapproach as you find out what actuallygains traction in the social enterprisespace.So what is coherence, in social business, andhow do you develop it?1. Vision and PurposeYou should work as a team on yourunderstanding of what you want to achieveuntil you can say it simply andcompellingly. Excellent visions state anobjective outcome achieved in a giventime scale, within parameters that arewithin your power to control. They have atouch of boldness about them anddescribe something worth getting out ofbed for. But there are some traps to avoid.Here’s an example of one objective thatwould fail the test. Let’s say you run abusiness that has set out to be recognisedas “the best network for social housing inthe North East.” This falls short for severalreasons:It is based on someone elsesperception of you being the bestand therefore not is not in yourpower to control.The rest might be really bad. Thiswould make you simply the best ofa bad bunch – who wants that as avision?There is no time scale.There is no clarity on what you willactually achieve.Never underestimate the power of a clearvision. Even though it smacks of managementconsultancy speak, this is the most obviousplace where you can state a clear intention andattract others who want to rally around yourflag. Clarifying your vision allows you to climbup out of the jungle of business developmentwork you are doing and check that you are stillhacking through the right jungle on a productivetrajectory, rather than just putting lots of effortinto hacking. I have worked with too manybusinesses who confuse busyness for progresstowards a desired end. Of course they allcomplain that they are far too busy to stop andwork out such a hackneyed thing as a visionstatement. If you dont have a clear vision, aninvestment company will not view you asbackable. End of story.If vision is what we will achieve then purpose iswhy we want to get out of bed to do this.Purpose is often overlooked in vision work, butis equally important in reality. Purpose isusually the bit that is not about making money,but about making a difference, or an impact orleaving a legacy. In my business, our purpose
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965is to leave a legacy of great leaders in a widerange of organisations. That is what drives meforward. By contrast, our vision at StrategicResource is to have developed over 1,000autonomous leaders who know how to carry ondeveloping themselves, and to have achievedthis by the end of 2020.2. CommunicationThe word should perhaps be banned as itis the stop-gap answer to all identifiedailments in all enterprises – a lack ofcommunication is to blame for all woes.However, effective communication is thecounterpart to clarity of vision. There is nopoint having a compelling vision if no onein your business knows about it. So, hereare a couple of reminders and promptsfrom the practical school of effectivecommunication.Establish a “drumbeat of communication”to the whole business. You should hold atown hall meeting at least every quarter soyou can update everyone on progressagainst plan and key strategic issues.Be intentional about the waycommunication flows between your keymeetings or working sessions. What is thepattern of meetings that culminate in yourboard meetings and how does informationfrom your board meetings cascade backthrough the business? Unless you plan tomake this work in a joined up way it willnot.Be explicit about the priorities in thebusiness and what you need each team,group or person to be chiefly focused on.You will never have all the resources youneed to achieve all your objectives sopeople need to understand on a regularbasis where the business has set itspriorities.Recognise that people take on boardinformation in different ways. Try usingseveral different means of communication,such as ezines, webinars, small grouplunches or suggestion boxes.Finally, dont forget to communicateexternally to suppliers, customers andinvestors.StrategyWhile the vision you craft will bedurable over a number of years, thestrategy you develop to deliver thevision will evolve over time. Strategy isiterative, by nature. However, potentialinvestors want to know in detail whatyour current strategy is. The key wordhere is detail. What gives youconfidence that you will achieve whatyou say you will achieve? What is yourcunning plan? Where is the backgroundresearch that shows that this is morethan simple wishful thinking? How doyou know that this is a business with astrong potential for adding to thefinancial and social bottom line? Howwill you use your resources and whatwill your cash-burn be until you reachbreak-even? Will you actually get tobreak-even? In other words: is this aback-able business?All the books and courses I have ever seen onstrategy make the same assumption: that thefoundation of strategy is to beat the competitionand win. This is not surprising; after all, strategywas born in the field of battle. Its languagecomes from strategic thinking through militaryterms such as “front line troops”“communication lines” “targets” “mission” andeven “bullet points”.All this points to a bias towards gainingcompetitive advantage over the opposition.This is great if that is what you want to do. Inthis situation your SWOT analysis (Strengths,Weaknesses, Opportunities and Threats) isdesigned to get you one up on the enemy andavoid being the casualty of the business warzone.In social enterprise the chances are that youwill need to balance competitive with
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965collaborative, or at least co-operative,advantage. There will almost certainly be someother organisations and agencies that you willneed to work closely with in order to gain amutual advantage. However, if you simplyfollow these current strategic models, they areunlikely to lead you in the collaborativedirection. My four P’s of Purpose, Progress,Partners and Potential offer one simplealternative to the traditional SWAT analysis. Atleast it makes you think differently.Investors want to see a business plan and likepages and pages of numbers. The temptation,therefore, is to provide an informationmemorandum of 80 closely typed pages withlots of slide-ware and tables of data. However,if you read through 200 of these it normallycomes down to a few simple things.Firstly, if you double the expected cost andhalve the expected income will the businessstill be financially viable?Secondly, what are the five or six keychallenges the business has to get right inorder to gain traction in the market you havechosen to be in? If you cant say it simply in afew sentences you will struggle to convince ashrewd investor; he or she will have heard it allbefore.Thirdly, what are the external points ofvalidation that give your strategy substance?These might be data about the market segmentyou choose to play in or demographic dataabout the people you are focused on.Fourthly, where is there any evidence thatyou are making progress against your plan? Acouple of things you have already achieved willmean a lot more than a dozen things on yourradar screen but still out of reach.Fifthly, what is it that you are not going to doin your business? What is outside your scope?Whatever you choose to include in yourstrategy should, by definition, exclude someother possibility so that your enterprise isclearly focused on its niche and not attemptingto be “all things to all people”, which neverworks.Finally, who are the key people you haveattracted to work with you on this enterpriseand why are they compelling leaders of yourbusiness? While it is fine to have a clear leader,make sure you surround yourself with very ablecolleagues whose combined experience givesconfidence. We’ll explore this further in the nextsection.The team itselfMost leaders make the same mistake.They look for people they get on wellwith and appoint them to theirleadership team. Maybe they wereenthusiastic champions in the earlydays for the idea, or perhaps they weresimply people they knew who wanted tobe involved. However, getting the rightpeople in at the senior level in abusiness is: a) not easy and b) criticallyimportant. Depending on which studiesyou reference, management qualitymakes up for some 40% of the variancefor business performance. Fortunately,management selection is one areawhere it is relatively easy to havecontrol through being picky and makinggood choices. So what do you need tolook for?Let me start with the obvious: work out whatskills, expertise and experience you need andlook for people who evidence them throughwhat they have achieved to date. The firstsimple rule is that if they can demonstrate toyou that they have already achieved somethingin a previous role, they can probably repeat thissuccess in the new role.The second simple rule is that you need toconsider the career trajectory they are on. If
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965you have an accountant who has spent sometime being a financial controller and now wantsto be a financial director (assuming you needone) that is a normal career progression. Onthe other hand, if they have been in marketingand want to move over to finance because youneed a finance person, this is a non-obviouscareer progression and is unlikely to work.The third simple rule is that you need to makesure you have people working with you who arenot like you. If you surround yourself withpeople with the same way of approaching workas yourself you will get along famously, but bevery liable to group think and unlikely toengender the necessary level of contention andchallenge every business needs in order tomake real progress in a new area.So how do you know your team members aredifferent from you? Start by knowing yourself(you dont need to change who you are, justhire people who are not like you). If you are atalkative, “think out loud” kind of person, makesure you have someone on your team who ismore reflective, who will come back to you aftera few days of having thought through what yousaid and provide you with a quality and depth ofthought that you may personally miss. If youare a big picture, trend spotting kind of person,make sure you have someone on your teamwho is into the details and worried about whatis happening today, rather than in your blue skyfuture.If you are someone who is good at deciding byyour instinct or gut, or bases your decisionslargely on prior experience, make sure youhave a pure logic person on your team. Thismeans having someone who can analyse theproblem dispassionately and show you wherethe errors in your thinking have occurred.Finally, if you are a “just in time” kind of person,make sure you hire someone who really likesstructure and wants to know what the plan isbefore they proceed. Of course, if you arereflective, detailed, logical and structured thenfind some people who are talkative, big picture,experience-based and flexible. You will knowthat you have it right when something about theperson annoys or bores you.The last trick in hiring is to look for people whoyou think are better than you. This is one usedby many successful serial entrepreneurs. Theyhave no fear that they will hire people who wantto replace them. They encourage a broadrange of experienced views for debate tominimise the risk that they will take a wrongdecision by missing some key data.But how do you hire people who are this goodwhen the business has very limited money andyou cant afford to pay the market rate? As asocial business or enterprise, you have twouseful tools here. The first is that you are ableto offer a senior role in a social enterprise thataims to make money, but also make adifference. This gives those who are tired andweary of traditional commerce a renewedsense of purpose. That in itself is worth a lot ofcompensation. The second is that you can offera small number of significant players a smallamount of equity in your business. They will betaking a punt on their ability to help you turnthis business into something with a strong exitvalue and therefore a useful return on their timein the medium to long term.
We connect social enterpriseswith investors & the corporate world4th Floor, 20 Old Street, London, UK, EC1V 9AB+44 (0)20 7490 9520Company Registration Number: 6686965Measuring yourteam’s performanceIf you drive a car, you have adashboard of data that tells you howmuch fuel you have left, how fast youare going and how far you have gone.Some cars offer you more informationon how fast the engine is spinning andwhat radio station you have tuned into.Every business needs a dashboard ofdata that tells you and your investorshow you are progressing. But what datado you need on your dashboard?Many businesses attempt to report too muchinformation and get lost in a morass of data thatbecomes truly impenetrable. Most businessesneed to work out which key ratios or indicatorsare really relevant and which ones are morebackground noise. I encourage teams to findthe top six or seven performance indicators andfind a way to represent these in a visual way. Ifyou are using a business planning tool such asthe balanced score card, business excellenceor OGSM (Objective, Goals, Strategy,Measures) then these are likely to fall out ofyour business planning process. Getting it righttakes time and most often the first things youmeasure require considerable refinementbefore they become elegant descriptors ofbusiness performance. Every business isdifferent so it is not possible to offer an off-the-shelf dashboard, but it needs to achieve threethings.Firstly it must be capable of telling you how youare progressing at turning your vision intostrategy and your strategy into action.Secondly, it must be capable of telling youabout the progress you are or are not makingon the priorities you have set and whether, inthe light of experience, the original plans needrefining. Rather than simply know that you haveseven clients in your pipeline of sales, you alsoneed to know which of these is most capable ofhelping you achieve your numbers andtherefore make the biggest difference. Ratherthan simply reporting progress against plan, forexample on a Gannt chart or Waterfall chart ofactivities, you need to indicate what beingahead or behind plan means in the biggerscheme of things. Thirdly, the data must becapable of helping you take tricky businessdecisions, so that they are data driven or atleast data referenced.The way most businesses develop their uniquedashboard is to generate some managementinformation and then keep on asking what itmeans until the refined output becomes adynamic set of indicators that is as good atshowing the performance over the last monthas it is at showing what needs to happen nextin order to achieve the plan. That takes time.As soon as you get investment money in, yourinvestors will have their own set of demands(not requests) about how they want you to diceand slice the data. But now is a great time toensure you are collecting and reporting datathat tells you something useful and powerful.Getting all of this in place means you are aneffective leader with a clear and compellingvision. You are busy developing your iterativestrategy to turn your vision into traction in themarket place and have attracted a talentedteam around you who complement your profileby being different from you. And you have adashboard of data that really says something.Id back you.