Wednesday, June 1, 2011

Why do Founding CEO's Get Fired?

A friend asked me to repost this old piece about Founding CEO's.  I am obliging because I have made the acquaintance of a slew of new young CEO's who might benefit from it.
They start out with a great idea.  They don’t sleep.  They invest everything they have in the idea.  They have no other life. They build the idea into a great opportunity.  They entice investors to fund the idea. They invite their most trusted friends to join them. They cultivate customers.  They share the potential of the idea.  They nurture the idea into a budding brand.  They start to generate revenue based on their idea.  They can see the break-even moment.  They know how they will invest the profits in new ideas.  They can smell the IPO or the world dominance of their idea. 
And then one afternoon, after an executive session of their Board, they are told that it is time to bring in “experienced, professional management.” 
And suddenly the “Founder and CEO” has only “Founder” on their business card.
And they wonder WTF?
They did so much so right…what could they possibly have done wrong?
It is hard to ride the wave of success if you are a Founding CEO.  Not many do so.  And those that do stay upright have a lot of help.   
Those that end up in the surf of superfluous staff positions, in their own companies, usually have wiped-out based on one or more of the following reasons.  Easy to avoid…but hard to see when you are trying to ride the wave.

1.    Not hiring well enough. Hiring their sister in-law, college roommate and two favorite lab partners is fine at the very beginning, but not upgrading the team is a fatal flaw.  It is a serious red flag to investors that the Founding CEO has limitations if they cannot or will not attract real talent to the enterprise.

2.    Not trusting those they hire.  Bringing in the much-needed talent and then not using it is another red flag.  If a Founding CEO is still making every decision and never schedules their team present to the Board, watch out.  The Board will figure out that the Founder CEO has security issues or control needs that will eventually be a gate-to-growth.

3.    Not expanding their skills beyond pitching their idea.  It was their primary skill set for so long that it is hard to determine when it has become obsolete.  But, if the only thing the Founder CEO can do is pitch their initial idea it is another gate.  It may take a while for the Board to realize that the Founder CEO is a one-note-samba, but they will.
4.    Not managing the basics.  Compared to the heady first phase of a company, it can be boring in the second stage of growth when on a day-to-day basis you have to show up and manage cash, stick to product schedules, understand costs, hire and train people, find customers, serve customers and communicate with the Board.  But it must be done.  A Founder CEO who does not master these basics will not hold on to the CEO part of their title for long.

5.    Not stretching their comfort zone.  Don’t confuse culture with comfort.  Founder CEO’s who define the culture of their company, as the method by which they are most comfortable doing business, will fail to build a sustainable model.  Comfort and success have very little in common.  If the Founding CEO is not outside of their comfort-zone every day they are not competing for their own job.

6.    Not outsourcing.  Thinking you can do it all, invent it better than everyone else and subscribing to the “not invented here” mentality, is hubris that wastes money and time.  Building partnerships is one of the most commonly requested skills in the specifications for the “experienced, professional management” that replaces Founding CEO’s.

7.    Not managing the BOD.  If you do not talk to them, they will talk about you.  And they will talk about you without all the facts. The investors can intimidate founding CEO’s.  Being intimidated is a serious mistake. You are accountable to the BOD, but you have to ask as much of your BOD as they ask of you.  No board meeting should end without the CEO placing that quarter’s demands on the BOD.  And a good CEO follows up all quarter, working with the BOD members and encouraging them to invest more than money.  A good relationship with the BOD offers many currencies to a company.  A good BOD can offer introductions, talent, partnerships, competitive insight, financial modeling, operational advice etc.  And a good CEO takes advantage of the offerings and builds the BOD’s investment in time, attention and loyalty.  It is hard to vote to fire a guy who regularly solicits and follows your advice.
All of these are avoidable pit-falls and it is easy to see who is going to wipe out and end up a Founder without portfolio in their own company.  
It is the Founder who never asks for help.

Saturday, May 28, 2011

Ready, Aim, Fire!

Recently my son saw the movie, "Up in the Air" and commented, "Oh, my God, Mom, they made a movie about your life, I mean, you are George Clooney.  Ya' know without the upgrades or the affair with the hot chick." 

Yep, that about sums up my career, serial terminator without the perks. 

I did not choose to be a professional terminator (or as some of my colleagues have taken to call me "The Haugennator").  It just turns out that I am good at delivering hard messages.

To be fair, I do not deliver hard messages much these days.  My consulting business has moved me from delivering the message, to preparing others to deliver the message.  Sometimes I am called in to prepare folks to receive the message and often I am asked to stick around and help them process the message.  My work can be complicated. 

This is not a bad business.  Helping people do the hard stuff well is a fine way to make a living.  And it is a skill that is in demand.  As a matter of fact, it never ceases to amaze me how remarkably bad most executives are at firing employees.  Again, in fairness, it is not their fault.  No one teaches this stuff.  You have to learn by trial and error.  I have had my trials and made my errors, so my clients call me in to help them avoid the big messy mistakes.

The biggest mistake an executive ever makes is to lose sight of dignity...that of the person they have to let go... and their own.

Here are my rules for firing someone with dignity:

1.   Understand your role.  Your job is not just to end someone’s employment.  Your job is to sever the employment relationship in a way that reflects well upon the brand of your company.  (It never reflects well on the brand when people are clumsily treated during a termination.)  Your job is to deliver the message and help this person start the process of moving away from the relationship without regretting the relationship.

2.   Get to the damn point.  You do not have to channel Donald Trump, but please do not beat around the bush thinking that small talk will soften the blow.  Do not delay the inevitable.  I have seen managers trump up conversation for 45 minutes before they dropped the hammer.  It is a very tough segue from hearing about their spouses torn rotator cuff, their daughter's ballet triumph or how their son is screwing up their freshman year in college, to a termination conversation.  Nut-up and start the conversation immediately.  Delaying is both disrespectful and excruciating.  It is best to jump in, "Hi, Fred, I am sorry, but this is a bad day, I have to end your employment with XYZ Inc."

3.   Do not go into a long list of the reasons or their failures.  I mean really, they just lost their job.  Spending 25 minutes in a self-justifying litany of where they screwed up doesn't help anyone.  And it might be logical that their job was eliminated due to budget cuts, but as one person told me, “that makes it even more humiliating, you know, to discover just how little value I was.”  So, save the big explanations. They cannot hear it anyway...they are already thinking of other things, they are dreading telling their significant other, they are calculating how long their savings will last and they are trying to remember if they have a full bottle of vodka at home.  How they screwed up is not significant today.  Even if they ask, don't go there.  Explain that the decision has been made and rehashing the past won't undo it.  I know, I know, some state laws or company policies require that every reason for a termination is documented up the wazoo and so you will have to go through that process.  My rule still holds up.  Go over the reasons in summary and stay focused on the fact that the decision is made and is final.  Your job is to get this person to accept the reality so they can start moving on with their life.

4.   This is not about you.  No one cares how hard this is for you, how tough your job is or how much you will miss this person.  The focus is on the person who has just lost their job.  Stay focused on them.  When you get home tonight you can whine and lament about your tough day to those that love you.  But for now, remember that you are doing your job... and from the fired employee's perspective; the job you are lucky to have.

5.   Don't offer help you cannot follow through on or make promises you will not keep.  If you could not imagine recommending this person to another employer, do not offer to do so.  Do not suggest that this person call you "If they need anything”.  Do not ever give this person a false hope of help that will not be forthcoming.  False promises will screw up the real plans they need to make to move forward and they will make you look like an insensitive ass. If you think that you know where this person should go next, if you have introductions you would be willing to make, if you would like to personally recommend this person to your prepared with all of this information going in.  Have a list prepared, or offer to add them to your LinkedIn network or offer them a selection of times that you would be willing to meet with them off-site to discuss the help you are willing to provide.  Make it specific and time bound.

6.   Be prepared before the conversation.   Unless you are terminating someone for bringing a weapon to work, you have the time to prepare.  If you are offering a package, have it with you.  Don’t ask them to wait until next week for details, or come back in a few days to discuss it. When they get home their family is going to ask questions and they will need answers.  For heaven’s sake, do your homework!

7.   If the person gets emotional, let them.  One of the worst mistakes you can make is not letting the person express their emotions.  If you appear too cool or too distanced it will just make them more upset.  So, let them be upset.  You need to be empathetic, but don’t ever say, “I know how you feel.”  Say, “I know this is upsetting, take the time you need to compose yourself.”  Stop talking and sit quietly. Have tissues nearby (yes, even if you are delivering this message to a man).  Understand that no one wants to be emotional, it is probably not in his or her immediate control, and it will pass in a few minutes.  Sometimes people express the emotions they are feeling as anger.  That, too, will pass if you wait a few minutes.  Don't match anger with anger.  When the volume gets turned up, match it with compassion at the same pitch.

8.   Imagine you had to rely on this person for a reference based on this experience together.  If you keep in mind that all fortunes can change and you never know in what capacity you might run into this person again, it will go a long way toward keeping you focused on maintaining everyone’s dignity.

There are all sorts of other HR rules and regulations that you will think about.  Every company had it’s own rules on references, for example.  There are forms and releases and all of that good garbage you will have to address.  But you will have an easier time getting to all of that “administrivia” if you remember the key points above.  Do your homework, get to the point, be brief, stay focused on them, only offer help if you mean it, let them be upset and remember that they might show up in your life again.