1、,Business 16 Stanford Department of Continuing Education Class # 6, 11/2/09,Hiring, Firing, Business Development,Hiring,Probably the single most important function of a CEO/Founder Your first hires will set the culture of the company Once done, it is nearly impossible to change Make sure you are doi
2、ng it right Bad culture is like cancer Always takes more time than anticipated Figure at least 6 months for key positions Many other things will go unattended while you interview and hire; welcome to the NFL Always more expensive than anticipated You get what you pay for,Who Do I Hire?,You need to s
3、tart with a key hire, like a CEO Pay attention to goal alignment, team dynamics It is like a marriage Complement what you have Beware of “superstars” who are not team players Be aware of ego issues and ability to delegate Always hire people smarter than you are Always hire people excited by your vis
4、ion Dont hire people who are just in it for the money,Hardest Hires,VP of Marketing Most really good marketing people are looking for CEO gigs The best ones are very analytical, quantitative, relationship oriented, politically sensitive VP of Sales See VP of Marketing Some sales guys are like drug a
5、ddicts; it is all they want to do The best ones like to measure and be measured; weak ones are afraid CFO With Sarbanes-Oxley, CFOs are in high demand, especially with public company experience Often the most under-appreciated position Should be thought of as a backup CEOMedical Directors Often make
6、 more than anyone else at the company Usually management “challenges” Usually poor managers Usually have giant egos,Hiring: 4 Schools,School #1: Hire the smartest, most energetic guys you can find, no matter what their background, and they will adapt Smart people will think out of the box Energetic
7、people will work tirelessly until they solve your problems Smart, energetic people dont take “no” for an answer Unfortunately, Smart people may be really smart, but they may be learning on your nickel Energetic people may not be the most efficient,Hiring: 4 Schools,School #2: Hire experienced guys w
8、ho have done it before These guys are incredibly efficient Lots of contacts They have scar tissue from getting beaten up for being smart and energetic for somebody elses firm They can be pretty cynical and rational Unfortunately, They may not be interested in “doing it again” at a small firm They ma
9、y expect big company perks and staff They may expect more compensation than you can afford,Hiring: 4 Schools,School #3: Hire guys who have tried and failed, because they have seen it all before They are more heavily motivated because they dont want to be seen as losers They know what doesnt work Unf
10、ortunately, They may not know what does work They may just be losers When things get wiggly, they may be the first to bail out,Hiring: 4 Schools,School #4: Hire the #2 guy at an organization who cant move up and has to leave to make his mark Many of these people are actually doing the work of the #1
11、 guy, but not getting any of the glory They have not only the drive, but the ability to succeed They are looking for a platform to gain visibility in success Unfortunately, They may be human, which may be their only drawback,How do I hire?,You can hire a search firm They usually specialize in one ki
12、nd of search (CEO, CFO, senior people, technical staff) Usually require a sum equal to 1/3 the first years pay in three installments They help you write a spec They show you resumes of people that meet your spec, who they have had a chance to interview You pay to fly them out The firm does initial r
13、eference checking You need to do the real references,How do I hire?,Get to know the partners involved They are unique people They love the thrill of the chase, travel, meeting new people and getting them to do something new Many recruiters have long relationships with entire management teams in many
14、 companies They have short attention spans They dont really understand your business But they dont have to They know the type No matter how good looking the junior associate (male or female), dont let that influence your decision It is the partner and his/her relationships that make all the differen
15、ce If something goes wrong, and the guy you hired leaves, you need to know that the freebie is worth it,Search Firms,However, If they cant find somebody right away, and youve already paid them their money, the are less incentivized If you only demand schlocky people, you will only get schlocky peopl
16、e They cant help you find good people for a dumb business Lots of people say they do searches, but only a few are any good at it Don Valentine was asked “who is your favorite search firm?” to which he replied “whoever I havent worked with in the last 6 months”,Doing your own search,Use your board VC
17、s love to gossip about who is leaving Yet another reason to have outside industry leaders on your board Like duck hunting: go where the ducks are Have your stuff together (business plan, etc.) Network at a high level, and try to understand the local politics in an organization Find out who is thinki
18、ng about leaving or big events that are going to take place (mergers, etc.) Network, network, network,Closing the Big Kahuna,Consider the human factors Your candidates spouse may be a big reason they want to leave It may have nothing to do with money Dinners, several, with your family and theirs are
19、 often helpful Make sure you like them,Closing the Big Kahuna,Compensation Salary + equity (+ bonus?): Surveys Usually try to keep him even with his current salary unless he can afford less Make sure they understand the trade-off between precious cash and stock Prepare two offers,Closing the Big Kah
20、una,Make sure you check their references Ask every reference for additional references Always explicitly ask about sexual harrassment, criminal activity and integrity Ask references for specific bad points Dont make the first question about their smoking crack; build trust Ask previous investors, bo
21、ard members Always keep several candidates on the line, so you dont freak out if your first choice says “no”,The smaller kahunae,Hire according to plan Remember, hiring is easier than firing There is no worse feeling than laying somebody off Hire only the best If you are complaining that you are int
22、erviewing too many people, you are probably doing a good job All employees look at the senior guys to see what perks they have This is why employment contracts, parachutes, etc. are a bad idea Insurance; COBRA works for a while, but you will have to set up a plan Ditto for option plan,Firing,Most en
23、trepreneurs do not fire fast enough The more senior the position, the less evidence it should take In retrospect, most people knew that they should have fired a CEO because they had a suspicion At the end, they waited 6 months, and then just wished they had fired him 6 months earlier Bad CEOs are al
24、so busy hiring bad employees You are better off firing too much than not firing enough Plan a turnover target. If you are underfiring, you may not be asking enough of your employees,Firing,Remember, you dont really need a reason You are not condemning an innocent man You dont need to build a case; y
25、ou dont have time Your employees should be justifying their existence every day You should be asking “Why havent I fired that guy yet?” Make it a habit to meet/interview people all the time Peoples lives change, and people move on Visit with recruiters regularly Ask them whos available Have board me
26、mbers do exit interviews; they will hear things you wont,Oh, no! Im not going to have enough money to meet payroll,Revenues did not meet plan The market changed Personality conflict with investors/loss of confidence The bank is calling your loan,Reorganizing,Banks: you can negotiate spreading out yo
27、ur payments But you will have to give up something Lien on IP Equity You are not going to change principal owed Landlord: you can usually renegotiate They may ask for a longer lease, equity, or some kind of lien IRS: if you do not pay your taxes, the directors and management of the company are perso
28、nally responsible Always always always accrue taxes You can go to jail They dont like negotiating,Reorganizing,Suppliers: you can lengthen payables It wont hurt your relationships if it is temporary If you are going to stay in the business, do not screw over your suppliers They never forget Employee
29、s You can ask them to go part time, take mandatory unpaid leave, pay cuts You cannot ask them to work for free They need to understand that there will be some kind of catch-up if they get you out of this jam IRS: if you do not pay your taxes, the directors and management of the company are personall
30、y responsible Always always always accrue taxes You can go to jail They dont like negotiating,Bankruptcy/Liquidation,Types of bankruptcy: Chapter 7: Liquidation Where the company will no longer be an ongoing entity, and a sale of the assets is required to pay back creditors Alternative to Chapter 7:
31、 Assignment for the Benefit of Creditors (ABC) Allows the company to choose an assignee to sell the assets Faster than Chapter 7 May provide a better price than a creditor who doesnt understand the business Chapter 11: Reorganization Where the company will be on ongoing operation under the supervisi
32、on of the court Requires the consent of a majority of the creditors Debt is restructured, and in some cases, forgiven,Oh, no! Im not going to have enough money to meet payroll,You need to take decisive action When you decide to do a layoff, you need to consider several factors How do I keep my key e
33、mployees? Timing? Will we be seen as damaged goods? Perception of investors Liability Ethics Minimizing pain,The Layoff,Like everything else, you will need to develop a tactical plan The deer hunter: a single shot Isolate and stabilize the survivors Have final paychecks, info packets ready to hand o
34、ut Get the victims out of the building ASAP Avoid leaks at all costs before the event Do it all in a humane way because you want people to speak well of you when you start hiring again,Business Development/Growing your Company,You can do it through revenues and VC (the old fashioned way) You can do
35、it through acquisitions Hire an entire team instead of having to build it yourself Can save time and money Can be totally pathological You may be able to eliminate a competitor while giving yourself additional strategic resources en masse Critical mass/scale Additional products May be taken more ser
36、iously,Business Development/Growing your Company,You can do it through revenues and VC (the old fashioned way) You can do it through acquisitions Hire an entire team instead of having to build it yourself Can save time and money Can be totally pathological You may be able to eliminate a competitor w
37、hile giving yourself additional strategic resources en masse Critical mass/scale Additional products May be taken more seriously,Growing your Company,Financing an acquisition Can raise VC May require some cash Can promise target money (a note) to be paid at a future date Can pay with your stock at a
38、 higher price than a VC may be willing to pay May be able to get a better deal if you promise more on the backend, but commit to milestones, with rights falling back upon failure Sometimes, banks like SVB may be willing to help,Business Development/Distribution Partners,Strategic distribution arrang
39、ements can be very valuable Allow you to sell more product than you could afford to Lets you sell into markets that you have no interest in Lets you sell to customers you have no access to Lets a potential acquirer “try before they buy” They can give you a lot of credibility They help you develop cu
40、stomer feedback, relationships, and model how a real sales force works They can also hurt Deals get signed, but sometimes little incentive for a partner to sell your product Your product may be used in bundling you have no control over There may be partner politics you may not understand,Business De
41、velopment/Distribution Partners,You need to understand how a partners sales force is being compensated You need to understand who is responsible for what You need to craft an agreement that minimizes rights conflicts Channel development is expensive, which creates issues A partner may want you to pa
42、y for that A partner may not want to give you an “out” However, you may need an out if you want to be acquired by somebody else You need to be able to audit results You should have performance milestones, with rights flowing back if they are not met You have little control apart from that,Business D
43、evelopment/Strategic Investors,Strategic investors can be very valuable Can give you insight into the thinking of potential acquirers You can find out what they dont care about More than one can set up a bidding war later on They can give you a lot of credibility They can also hurt If they stop participating, people will want to know why Some buyers may be turned off If you bring one in too early, you may give too much away You need to understand who your relationship is with, and what value it is,
