Building A Successful Company

Part Four: Leadership

By Demetrios Sapounas

In the past decade and a half, I have had the opportunity to work on several new ventures and advise and mentor numerous entrepreneurs on their journey to building a successful company from an idea.  Recently, I also began working as a business coach with the Small Business Development Center (SBDC).A common theme with all these interactions is the emphasis on building a product. This includes: raising capital, developing detailed revenue models, recruiting a team and getting customers – not necessarily in this order.  This is the “classical” approach of going about launching a new venture where the belief of “build it and they will come” still seems to influence early- stage activities.

How many times have you found yourself working at a company and you could not wait to find your next job?  You often hear that “people leave managers, not companies”, but some research indicates that leadership plays a larger role on employee commitment, engagement, and longevity. 

Much has been written about leadership.  Many define it as a formula, others describe it as behaviors and yet others talk about leadership as something you can learn through training.  I view leadership as something more complex- something that has its foundation in personal beliefs, integrity, dependability, conviction, compassion, drive, and ability to listen. The old idea of “doing business on a handshake” is a testament to many of these attributes.  It instils confidence, trust and conveys integrity and reliability.  Of course, these days you do need a contract to do business, but everything starts with the handshake.

Where leadership traits become extremely important is in the running of a company or managing a team.  It boils down to the personal relationships and the trust and credibility you, as a leader, can build with your team.  It has to do with coming across as a genuine person, someone who is trustworthy, dependable, caring, who can communicate clearly, who can inspire people.  Training can help improve some of those traits, but they have to come naturally to you. 

As a founder, you probably appointed yourself as the company’s first CEO.  That may work for a while, but you should acknowledge your limitations and play to your strengths.  Especially early on, humility can create bonds with your team, build trust and create a following, because you come across as genuine.

At a start-up, the non-technical founder and CEO, with enterprise software sales background at a global software company, felt that the past interactions with developers provided all the necessary knowledge about how you build software and engage with the development team.  In meetings with the offshore development team the CEO often boasted about knowing everything about how software is built and that the developers are taking too long to deliver features (many of them rather complex and with dependencies across the platform) and charging too much.  Those interactions diminished any credibility the CEO had as a leader, being cognisant of his strengths and limitations, or someone who could be trusted.  This CEO did not instil the confidence to lead the company.

Great leaders can be found in many walks of life and their impact can be lasting.  An example is Sir Alex Ferguson, the long-time manager of Manchester United, the British football club.  During his tenure, the team’s success reached beyond the UK boarders and became one of the most popular teams in the world.  He did not start at the top.  When he first joined Manchester United, the team was not at the top of the charts, and it was struggling.  Sir Alex built a good team he could trust and depend on, to identify and recruit young talent for the team’s academy program, as well as good players who could fill gaps in United’s first team.  David Beckham, Cristiano Ronaldo, to name a few, came into United through those programs.  By building the academy’s reputation and United’s success, made it easier to recruit the best footballers in the world, much like Apple, Google or Facebook can attract the best technical talent.

Sir Alex expected from his players dedication, strong work ethic, intensive training, working as a cohesive team, trust on each other’s abilities and communication on the field.  These are the same expectations you should have of the people at your company.  Teamwork and communication are extremely important no matter what business you have.  As the founder you should set the example and you should also ensure politics are kept to a minimum and do not become what defines the operations of the company.  Keep your team’s focus on the short-term and long-term objectives and on growing and making the company successful.

Football is the preeminent ageism business, because, with age, speed, stamina and the ability to compete with younger players diminishes.  Sir Alex was up-front with his players, when he started to detect diminished performance, whether of age or lack of training or dissatisfaction or some other reason and talked to them about the situation and, when necessary, traded them to other clubs.  He always tried to reach a mutual understanding and a positive outcome for the team and the player, because those players could become the ambassadors for United and often returned to the club as scouts, assistants or coaches.

As a leader you need to be able to listen. They are not very observant and do not listen carefully, which leads them to miss much of what is going on around them. It can be said that the reason we have two ears and two eyes but only one mouth is to listen and observe twice as much as we talk.  By following this principle, you can learn a lot, whether you are interacting with your team or a client.  Expressions can provide much more information than words and can help you assess the situation, pick up on specific cues and when you speak you can come across much more thoughtful, intelligent, precise.  This trait can serve you well and is worth practicing and becoming good at.

There have been many occasions when I worked with people who liked to talk.  In one case, the CEO of a company was able to turn a 30-minute meeting into a 90-minute waste of time.  Not only he liked to talk (or listed to himself talking), but he would say the same things from one meeting to another, make the same points and provide very little in the form of actionable information.  I would characterise this as ineffective communication.  Salespeople tend to talk a lot and often others refer to this as getting the customer to buy, so to stop hearing them speak!  But especially salespeople, if they listen carefully to what prospective customers say and how they act instead of focusing on making a sale, they will end-up with more satisfied customers.

As the founder, you think and operate as the owner of the company.  Great leaders think and operate like an owner, even when they are not.  Though this is not commonly found in people who are hired into a company, it is a distinctive trait of some of the best company founders.  Apart from a larger purpose, strong confidence, and conviction, embrace of the audacious, great leaders make the unpopular and controversial decisions and they are able to clearly communicate to others the ultimate goal.  They focus others in the company on 2-3 objectives, instead of long lists of tasks, while tempering their impatience for quick and immediate outcomes.  The most important aspect of great leaders is to trust the judgement of others and being comfortable delegating authority.  Similarly, they do not micromanage, they do not dominate conversations or insist to always have the last word.  They also understand that they do not have to be involved in every decision, rather they need to correctly make a few large ones to achieve success.  Success comes from the achievements of the organization, rather than their individual accomplishments.  This translates into considered tough and fair, which creates a following and respect.

Great leaders are also excellent at working with people.  They can extract commitment and exceptional performance from the employees by setting a personal example, by having an understanding of the character of their staff and having empathy for them, during difficult times.  They play multiple roles concurrently, being conductor, coach, mentor, educator, motivational speaker, psychiatrist, puppeteer, orchestrator, judge, and executioner.  They vary these roles trying to figure out how to extract higher performance (the extra 5%) from groups and individuals.  This can make the difference between being a leader in the market or just another one in the pack.

Leaders need to be visible and lead by example.  The traditional militaristic and hierarchical approach, associated with the boss, may have been effective in the past and many companies are still run in this way, but that ensures you lose touch with the realities of your business.  Progress, status reports and presentations are not a substitute for engaging with customers and getting first-hand feedback.  This is the type of leadership Sir Richard Branson practices and his companies have worked out rather well.

Delegation and distributing ownership and accountability to your team is a critical component to scaling your company.  This does not come easy when you have been responsible for all the decisions and the day-to-day operating details.  It is necessary and that is where your ability to effectively deal with people becomes important.  Certainly, trust in your team helps, but that takes time to establish and many times you do not have the time.  Making people responsible and assigning accountability is a good way to quickly establish ownership and will also help you better assess the strengths and weaknesses of your team. 

A way to assign accountability is to use the DRI (Directly Responsible Individual), a method implemented at Apple by Steve Jobs and one that worked well for them.  The DRI has been adopted by other companies, not only because people who moved from Apple to other companies took it with them, but also because of its simplicity and ease of implementation.

Every meeting should have actionable items.  Assigning an individual to each actionable item makes them the DRI.  This means they are responsible and accountable for delivering on that item.  This also makes it easy for others to know who the responsible individual is for delivering on things that need to be accomplished.  All someone must do is ask “Who is the DRI?”.  This method can be applied to small actions or tasks, but also to larger initiatives.  Larger initiatives consist of multiple teams and numerous action items, and each can have a DRI.  This way ownership and responsibility are explicitly assigned to individuals, often at the individual contributor level, making it more efficient to accomplish objectives.

The DRI also empowers people to make decisions and solve problems when they surface and in a timely manner.  As the company grows and the number of employees increases, employee empowerment becomes key to maintaining efficiency and a fast pace.  As a start-up, you move fast, make decisions as needed even if some are the wrong ones, change or adjust your direction overnight and do whatever it takes to adjust to the market and satisfy customer needs.  As you grow, the speed of execution and the desire and rate of change tend to slow.  This may be due to management layers that got introduced, new people brought into the organization that are not comfortable with the very fast start-up pace or are more conservative, due to influences from stakeholders or investors. 

Apple has been able to maintain its start-up mentality and quick pace, even though it is a $100B+ company!  That has been the example set by the leadership and has allowed the company to quickly change its strategy, adjust to markets, address product failures.  It is up to you, the founder, to set the example of how you want to operate and the type of company you would like to become, e.g., Apple or GM.  You just need to make sure that the rest of the leadership team is comfortable with this model and willing and able to operate in such an environment.

Empowerment is also a necessity, because you want the people to feel trusted and comfortable with making decisions, instead of having to wait for a manager or someone more senior to make the decision.  By the time a decision is made, it may be too late to have the desired impact.  Richard Branson talks about the initiative and decision-making frontline employees at Virgin Airlines exhibit and the difference it came make for customers.  It demonstrates caring for the customer needs and a desire to provide excellent customer service.  This can lead to satisfied and repeat customers, plus word of mouth and referrals, elevating the company’s standing in the market.  Virgin likes to recognise employee initiative and accomplishments, thus demonstrating that they value their employees.

I was at an early-stage company that had more than hundred employees and a dedicated human resources department.  The founder and CEO insisted on personally interviewing every single person considered to be hired in the organization, no matter the position for which they were applying. This meant finding time on the CEO’s calendar to schedule the interview and then getting the CEO’s feedback and approval to make an offer.  This introduced additional time to the hiring process, which resulted in many candidates accepting other opportunities due to the long hiring process and scheduling delays.  That also communicated to the people involved in the hiring process that the CEO did not have the confidence in them to make the right decision.

Another aspect of leadership is the opportunities you create for your team to grow and learn new things.  This includes you as well. As the founder, the CEO, a leader in your organization, you need to continuously grow, improve your skills, learn new things, stay abreast of changes.  The best people understand the need to continuously learn and grow, because that makes them better at what they do, more valuable and they can deliver better results.  Provide opportunities for everybody in the company to grow, improve their skills and learn new things.  Irrespective of whether this occurs as part of formal training programs or informal events like attending an industry conference or trade event or even hackathons or meetups.  Making growth and training part of your company’s culture communicates an emphasis on continuous learning and improvement and an interest in the growth of your people.

You may feel that as a start-up you cannot afford to train your employees.  That may be the case, though providing training opportunities does not need to cost a lot.  There are many free or low-cost approaches, from leveraging free online courses to giving your people a certain number of hours per month to apply to learning something new.  This goes a long way toward demonstrating caring and interest in employee growth and in return you can get more devoted and engaged employees.  You can also give them the opportunity to showcase their knowledge by providing a forum for them to present to others at the company what they have learned, how is aligns with the work they do and what value it can provide to the company.

In the next segment we will discuss product, quality and how striking a balance between go to market, quality and features could make a difference between success and failure.

Resources

Alex Ferguson and Michael Moritz, “Leading”, Hachette Books.

Directly Responsible Individuals: The What, How and Why of DRIs: https://tettra.com/article/directly-responsible-individuals-guide/

How Apple Works: Inside the World’s Biggest Start-up: https://fortune.com/2011/05/09/inside-apple/