Central casting concerns

It gets scant coverage at business school, but getting the casting right when you build a team is one of the most important things you will do if you are intent on creating a successful company.

Building a team is a challenge that never goes away because it’s vital through all the phases of company growth: planning, starting, building, maintaining and fixing. While a great business plan should help you raise money, all of your analytical and strategic skills will be less important when you begin trading. At this point you will need a high proportion of can-do optimists combined with excellent selling skills. Raw energy is going to be hugely important too.

Hunters and farmers
From the get go you will need hunters, but as you grow you need more farmers. The professional managers who can run a mature business would really struggle in a start-up. This may sound obvious, but it is extraordinary how many companies get this wrong. We’ve seen quite a few examples via our private equity business, Genesis Investments, such as:

a) Businesses started by people with great craft skills, but no capabilities in general management. Their lack of interest in business skills usually causes them to strike poor deals when they start up and charge too little. The creative industries, for example, are full of people who are obsessed with doing great work but who are woefully uncommercial.

b) Ventures with a lack of appreciation of marketing and sales. And let me make one thing clear, in a start up it is definitely ok to combine the two.

Intellect without guile
I made the big mistake a few years ago of investing heavily in a business of really bright people whose clients gave them the most gushing testimonials. When it was too late, I began to realise that almost all of the senior team were highly intelligent without being ‘smart’. A culture had developed where no-one was seriously interested in the commercial side except when there was a crisis. For all of its reputation for great work, the company took years to achieve breakeven and all because the team was unbalanced from the start. I personally found this particularly embarrassing as I had made a similar fundamental error as I built CIA in the advertising media buying sector. The casting issue only became clear when our company was really flying and our band of six directors went away for the first time (most reluctantly!) on a two-day management training session. The facilitator gave us a massive questionnaire to complete, full of what I thought were strange, unconnected questions.

He had earlier told us that the three main drivers for business executives were: to achieve, to influence and to affiliate (i.e. to want to get on with people). The results were jaw dropping – all of our directors were absolutely obsessed with achievement, but no-one was interested in influencing people or ‘affiliating’.

So, unknowingly, I’d recruited a bunch of hard-driving guys who lived off a diet of raw meat and iron filings, but we had no-one interested in getting on with people and keeping the team together. At that stage we’d definitely have seen them as wimps.
It was all very well having a team of hunters, but as our company grew up, we were destined to have unhappy staff and high turnover, unless we brought in some of the softer ‘caring’ skills. Fortunately an outsider had spotted it just in time.

Grasp the financial nitty-gritty
The lack of priority given to the finance function is still surprisingly common. I use the term ‘finance’ here in the broadest sense. Obviously, finance should include budgeting, M&A and business strategy, but there are also things that are regarded as completely mundane that need to be addressed as competition and transparency intensify. These areas are where real money is made or lost. This includes: raising money; loans; overdrafts; pricing policy; profitability analysis; negotiating and structuring contracts; and getting the money in. The latter is usually regarded as an unpleasant and rather embarrassing task, which has always amazed me as it’s your money that you are collecting!

So, the message is clear – never, ever underinvest in the finance area. If you are going to sub-contract the function, it’s vital that one of your team is seriously interested in the commercial side. A company is doomed without that – or at the very least, is destined to under-perform consistently – which is nearly the same thing.

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