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CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
CVs and VCs: Managing the People/Profit Equation
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CVs and VCs: Managing the People/Profit Equation

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This is part of the MaRS BioEntrepreneurship series …

This is part of the MaRS BioEntrepreneurship series
http://www.marsdd.com/bioent/apr16

Speaker: Joanne Harack, Snelgrove Associates

* Founder entrepreneurs: from lab to leadership
* Organization development framework: from spin out to emerging company
* HR planning to match the business plan: short- and long-term needs
* Getting the basics right: payroll, taxes, and related auditable processes
* Intellectual property: from University to business
* Hiring versus outsourcing
* Recruitment/selection tools and techniques
* Compensation philosophy and structure
* Employment agreement basics
* Investors, Board and SAB
* Organizational culture

To download an audio file of this presentation, please go to :
http://www.marsdd.com/bioent/apr16

Published in: Economy & Finance, Technology
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  • 1. CVs and VCs Managing the People/Profit Equation Joanne E. Harack MaRS BioEntrepreneurship Series, April 16, 2007 1
  • 2. Agenda Background to the biotech industry ! Personal challenges for founders ! Organizational development framework ! Building organizational capability ! HR functional expertise ! Key processes ! Moving ahead ! MaRS BioEntrepreneurship Series, April 16, 2007 2
  • 3. Creating Science Businesses A VC’s view: ! “Take people, ideas and money and mix.” A CEO’s view: ! “Biotechnology is about profit and passion.” An employee’s view: ! “These companies provide incredible learning opportunities – if you can take it.” MaRS BioEntrepreneurship Series, April 16, 2007 3
  • 4. Evolution of Biotech (Life Sciences) Industry Biotech companies have emerged via a ! combination of innovation and entrepreneurship A university researcher and a venture ! capitalist formed Genentech in 1976 1980s and early 1990s – new IPOs followed ! Genentech model Late 1990s-now – consolidation and blurring ! of biotech/big pharma and search for new models MaRS BioEntrepreneurship Series, April 16, 2007 4
  • 5. What’s Unique about the Biotech Industry? Highly regulated ! Priority on science discovery ! Reliant on VC financing ! High Value on IP/patents/science ! Many influencers: FDA, healthcare, ! reimbursement, patients/consumers Long /complex product to market cycle ! Continuity of thought over extended time ! MaRS BioEntrepreneurship Series, April 16, 2007 5
  • 6. What are Conventional Biotech Companies Like? Small and mid size companies just ! focused on survival, not best OD practice – recruitment of leaders Accountability to investors/stockholders ! & need for measurements Philosophical dilemma of researchers ! –academic to business environment MaRS BioEntrepreneurship Series, April 16, 2007 6
  • 7. Typical Organization Dynamics Informal rather than structured career ! development Integration across disciplines ! Teamwork ! “Can do” attitude: intellect + ! pragmatism Professional “HR” functional expertise ! lacking MaRS BioEntrepreneurship Series, April 16, 2007 7
  • 8. Catbert, Evil HR Director MaRS BioEntrepreneurship Series, April 16, 2007 8
  • 9. From Lab to Leadership The science of business/the business of ! science Science Business: Gary P. Pisano ! Businesses creating science are ! fundamentally more complex than those using science Unique personal and organizational ! challenges MaRS BioEntrepreneurship Series, April 16, 2007 9
  • 10. Personal Challenges for Founder/Entrepreneurs Telling the story ! Convincing initial investors ! Selling the concept ! Commercial capability ! Recruiting the team ! Current and future capability ! Letting go ! At what point in the company’s growth ! does my role change? MaRS BioEntrepreneurship Series, April 16, 2007 10
  • 11. Serial Founders Telling the story Letting go CYCLE OF CHALLENGE FOR SERIAL FOUNDERS Selling the Recruiting/building Concept the team MaRS BioEntrepreneurship Series, April 16, 2007 11
  • 12. Intellectual Property: An HR Perspective Paradigm shifts: ! Academic “publish/disseminate” vs. ! corporate “keep secret/appropriate” Individual discovery vs. corporate asset ! Assignment of inventions to the company ! Very few academic scientists are willing/able to make the shift on a permanent basis MaRS BioEntrepreneurship Series, April 16, 2007 12
  • 13. Founder to CEO Raising and managing finances ! Recruiting and building a team ! Creating the corporate culture ! Determining short, mid and long term ! goals Clearly communicating goals to the ! Board and employees MaRS BioEntrepreneurship Series, April 16, 2007 13
  • 14. Stages of Organizational Development Phase 3 Phase 2 Success/ Late Complexity Transformation – or Death! Early Phase 1 Time/Effort MaRS BioEntrepreneurship Series, April 16, 2007 14
  • 15. Phase 1 Organization Survival oriented ! Highly entrepreneurial ! Fast mover, adaptable and changeable ! Perpetually cash starved ! Risk taker ! MaRS BioEntrepreneurship Series, April 16, 2007 15
  • 16. (Early) Phase 2 Organization Demonstrated successes ! Efficiency and effectiveness ! Systems, procedures oriented ! Management focused versus ! entrepreneurial MaRS BioEntrepreneurship Series, April 16, 2007 16
  • 17. (Late) Phase 2 Organization More meetings and task groups ! Occupied with enshrining and repeating ! known success patterns Ignore or reject innovation outside of ! the “proven” success pattern MaRS BioEntrepreneurship Series, April 16, 2007 17
  • 18. Phase 3 Organization Close to customers and market ! Searching for innovative solutions ! Adaptable, changeable, “reinventing” ! itself Quality focused internally and externally ! MaRS BioEntrepreneurship Series, April 16, 2007 18
  • 19. HR Priorities at Each Stage Recruitment ! Rewards and Recognition ! Employee engagement ! MaRS BioEntrepreneurship Series, April 16, 2007 19
  • 20. Questions to Answer What is the key HR driver in the ! business plan? How will we grow the company? ! What do we want to be known for? ! What will it take to succeed? ! MaRS BioEntrepreneurship Series, April 16, 2007 20
  • 21. What is the key HR driver in the business plan? In the heyday of dot.com companies, mass ! hiring was typical; turnover was also high and rapid. This kind of hiring is not appropriate in a business driven by breakthrough science. Biotech business plans do not typically have ! “hire 40 scientists” as business milestones. If your key milestone is clinical, you need ! people who know how to get to the clinic. What specific events will trigger hiring for the ! company? MaRS BioEntrepreneurship Series, April 16, 2007 21
  • 22. How will we grow the company? Two approaches: ! Hire the ideal management team and they “hire ! down” the rest: in very well capitalized companies the conventional wisdom is to hire the management team first, but you have to be prepared to “over hire” and fire later Hire key positions/individuals and fill in the rest ! later: less well funded companies fill out a partial scientific “swathe” to demonstrate success quickly MaRS BioEntrepreneurship Series, April 16, 2007 22
  • 23. What will it take? If taking the “top team down” approach, the ! executives MUST be able to act as individual contributors (you do not want a senior team of “delegators”) If using the “key positions” approach, ! everyone in the company must be comfortable with ambiguity, role overlap Appropriate balance of opportunistic and ! planned hiring Compensation philosophy and structure ! should reflect the value proposition MaRS BioEntrepreneurship Series, April 16, 2007 23
  • 24. Scientific Advisory Board Timing & leadership ! Charter: how do you want to use the SAB? ! Role: advisor to the development process; ! typically report to the head of development; do not play an operating role Value: facilitate academic collaborations; ! provide sanity check on the science Rewards: equity or honorarium ! MaRS BioEntrepreneurship Series, April 16, 2007 24
  • 25. Board of Directors Formal Charter and roles; fiduciary ! responsibility Investors play a major role (choose ! them carefully!) Internal vs. external directors ! Governance: private vs. public ! MaRS BioEntrepreneurship Series, April 16, 2007 25
  • 26. Clinical Advisory Board Focused on clinical outcomes – not the ! science per se; predominately M.D.s Must report to the CEO (or head of ! regulatory/clinical) usually with a formal relationship to the Board (ethical and liability oversight) Typically created at the pre-clinical discovery ! phase One or two members may serve as ! consultants/advisors to CEO or Board prior to formation of the CAB MaRS BioEntrepreneurship Series, April 16, 2007 26
  • 27. HR Functional Expertise: Hired In or Outsourced? In general, dictated by: ! Existing expertise, previous experience and/or comfort level ! of CEO Volume (tasks, employees) ! Degree of difficulty ! Objectivity required/desired ! Discrete functional expertise often added at Phase 2 ! (or 30+ employees): HR functions that have been delegated to others are then integrated into the HR function If discrete HR function is present in the early stage, ! the incumbent performs additional roles MaRS BioEntrepreneurship Series, April 16, 2007 27
  • 28. HR Functional Expertise: Hired In or Outsourced? (cont.) Most commonly outsourced (Phase 1 ! organizations): Payroll: ADP or Ceridian ! Recruiting of senior leadership, including ! Directors: Executive Recruiters, specialized search firms Employment contracts; ESOP; IP ! assignment documents: law firm MaRS BioEntrepreneurship Series, April 16, 2007 28
  • 29. HR Functional Expertise: Hired In or Outsourced? (cont.) Irrespective of whether the expertise resides ! within or outside of the firm, internal accountability must be assigned “Outsourcing” does not mean delegating all ! responsibility or eliminating commitment of time Failure to manage outsourced functions in a ! coordinated manner from the beginning >rework, inconsistencies and unnecessary expense later! MaRS BioEntrepreneurship Series, April 16, 2007 29
  • 30. Recruitment: Talent Acquisition Recruiting/selection is both an “art” and a ! “science” “Would you date anybody? Selection ! matters!” Piers Steel, University of Calgary People are the fundamental building block of ! business growth and competitive advantage no matter how you choose to build out the organization Logistics of the recruiting process require ! frequent “refreshing” as organizations develop MaRS BioEntrepreneurship Series, April 16, 2007 30
  • 31. Talent Acquisition: the Paradox In annual surveys, 85% of executives ! across mature industries say that their companies do not have enough talent or are chronically short of talent; yet - CEOs report spending less than 10% of ! their time on talent acquisition and development. MaRS BioEntrepreneurship Series, April 16, 2007 31
  • 32. Talent Acquisition: Some Challenges Candidates in general are harder to find, ! more selective and difficult to “land”; Recruitment of Directors has become more ! difficult (demographics, competition, personal liability); Demographic profiles and immigration are ! increasingly important; Global “war for talent;” ! Mistakes are costly. ! MaRS BioEntrepreneurship Series, April 16, 2007 32
  • 33. Recruiting Process Sourcing ! Evaluating ! Selling ! Closing ! MaRS BioEntrepreneurship Series, April 16, 2007 33
  • 34. Sourcing Goal: to reach and connect with highly ! qualified candidates who aren’t looking for a job. At the right sites. ! From the right people. ! In the right way. ! quot; Build your recruiting practices so that people seek out your organization. quot; Work with recruiters who understand your value proposition, will negotiate rates, and can represent you credibly MaRS BioEntrepreneurship Series, April 16, 2007 34
  • 35. Evaluating Understand the job/role ! Interview with a team; prepare ahead ! of time Use behavioral interviewing ! Perform “due diligence” - references ! Collect feedback quickly ! For senior hires, consider formal ! assessment (e.g. ghSmart) MaRS BioEntrepreneurship Series, April 16, 2007 35
  • 36. Selling The best talent are very discriminating ! seekers of information, and are hard to recruit Focus on the right motivators: (advantages, ! benefits, capabilities, challenges) Sell the candidate – not the company ! Ensure fit with your culture as well as the job ! MaRS BioEntrepreneurship Series, April 16, 2007 36
  • 37. Selling (cont.) Who we are: vision, mission and values ! Where we came from: the lore ! Where we are going: the lure ! HOW THE CANDIDATE FITS OUR ! COMPELLING FUTURE MaRS BioEntrepreneurship Series, April 16, 2007 37
  • 38. Some Possible Value Propositions High performance “winner” in our niche ! Big risk/big reward ! Therapeutic breakthrough that saves ! lives (idealist) “Lifestyles” ! MaRS BioEntrepreneurship Series, April 16, 2007 38
  • 39. Closing: The Offer Letter The simpler the better ! Executives ! Others ! Timing and timeliness ! Formal orientation commences well ! before arrival Elicit feedback ! MaRS BioEntrepreneurship Series, April 16, 2007 39
  • 40. Compensation philosophy and structure There is no “best way” to structure total ! compensation The kind of organization you are building will ! dictate the relative emphasis placed on: Base salary ! Bonuses ! Equity ! Benefits/intangibles ! quot; The market and how you relate to it will dictate salary benchmarking MaRS BioEntrepreneurship Series, April 16, 2007 40
  • 41. Compensation philosophy and structure (cont.) Most early stage companies fail to think through a ! compensation philosophy Most early stage companies do not think through ! how to structure the ESOP – the investors/Board will be focused on the senior team and the overall cap structure. Without conscious, deliberate planning, the option ! pool allocated to employees can be depleted too quickly. Compensation issues typically surface with the third ! employee! It is worthwhile seeking external professional advice ! (consulting, surveys, industry associations.) MaRS BioEntrepreneurship Series, April 16, 2007 41
  • 42. Performance Management MaRS BioEntrepreneurship Series, April 16, 2007 42
  • 43. Performance Management Goal Setting and Review Process ! Keep it REALLY simple – early stage companies change too ! quickly to make investment in complicated systems either necessary or practical Keep the expectations clear – the goal is to align individual ! and corporate goal achievement, not a “scientific” measurement of each employee’s contribution Remember that it is really about two way communication ! and feedback – which should be ongoing, not an annual event It is not about money! Consider separating annual salary ! increase decisions from the review process MaRS BioEntrepreneurship Series, April 16, 2007 43
  • 44. Creating Engagement Turnover in biotech companies is high ! (>20%) Below the management team most ! vulnerable; more problems of fit and culture Variations across organizational levels ! and functions MaRS BioEntrepreneurship Series, April 16, 2007 44
  • 45. Creating Engagement (cont.) quot; Components: Fit and belonging ! Status and identity ! Emotional reward ! Economic interdependence ! Trust and reciprocity ! MaRS BioEntrepreneurship Series, April 16, 2007 45
  • 46. Creating Engagement (cont.) Treat people as partners – not ! “resources” to be managed Communicate, communicate, ! communicate Clean and safe physical environment ! Opportunities for self expression ! Coaching, counseling and confronting ! conflict and non-performance MaRS BioEntrepreneurship Series, April 16, 2007 46
  • 47. Defining Organizational Culture as the Company Grows How does the organization see itself, ! others, the world? What does “good” look like? ! What is an example of a “failure”? ! Quality of conversation ! Formality of feedback ! A diagnostic is helpful ! MaRS BioEntrepreneurship Series, April 16, 2007 47
  • 48. In Conclusion… Employees: Build Individual Capability “HR” VCs: Build Wealth CEO: Build the Enterprise “HR”= human and organizational capability MaRS BioEntrepreneurship Series, April 16, 2007 48

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