Of untenable CEOs

The positions of two CEOs are being discussed this week as untenable. One of them is the British Prime Minister Theresa May, fresh from the weak and wobbly win at an election where she campaigned as the “strong and stable” alternative. The other is Travis Kalanick, the CEO of Uber, who is currently running an organisation without a COO, a CFO, a CMO or SVP of Engineering, and is under pressure to take a leave of absence following an investigation by Eric Holder into the pervasive sexist culture in the company.

On first glance, there are no similarities. What can a British PM fond of speaking in tautologies possibly have in common with a CEO of an organisation widely seen as having “disrupted” public transport and valued at US$ 70Bn (though some disagree)?

On a bit of reflection, one key similarity emerges: a leadership style that fosters a toxic organisational culture.

On becoming PM first, Mrs May famously operated a kitchen cabinet of sorts, with a small coterie of advisors and throwing out anyone who seemed to be out of line with her authoritarian way of working. She called an election presumably buoyed by a 20-point lead over Labour in the polls to seek an absolute majority to enable her to negotiate a Brexit deal without needing the support of the Parliamentary colleagues. Having called the election, she did not discuss her manifesto with her party or her team, focused on “Theresa May” and not the Conservative Party, and uttered meaningless soundbites that earned her the moniker MayBot over the campaign.

Mr Kalanick, on the other hand, presided over an organisation that thought nothing of threatening journalists and “weaponising facts“, nor of accessing and sharing medical records of a person raped by one of their drivers in a country far flung from California. Privacy was not a thing to bother with. He also deemed it acceptable to issue guidelines on how to have sex with a colleague at an office party.

Culture, as the developments this week show, does eat strategy for breakfast.

In Britain, the electorate was able to challenge Mrs May so much so that at the time of writing, there is a scramble on, and many Tories do not see her leadership going unchallenged.

In case of Uber, however, the three co-founders own a controlling stake. That may appear, at first glance, to make the job of the board harder if they wish to ask Mr Kalanick to step down. But the board has voted unanimously to adopt the Holder report and is said to be considering the option.

However, much as deposing Mrs May and Mr Kalanick may give a sense of having done something, the real challenges remain.

Uber’s culture will not repair itself overnight. Nor will the company magically be able to attract talent* to fill the key roles. Bad reputation and the whiff of scandals can endure, as another organisation unable to attract talent is currently experiencing.

Nor will Mrs May suddenly become better at being collaborative, discursive, amenable to advice, and realistic about Brexit negotiations, although this is precisely the advice being given to her. To be fair, she has apologised to Tory MPs. But despite her apparent contrition, “I will get us out of this mess” doesn’t sound like a departure from me-centricity.

Whoever takes the poisoned chalice, or chalices in case of Uber, shall face the challenge to be a vigilant steward of the interests of investors, shareholders, and citizens alike.

After all, in this brave new world of breaking coalitions and disrupted industries, “Eternal vigilance is not only the price of liberty; eternal vigilance is the price of human decency.”

*Link dated June the 14th added two days after this article was published.

Founder Conflict: Key Asset Ownership

This article is the seventeenth in the Startup Series on FirstPost’s Tech2 section and first appeared on June the 7th, 2017.

In this and the next couple of columns, I shall write about founder conflicts commonly encountered but not often easily resolved.

Some are foreseeable e.g. what happens to the equity of a co-founder who ups and leaves, and hence addressable, e.g. in the case of this example, through a shareholding rights agreement for which you ideally paid a lawyer, who helped you understand what you were agreeing to.

Some arise from human beings being human beings, ranging from unpredictable and flaky, to stubborn and demanding. These conflicts are harder to resolve because they require us to think creatively, to minimise immediate and future damage to the startup, and to stay focused despite all provocation.

One of the most common disagreements arises from the ownership of things that founders may bring to the potluck called the startup, and that really are essential business assets. The social media real estate is sometimes acquired before the company has been formed. Getting handles on platforms aside, this may mean one of the founders, who may not yet legally be in a contract with other founders, pays for the domain name or names. In the hubbub of early days, the domain name ownership transfer never happens and the founder, who paid for it, continues to own the domain name.

Should he? The short answer to that question is: No.

The domain name is an intangible asset of the business, among other IP. The renewal incurs a recurrent cost. If the person makes the expense out of his pocket, he can solidify his claim on the domain name. If the company reimburses him this expense, it is further unclear why he continues to hold on to the domain. This creates a fog for accounting and governance purposes.

As the business grows, in revenue and in value, the domain name will also grow in value. But hey, if you didn’t effect a clear transfer of ownership, it doesn’t belong to the company. How will it be accounted for in the books? At any rate the person owning the domain can hold you to ransom and play hardball at any time he likes. This is unlikely to end well.

Should the business wish to file a trademark on the name, the person holding the domain may be in violation of the trademark, assuming he lets you file trademark in the first place and doesn’t stake a claim. See comment about hardball above.

Should you attempt to raise growth capital at some stage, this will come up and raise a red flag as to the vigilance of the directors and founders. See comment about hardball again.

Transferring ownership is the ideal scenario. But let’s imagine, other founders agree that he can continue to own the domain.

The company may then want to consider signing an agreement with him to let the business use the domain name. Such a deal will have an agreed monetary consideration and will hopefully be for a clear but renewable term. Your shareholding rights agreement should allow for such a deal, and as cofounders, you should consider the governance and risk impact of such a deal on the future developments in the business. If you don’t, your investors, if vigilant, will point out what a bad idea laxity on this account has been!

While this sort of a deal remains a possibility, you may want to consider negotiating a one-time offer to buy the domain off him instead. If there is resistance, I would ask you to consider the possibility that the domain name ownership issue is just an indicator of other undesirable issues that may arise in the future.

As cofounders, you can apply this test of ownership to any other assets essential to the business that one of the cofounders brings to the table. It is worthwhile taking stock of “who brought what” at the time of forming the company and start with a clean slate where all assets are placed on the company’s books, with adequate compensation made as agreed.

Cosmetic counter sales staff: a counter view

A dear friend of mine recently spoke of how, while making an impulse purchase for a lipstick at an airport, she ended up having a fascinating conversation with a male counter sales guy, who seemed to be a lipstick connoisseur with a massive collection of his own. She noted how he had great insight into how lipstick should be bought, ideally for personality not just skin tone. Was it her gender bias, she wondered, that she was so delighted by this surprising encounter? She travels globally and had never experienced such a knowledgeable and passionate counter sales guy.

The story made me wonder about gender biases in talent hiring for specific roles especially in industries seen as gendered.

Across the world, cosmetics counter sales staff is rarely male (the exception: perfume counter sales staff is rarely female). The field sales force, however, is rarely female, as I note both from occasionally bumping into field sales staff of brands in SpaceNK and Liberty in London, and from my earlier experience in my first and extremely short-lived first job in a well-regarded Indian cosmetics company.

The brand managers in the company were almost all women whereas, barring a couple of stellar exceptions, the field sales force was all men. These men, otherwise traditional, old-fashioned, sometimes married, were the definitive experts on both our products and our consumers. In my short stint, it became quite clear that their job brought them in contact with wholesalers, retailers, and consumers, and whenever a new product was launched, they also gave trial products to their family and got unfiltered feedback from them. This gave them a wealth of knowledge and insight. Whether the company was harnessing it in a structured way, I couldn’t say.

In contrast, the counter sales staff only ever encounters a consumer primed for some purchase, even if not in the exact category she ends up buying. This means the encounters are more narrow in scope, and only if a consumer ends up at the counter in a slow time of day, can she expect a fulsome and deep conversation about the products and the anthropology and psychology of purchasing one colour over another.

In all this, the consumer is, of course, key. Not only does she, peripatetic as she is, encounter the brand in many more locations, she also gets to see the non-uniformities, the vagaries of the brand’s operations in many ways. These can be revealing about the brand’s values and prejudices.

What is stopping the cosmetic industry hiring more men as counter sales staff? Do men not seek out these roles? Or are they actively rejected in an act of gender bias, unless, as my friend noted in the case of the sales guy she met, they are “flamboyant” in their presentation?

And since everything needs to have a business case, by not having male sales staff, could brands be missing a trick in capturing the growing male interest in cosmetics and skin care? The male grooming and beauty market is estimated to be $50Bn and growing.

One could cynically note that keeping men and women segregated helps companies as they persist in charging women, in cosmetics and skin care, a whopping 37% more than they charge men. This is frankly not sustainable as the web is transparent, and women can read labels and buy substitute products and brands.

Change however is coming, slow but steady, it appears. Even if it is in the form of YouTube influencers.

Men could, of course, watch YouTube videos privately but coming to the cosmetics counter in a city centre store is still uncommon. Andrew Snavely, who runs a magazine focused on men’s grooming, thinks this is unwise and notes: “… young professional men find trial and error with products to be an expensive and time-consuming process…”. Could this be because men feel unwelcome at beauty counters to discuss their needs with the mainly female staff? Airport stores, such as the one my friend was visiting, are probably more welcoming because a man could always pretend he is buying for a woman and engage in a conversation about lipstick.

On a philosophical note, everything that frees women frees men too. And vice versa. That includes the freedom to discuss, try, buy and use cosmetics.

Cosmetic brands would do well to watch watch their gender biases and actively hire male counter sales staff, thus welcoming male customers more.

May be over time, both men and women will get better at speaking openly across gender lines about gendered topics.

Because we are worth it .

Attracting talent

This article is the sixteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on May the 25th, 2017.

Apart from having a strategic direction and enough money to execute on the vision, the key challenge for founders is talent. Based on my experience, I will go out on a limb and say this: talent is not scarce. No matter what we hear about the “war for talent”. What is scarce is the ability to know what talent you need, find that talent, and find that talent efficiently, quickly, and affordably. This is truer still of the earliest hires, who shape your vision and your startup’s culture.

Here are some pointers based on my experiences with helping founders find people for their teams.

Making a successful hiring decision requires a process: knowing whom you seek, where they hang out, whether they see and notice your call for talent or otherwise know of your need, whether your call for talent is attractive enough, whether they are interested enough to apply or reach out, whether your hiring process confirms a mutual fit, whether you agree terms and, finally, whether they are still interested and have not been poached by a better offer in the meanwhile. This step-by-step looks obvious when one lays it down in black and white. In reality, most founders founder when it comes to hiring because they are haphazard and their follow-up is poor. Avoiding disorganised thinking and the ensuing chaotic hiring process, which can repel many a good candidate, is therefore the first thing to aim for.

The second thing is to avoid obvious and easy answers. At every step.

Most founders look in one type of spaces e.g. online startup communities or mailing lists or Slack groups. These are also spaces where your target talent is most likely to see all the other competing possibilities. Avoid being so narrow and niche. The wiser thing to do would be to tap your IRL network too. Ask the people you know who are not connected to the startup space and you may unearth several new possible candidates. As a bonus, your contacts would also have vouched for you and your startup before those candidates agree to talk to you.

People have CVs and people have side projects. These side projects in many cases provide insight into a person’s thinking as well as their skills. The obvious mistake is to not probe these side projects and thus miss possibilities. In two instances that I have been involved with, the side projects pursued by potential hires showed how those hires were perfect for the company’s international expansion plans.

Falling back on unconscious biases is another obviously easy thing to do in hiring. And avoidable. It has been shown that women get hired on proof, while men get hired for potential. If you are not finding or reaching talent of the kind you want, it would be foolish to let your unconscious biases against an entire gender make your hiring outcomes worse. Unconscious bias training goes some way not the whole way in addressing these flaws in thinking although it would be advisable for your own personal growth as a leader and entrepreneur. Emerging hiring technology could give a helping hand too. For instance, Blendoor enables merit based matching by hiding irrelevant data and thus widening your candidate pool.

Google’s chaotic hiring process in the early years has now passed into tech industry legend. It is also something best avoided and not emulated. It is crucial that founders build a creative but robust hiring process that scales, including for collecting candidate data, made simpler by platforms such as Workable, and conducting telephonic and face-to-face interviews. Equally it is important to make references as systematic and methodical as interviews themselves. Not asking meaningful questions and failing to listen actively to what the referees say is unwise, although it is easy to do cursory checks and feel you are done.

Last but not the least, avoiding firing people who aren’t a great fit is not a great move. Especially early hires, who will shape your startup’s culture, have to enable your vision and not sabotage it. If they are being disruptive or otherwise do not fit the startup, the founder has to learn to let them go. There are laws of the land that will cover firing within and outside probation periods. Of course this assumes you have given people employment contracts! It is also useful to talk to people in “exit interviews” before they leave to understand what you might have contributed to the disagreements.

Hiring is a contact sport. Putting this advice into practice will take commitment to solving the talent puzzle for your own startup.

How to be a valuable non-tech co-founder

This article is the thirteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on April the 3rd, 2017.

The excessive media focus on techies as startup founders often makes non-techies doubt their ability to found and build a startup and create value. Many non-tech persons I meet believe that they won’t get investment without a tech co-founder whom they then spend considerable time trying to find. Many techie founders on the other hand seem to not think of finding non-tech co-founders with the same keenness. Both approaches need a rethink.

For starters, both the tech and non-tech founders have to stop using the term “non-tech”. The term suggests the primacy of tech skills which, while not inaccurate, does not highlight its limitations i.e. unless the technology is solving a problem and can create a product or service for which someone will pay, there is no business there. “Non-tech” in other words is the business person in a startup team.

A well-known story where a “non-tech” leader changed the fortunes of a “tech” company is of Mark Zuckerberg, the tech founder of Facebook, bringing Sheryl Sandberg on board as the Chief Operating Officer. At the time, Facebook was privately owned, valued at $15 billion, making nearly $56 million annual loss. Within eight years, under Sandberg’s leadership, Facebook grew its revenue more than 65x, made nearly $3.7 billion profit, did a successful IPO and, at $320 billion, now ranks as the fourth-most valuable tech company in the world.

So, how to be a valuable business co-founder?

Bring an understanding of the target customers. Talk to as many as you can. Listen with an open mind. Don’t look for patterns too early. Don’t challenge their reported lived experience even if it clashes with research data. Just listen, with attention.

But what if you are building is something truly path-breaking such as Henry Ford’s car? Ford famously said if asked for what they want, customers would have asked for faster horses! Even in such a case, you will still need to listen, evangelise, recruit champions, and build an organisation to reap the rewards for the startup. That was the magic Sheryl Sandberg brought with her operational nous to growing Facebook!

In an early stage startup, the business co-founder would translate the understanding of the customer to the tech team building the product. Being the champion of the customer and the community through the development process is not easy and will require great empathy with the tech team and the development process as well. At the same time, it is important to emphasise how some tech decisions should not be made before the business issues are resolved. A startup I advised learnt to its considerable cost that it is wise to get the payment gateway sorted before signing up to the customisation of a shopping cart and e-commerce platform. This folly of putting the cart before the horse was also quite expensive.

Test your product, service or app yourself first, and do so remembering the customer feedback you collected. Go further and involve some of your strongest critics in that testing. Enable iterations with an eye on the customer’s concerns, balancing the customer journey with technological feasibility. In a startup I was involved in, the business co-founder wanted the website to be designed to be accessible even on low bandwidth as many consumers were likely to be. Her concerns were overlooked to such an extent by the tech co-founder that the end result was an unusable website, the death knell for the e-commerce-only venture.

Examine all the processes, interfaces, “touch points” where your customer and community interact with your business. Ask if you are treating them well – addressing their concerns, reducing friction in how they can pay for something or raise complaints or indeed give feedback to the business.

In another startup, customers wanted the ability to consult a human being on the phone or chat before completing a purchase. The lack of such a possibility was frustrating customers and ending up in no sales being made. Neither the tech nor the business co-founder had paid attention to that feedback from the customer testing phase, as they were both used to eschewing human contact in favour of online experiences while shopping.

Examine the processes and organisation design for whether they are fit for purpose, efficient, and scalable. Does your business have seasonal cyclicality? Will you need more staff to ship thus increasing costs in your high season? How will you process returns if all your staff is dedicated to shipping faster and more? These questions are often not thought of in advance, as I saw in case of a fashion startup, whose success exceeded their expectations.