7/18/2004 copyright 2004. all rights reserved.1 organizational development in hi-tech startups by...

7/18/2004 Copyright 2004. All rights reserved.

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Organizational Development in Hi-Tech Startups

By Mark A. Herschberg

Wellesley Alumnae & Affiliates in Multimedia (WAAM)

Introducing WAAM Guest Presentation…

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Who am I?MARK HERSCHBERG. Educated at MIT, Mark double-majored in physics and EE/CS, and then went on to complete his Master's degree in cryptography at MIT's Laboratory for Computer Science. Currently, he runs White Knight Consulting, providing organizational development and project management services to small firms. His services include: operations management, strategy, business plan consulting, HR, process engineering, and project reviews. For the past seven years, Mark worked at numerous startups on wireless, finance, and data mining solutions. As the former Director of Software Engineering at Vaultus, he tripled the company size and later was instrumental in its sale for $42M. Based on his experiences training engineering teams, he authored an upcoming book on practical software engineering skills and also moderates the Job Discussion forum of JavaRanch, a 70,000 user software engineering website. He also teaches at MIT's UPOP program and often gives talks at conferences and colleges. In his spare time, Mark is one of the top ranked ballroom dancers in the country.

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Overview Themes

Organizational Development Team Building in Startups

Topics: The Core Team The Changing Organization Hiring Culture

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IntroductionWhat is organization development?How does OD play out in startups?

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Relevance A successful startup needs a thousand

things to go right.

The right people, the right process, and the right culture are critical to success.

The key to success is structural.

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Build for a Dynamic TeamEverything changes:

Business plans get rewritten Target markets change Competitors are unpredictable Company size can double or triple in a year

You cannot hire or formally reorganize fast enough

You must build (to be able to adapt) for tomorrow

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The Core Team

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Co-Founders Most successful companies have 3-4 founders Skills needed: (partial list)

Key Points: Different roles are needed at different times Pick co-founders for what they can do long term,

not just because they’re your friend

Vision HR Communication

Sales Finance Networking

Marketing Fundraising Leadership

Management IT Biz Dev

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VCsVC’s invest in teams, not products

VC’s provide networking, board members, and direction (in addition to money).

The VC is your creditor, not your friend. VC’s needs != Company’s needs

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BoardsBoard of Directors

Responsible to shareholders They control the company They can fire you

Board or Advisors Experts in their field Connections and advice

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Partnerships There’s a fine line between partner, client,

competitor, and investor

Partnerships useful for leveraging limited resources

Partnerships vary in scope, deep partnerships can yield more value, but at a higher cost of time. Choose wisely.

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Networking The value of networking cannot be overstated! Little or no sales, HR, marketing —

leverage your network.

However, do not rely on this strategy long term!

Viral is about as sound as “web ads = profit”

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When to step aside Why did you start the company? What is

your goal? (money, creation, power…)

Make this goal clear at each step

At some point, you may no longer be the ideal candidate

Good entrepreneurs rarely make good CEOs

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The Changing Organization

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Types of Organizations Organizational drive

R&D / Technology Sales / marketing Key customer / Opportunity / Partner Consulting Manufacturing Distribution / Supply Chain Economic advantage

Drive can (and likely will) change over time This change motivates other organizational

changes

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Facing Organizational Change Changes lead to:

New hires Reorganization Budgetary shifts

Change often creates winners and losers

“The fundamental response to change is not logical, but emotional.” – Peopleware, p 197

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Challenge of Organizational ChangeKeys to successful organizational

change: Expectation setting for changes Redefine teams and roles. Make sure to

not violate any existing “contracts.” Help teams see the bigger pie, not smaller

slice.

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Team Inflection Points Different team sizes have different

process/communication needs

Team Groupings 2-5 people: informal, “war room” 5-20 people: understood communication flow 20-40 people: defined process 40+ people: subdivisions

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Procedural Changes Drive and size require procedural changes

It is important to grow and modify the process as the team changes

Hold process reviews every 6 months

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Hiring Employees

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Theory X vs. Theory YTheory X:

People are lazy and greedy; employees need tight controls and are motivated only by financial incentive.

Theory Y:People want to be challenged and feel like part of a team; work is natural. Employees value not just money, but trust and responsibility.

Douglas McGregor, "The Human Side of Enterprise" (1960)

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Old vs. New EmployeesOld Employees

Memory Paid their dues Took on risk Define culture

New Employees Defined jobs Specific

Expectations

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Who to hire Define your dream team; then define realistic

subsets based on job market conditions

Co-workers are the key to job satisfaction

Golden Rule:Always hire people smarter than yourself.

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Knowledge vs. IntelligenceHire for capability, not knowledgeKnowledge for one vs. knowledge for allLaundry lists need to be washed

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When to hireOrder may matter

Hire for today (tomorrow may never come)

Better: hire for today, leaving options open for tomorrow

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In-house Cost Benefits:

No startup cost High retention High overhead

Keep tasks in house when they are: Core competency Repeated actions Generating useful long term knowledge Strategic

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Contractors Cost / Benefits:

Low overhead Some startup cost Low retention

Contract in-house when: One-off’s Tangential tasks Domain expert Short term need

Always consider future needs and interactions

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Outsourcing Cost / Benefits:

Low overhead Some startup cost Low retention

Similar to contractors, but off-site

Use like contractors

Warning: narrow communication pipe

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Offshoring Similar to outsourcing but overseas Often cheaper than local labor Drawbacks:

Very narrow communication pipe Time difference Language barrier Cultural barrier Differing service expectations Potentially limited legal reach

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Productivity Timeline

Employees begin not just with low productivity, but with negative productivity

Productivity

Time

Zero ProductivityNegative

Work

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Compensation It’s more than just money: (partial list)

Startups are rarely about moneyPeople who work for money never see

beyond the next paycheckSomeone else will always pay more

Money Other std. benefits Travel

Stock options Growth potential Work hours

401k Culture “Coolness”

Health plan Learning opp. Misc.

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Compensation In startups, typically salary is slightly below

average

Compensation may be shifted, but carefully. (Similar to the Challenge of Organizational Change)

Everyone has unique constraints, make the most of them

Free food is always overvalued

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Culture

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Culture vs. Performance Cultural fit is key Poor cultural fit causes disruptions

Cultural fit

Performance

Low

High

High

Low

Low performers can be improved; but you cannot change someone’s cultural fit.

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Value of Corporate CultureValues define an organization

(when not ignored)Culture is a job benefitTreat employees well

This is how they will treat each other This is how they will treat customers

Culture can help define growth in uncertainty (prevents shortcuts).

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Cultural Aspects Components of culture

Corporate values Corporate priorities Work / Personal balance Interpersonal interaction

Culture is found Between people Between people and policy

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Conflict Conflict is not evil, grudges or evil.

Benefits of conflict: Communication Exploration of differences Overt instead of covert

Conflict can be used to a company’s advantage, if used well.

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ConclusionOrganizational Development is critical

to a successful startup.The wrong people or structure will lead

to failure.Environment will change, the

organization must change with it.People are the lifeblood of the

organization

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Contact

Mark A. Herschberg

mark@whiteknightconsulting.com

www.whiteknightconsulting.com

Project Management Organizational Development

Post Mortems Hiring

Process Development Business Plans

Strategy