building a new venture team and planning for the next generation

Building a New Venture Team and

Planning for the Next Generation

2Chapter 16: Building a Team Copyright 2008 Prentice Hall Publishing Company

LeadershipLeadership Process of influencing and inspiring Process of influencing and inspiring

others to work to achieve a common others to work to achieve a common goal and then giving them the power goal and then giving them the power and the freedom to achieve it.and the freedom to achieve it.

Entrepreneurs must take on many Entrepreneurs must take on many roles in their companies, but none is roles in their companies, but none is more important than that of leader.more important than that of leader.

How is the leader of a company like How is the leader of a company like the leader of a jazz band?the leader of a jazz band?


Effective LeadersEffective Leaders Create a set of values and beliefs for Create a set of values and beliefs for

employees and passionately pursue them.employees and passionately pursue them. Define and then constantly reinforce the Define and then constantly reinforce the

vision they have for the company.vision they have for the company. Respect and support their employees.Respect and support their employees. Set the example for their employees.Set the example for their employees. Create a climate of trust in the Create a climate of trust in the

organization. organization. Build credibility with their employees.Build credibility with their employees. Focus employees’ efforts on challenging Focus employees’ efforts on challenging

goals and keep them driving toward those goals and keep them driving toward those goals.goals.


Effective LeadersEffective Leaders Provide the resources employees need Provide the resources employees need

to achieve their goals. to achieve their goals. Communicate with their employees.Communicate with their employees. Value the diversity of their workers.Value the diversity of their workers. Celebrate their workers’ successes.Celebrate their workers’ successes. Are willing to take risks. Are willing to take risks. Encourage creativity among their Encourage creativity among their

workers.workers. Maintain a sense of humor.Maintain a sense of humor.

(Continued)(Continued)


Effective LeadersEffective Leaders Create an environment in which Create an environment in which

people have the motivation, the people have the motivation, the training, and the freedom to training, and the freedom to achieve the goals they have set.achieve the goals they have set.

Become a catalyst for change when Become a catalyst for change when change is needed. change is needed.

Keep their eyes on the horizon.Keep their eyes on the horizon.



Three Vital Tasks of a Three Vital Tasks of a LeaderLeader

1. Add the right employees and 1. Add the right employees and constantly improve their skills.constantly improve their skills.

2. Create a culture for retaining 2. Create a culture for retaining employees.employees.

3. Plan for “passing the torch” to 3. Plan for “passing the torch” to the next generation of the next generation of leadership.leadership.


Building an Building an Entrepreneurial TeamEntrepreneurial Team

Study: 80 percent of employees turnover Study: 80 percent of employees turnover is caused by bad hiring decisions.is caused by bad hiring decisions.

Leadership IQ study: Leadership IQ study: 46 percent of newly hired employees will fail in 46 percent of newly hired employees will fail in

their jobs within 18 months.their jobs within 18 months. 19 percent of newly hired employees will 19 percent of newly hired employees will

achieve unequivocal success. achieve unequivocal success. DDI study: 34 percent of hiring managers DDI study: 34 percent of hiring managers

admit to making bad hiring decisions admit to making bad hiring decisions because they were under pressure to fill a because they were under pressure to fill a job. job.


How to Avoid Hiring How to Avoid Hiring MistakesMistakes

Elevate recruiting to a strategic Elevate recruiting to a strategic position.position. Look inside the company firstLook inside the company first Encourage employee referralsEncourage employee referrals Make employment ads stand outMake employment ads stand out Use the Internet as a recruiting toolUse the Internet as a recruiting tool Recruit on campusRecruit on campus


How to Avoid Hiring How to Avoid Hiring MistakesMistakes

Forge relationships with schools Forge relationships with schools and other sources of workersand other sources of workers

Recruit “retired” workersRecruit “retired” workers Consider using offbeat recruiting Consider using offbeat recruiting

techniquestechniques Offer what workers wantOffer what workers want



Hiring the Right Hiring the Right EmployeesEmployees

Conduct a job analysis and create Conduct a job analysis and create practical job descriptions and job practical job descriptions and job specificationsspecifications


Conducting a Job Conducting a Job AnalysisAnalysis

Create a Create a job description job description - a written - a written statement of the duties, statement of the duties, responsibilities, reporting responsibilities, reporting relationships, working conditions, and relationships, working conditions, and materials and equipment used in a job.materials and equipment used in a job.

Create a Create a job specification job specification - written - written statement of the qualifications and statement of the qualifications and characteristics needed for a job, stated characteristics needed for a job, stated in such terms as education, skills, and in such terms as education, skills, and experience.experience.

Dictionary of Occupational TitlesDictionary of Occupational Titles


Sample Job Description Sample Job Description from the from the Dictionary of Dictionary of Occupational TitlesOccupational Titles

Worm PickerWorm Picker - gathers worms to be used - gathers worms to be used as fish bait; walks about grassy areas, as fish bait; walks about grassy areas, such as gardens, parks, and golf courses such as gardens, parks, and golf courses and picks up earthworms (commonly and picks up earthworms (commonly called dew worms and nightcrawlers). called dew worms and nightcrawlers). Sprinkles chlorinated water on lawn to Sprinkles chlorinated water on lawn to cause worms to come to the surface and cause worms to come to the surface and locates worms by use of lantern or locates worms by use of lantern or flashlight. Counts worms, sorts them, and flashlight. Counts worms, sorts them, and packs them into containers for shipment. packs them into containers for shipment.

(# 413.687 - 014 in D.O.T)(# 413.687 - 014 in D.O.T)



Conduct a job analysis and create Conduct a job analysis and create practical job descriptions and job practical job descriptions and job specificationsspecifications Plan an effective interviewPlan an effective interview


Planning an Effective Planning an Effective InterviewInterview

Develop a series of core questions and Develop a series of core questions and ask them of every job candidate.ask them of every job candidate.

Ask open-ended questions rather than Ask open-ended questions rather than those calling for “yes or no” answers.those calling for “yes or no” answers.

Create hypothetical situations Create hypothetical situations candidates would encounter on the job candidates would encounter on the job and ask how they would handle them.and ask how they would handle them. Situational interviewsSituational interviews


Planning an Effective Planning an Effective InterviewInterview

Probe for specific examples in the Probe for specific examples in the candidate’s work history that candidate’s work history that demonstrate the necessary traits and demonstrate the necessary traits and characteristics.characteristics.

Ask candidates to describe a recent Ask candidates to describe a recent success and a recent failure and how success and a recent failure and how they dealt with them.they dealt with them.

Arrange a “noninterview” setting that Arrange a “noninterview” setting that allows others to observe the candidate allows others to observe the candidate in an informal setting. in an informal setting.





Plan an effective interviewPlan an effective interview ConductConduct the interview the interview


Conducting an Effective Conducting an Effective InterviewInterview

Break the ice. Break the ice. Goal: to diffuse nervous tension.Goal: to diffuse nervous tension.

Ask questions. Ask questions. Puzzle interviews.Puzzle interviews. Remember the 25/75 Rule.Remember the 25/75 Rule. Keep it legal!Keep it legal!

Sell the candidate on the company. Sell the candidate on the company. Best Best candidates will have other job offers. Your candidates will have other job offers. Your job: to convince the best candidates that job: to convince the best candidates that your company is a great place to work.your company is a great place to work.




Plan an effective interviewPlan an effective interview Conduct the interviewConduct the interview Check referencesCheck references


Checking ReferencesChecking ReferencesChecking an applicant’s references is Checking an applicant’s references is an important part of protecting a an important part of protecting a company against making a “bad hire.”company against making a “bad hire.”Is it Is it really really necessary?necessary?Yes!! According to the Society of Yes!! According to the Society of Human Resource Management, more Human Resource Management, more than half of all candidates either than half of all candidates either exaggerated or falsified information exaggerated or falsified information on their résumés. on their résumés.


Company CultureCompany Culture Distinctive, unwritten, informal Distinctive, unwritten, informal

code of conduct that governs the code of conduct that governs the behavior, attitudes, relationships, behavior, attitudes, relationships, and style of an organization.and style of an organization.

“ “The way we do things around The way we do things around here.”here.”

In small companies, culture plays In small companies, culture plays as important a part in gaining a as important a part in gaining a competitive edge as strategy does.competitive edge as strategy does.


Characteristics of a Characteristics of a Positive CulturePositive Culture

Respect for work and life balanceRespect for work and life balance Sense of purposeSense of purpose Sense of funSense of fun DiversityDiversity IntegrityIntegrity Participative managementParticipative management Learning environmentLearning environment


Job Design StrategiesJob Design Strategies Job simplificationJob simplification - breaks work down - breaks work down

into its simplest form and standardizes into its simplest form and standardizes each task.each task.

Job enlargement (horizontal job loading)Job enlargement (horizontal job loading) - adds more tasks to a job to broaden its - adds more tasks to a job to broaden its scope.scope.

Job rotationJob rotation - cross-trains workers so - cross-trains workers so they can move from one job in a company they can move from one job in a company to others, giving them a greater number to others, giving them a greater number and variety of tasks to perform. Often and variety of tasks to perform. Often used with a skill-based pay system.used with a skill-based pay system.


Job Design StrategiesJob Design Strategies Job enrichment (vertical job loading)Job enrichment (vertical job loading) - -

builds motivators into a job by builds motivators into a job by increasing the planning, decision increasing the planning, decision making, organizing and controlling making, organizing and controlling functions (which traditionally were functions (which traditionally were managerial tasks).managerial tasks).

Five core characteristics:Five core characteristics: Skill varietySkill variety Task identityTask identity Task significanceTask significance AutonomyAutonomy FeedbackFeedback

EnrichedJob



Job Design StrategiesJob Design Strategies

FlextimeFlextime - an arrangement under which - an arrangement under which employees build their work schedules employees build their work schedules around a set of “core hours” - such as around a set of “core hours” - such as 11 a.m. to 2 p.m. - but have flexibility 11 a.m. to 2 p.m. - but have flexibility about when they start and stop work.about when they start and stop work.

Job sharingJob sharing - a work arrangement in - a work arrangement in which two or more people share a which two or more people share a single full-time job.single full-time job.



Job Design StrategiesJob Design Strategies FlexplaceFlexplace - a work arrangement in - a work arrangement in

which employees work at a place which employees work at a place other than the traditional office, other than the traditional office, such as a satellite branch closer to such as a satellite branch closer to their homes or, in some cases, at their homes or, in some cases, at home.home.

TelecommutingTelecommuting - an arrangement - an arrangement in which employees have in which employees have employees working from their employees working from their homes use modern homes use modern communications equipment to communications equipment to hook up to their workplaces.hook up to their workplaces.



Rewards and Rewards and CompensationCompensation

The key to using rewards to The key to using rewards to motivate workers is tailoring them motivate workers is tailoring them to the needs and characteristics of to the needs and characteristics of individual workers.individual workers.

Money is an effective motivator - Money is an effective motivator - up to a point.up to a point. Pay-for-performance systemsPay-for-performance systems Stock optionsStock options


Rewards and Rewards and CompensationCompensation

Intangible rewards such Intangible rewards such as praise, recognition, as praise, recognition, celebrations, and others celebrations, and others can be can be veryvery powerful, powerful, yet inexpensive, yet inexpensive, motivators.motivators.

Entrepreneurs tend to Entrepreneurs tend to rely on nonmonetary rely on nonmonetary rewards. rewards.


Family Family BusinessesBusinesses

Make up 90 percent of all U.S. businesses.Make up 90 percent of all U.S. businesses. Account for 64 percent of U.S. GDP.Account for 64 percent of U.S. GDP. Employ 62 percent of private sector work force. Employ 62 percent of private sector work force. Comprise one-third of the Comprise one-third of the Fortune 500Fortune 500

companies.companies. Unfortunately, only 30 percent of first-Unfortunately, only 30 percent of first-

generation businesses survive into the second generation businesses survive into the second generation.generation.

Of those that do survive to the second Of those that do survive to the second generation, only 12 percent make it to the third generation, only 12 percent make it to the third generation. generation.


Why Is Why Is Management Management Succession So Succession So

Difficult?Difficult?No management succession plan!No management succession plan! 81 percent of all business 81 percent of all business

founders intend to pass their founders intend to pass their companies on to their children.companies on to their children.

But... 25 percent of family But... 25 percent of family business owners have no formal business owners have no formal management succession plan!management succession plan!


The Succession The Succession PlanPlan

Step 1Step 1. Select the successor.. Select the successor.Step 2Step 2. Create a survival kit for the . Create a survival kit for the

successor.successor.Step 3Step 3. Groom the successor.. Groom the successor.Step 4Step 4. Promote an environment of . Promote an environment of

trust and respect.trust and respect.Step 5Step 5. Cope with the financial . Cope with the financial

realities of estate and gift taxes.realities of estate and gift taxes.


Coping with Estate Coping with Estate TaxesTaxes

Buy/Sell agreementBuy/Sell agreement Lifetime giftingLifetime gifting TrustsTrusts

Bypass trustBypass trust Irrevocable life insurance trustIrrevocable life insurance trust Irrevocable asset trustIrrevocable asset trust Grantor-Retained Annuity Trust (GRAT)Grantor-Retained Annuity Trust (GRAT)

Estate freezeEstate freeze Family Limited Partnership (FLP)Family Limited Partnership (FLP)

TaxBill


Exit StrategiesExit Strategies Entrepreneurs Entrepreneurs

planning to retire often planning to retire often use two exit strategies:use two exit strategies: Sell to outsidersSell to outsiders Sell to insidersSell to insiders

Cash plus a noteCash plus a note Leveraged buyout (LBO)Leveraged buyout (LBO) Employee Stock Employee Stock

Ownership Plan (ESOP)Ownership Plan (ESOP)

building a new venture team and planning for the next generation

Documents

hired employees

resources employees

percent of employees

focus employees efforts

job analysiscreate

job specificationschapter

bad hiring decisions

practical job descriptions