“I hired him as President thinking he would transform my company. He was experienced, had worked for Indian and MNCs and we got along well. He was the highest paid executive in my company at Rs 45L plus incentives. Unfortunately, I didn’t see any impact on sales or margins and I had to ask him to leave”, said the founder-CEO of the startup. “How long did he stay in your company?” I asked the founder-CEO. The COO was asked to go after 4 months.
On further probing, the founder CEO explained, “I think 3-4 months is sufficient time to see results in sales. I want to see execution and quickly, not ideas and plans. He just spent time meeting customers, spent money hiring a company to train employees, wanted clearance to hire some more people and wanted to build a plan that he would then execute.
Arrey bhai, what’s there to plan about when we know our customers and market and know exactly how much we can do.Instead of “doing”, he was wasting time and money in planning! Apparently, he couldn’t work without a plan in place. I couldn’t understand what his problem was – after all, we’ve been in business for a few years and are profitable and we never worried about planning-shanning. I think I made a mistake in bringing him on board. I think getting these high-fliers into a young and small company is not appropriate since they want all kinds of resources and time to execute. We cannot afford such luxuries.”
“I was excited to join the company to help it grow to 10X its current size. I really liked what they had done so far and I enjoyed good chemistry with the CEO. I was impressed by his knowledge and vision for his company. To grow at the desired pace would’ve required us to expand practice areas, enter newer geographies, build relationships with very senior executives, develop a brand, leverage technology and become a process driven organization.
We would’ve needed to have strong operations and performance metrics. We would’ve needed to make investments in people, marketing, sales, and technology. But, the quality of the people around me left much to be desired. Many of them had poor communication and interpersonal skills. Learning to listen to customers problems didn’t seem important. While there was this intention to grow ten times, the details of how that was to be achieved were more than hazy.
For example, What kinds of customers and markets and practices should we focus on? How much money would be required to be spent? In what areas and over what time frame? What kinds of people would be required to grow and manage the business? What kind of marketing needed to be done? What kinds of internal systems of measurement would need to be in place? And so on.
To do this, required me to understand customer needs, capabilities and competencies of the current team, market trends etc. There was no planning process in the company and that made it difficult to estimate resources, activities, headcount, time and outputs. There was seat-of-the-pants management with an enormous amount of focus on tactical aspects of the business, the here and now. There was no thinking about planning of any kind. If there’d been planning, then we would have understood what was an investment and what was an expense. Because some things take time to develop and one needs to budget that into the planning process. Else, treating it as an expense would result in dropping initiatives that would pay off over a 6 to 9 month period. The company would therefore not be able to grow multiple engines of growth to achieve its goals of growing ten times.” This was the former President speaking.
He continued, “The founder-CEO had achieved success over the past few years but I think he had become a victim of that success. It was difficult for me to make him see that what had brought them to this current point wasn’t going to be sufficient to take them to the next levels. They need to look around and see how larger better companies were doing and more importantly learn from them.”
What do you think?
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Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.
The article first appeared in FE and is reproduced with author’s permission.
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I think the president was right.
We do need a fresh perspective, a new way methodology to take the company forward after a point of time.
And all the points listed by him make so much sense.
I am involved with a start up and am facing similar issues. None of us have the expertise to deal with the start up woes or challenges.
Someone with this kind of experitse and vision should help
The post was a lovely read
I guess most successful business owners would understand what the president was trying to say.
The CEO was indeed a victim of his own success and someone who probably has never worked in a large organization.
Good post.
You know what..I have been in touch with several startups over the last few years and many of them still believe (when it comes to real action) that the ‘ceo is/was correct’..
totally agree with Ashish..
..somehow if the president was right, then the company was not a startup anymore
on a serious note, “do-it-now” is (and should be) the way in startups..
>> expand practice areas, enter newer geographies, build relationships with very senior executives
This sounds like a software services company based on the above terminology. This can add some context to the stated problem. Anyone working with products or manufacturing would be able to appreciate plans involving longer gestation periods.
The founder CEO and the president had some very fundamental differences. I am surprised the president even took the job. Consider this : “I think 3-4 months is sufficient time to see results in sales. I want to see execution and quickly, not ideas and plans”
The founder CEO merely wanted someone who could bring in more sales (at least more than his salary).
Excellent post, Sanjay !
Agree with every word of Vivek Rajagopalan
Was that a COO or President? Mostly Presidents preside over functions and if he did that then he deserves the reaction from CEO
.
I think this is a imaginative story to say
“Give time to establish a plan and then execute” …
OR
“Spend more to achieve more with proper strategy from strategists”
The first thing the COO or President should have done is (before joining) answered the question… “How much money would be required to be spent?” and then joined. That would have given the CEO a comfort…or he would not have even hired.
Good one though.
Kasi
I guess its more to do with timing, during early stage of a startup the focus should always be on generating revenues and this needs to be driven by the founding team itself.
Once you reach a milestone(decent amount) in terms of recurring revenue/month, the focus should change and you need people like Mr President to set up everything in place, prepare a plan and execute based on the plan. 3-4 months is more than enough to understand the business, prepare a plan and start executing based on the plan.
If someone start preparing a detailed plan from day 1, they would spend couple of hours daily on updating the plan itself. What you need is a broad outline of activities that you would need to become successful and execute based on this simple plan.
In our venture, we have identified some drivers/parameters of success for our business and everyone is assigned a target in terms of these drivers and we track our performance on these 7-8 parameters.
Would love to hear from others on this topic.
Agreeing and adding to what Kasi said. I think this has a lot to do with what was communicated to the COO when he was being brought on board. You need to execute against a plan (whether perfectly clear or ‘somewhat’ clear).
If the CEO/Founder wanted him to “execute” rather than ‘ideate’ and ‘plan’ then the basic premise is that the CEO/Founder already has a plan that can take the company to 10x, but can’t execute it himself and needs a seasoned person to execute it.
Obviously there is a disconnect as to what is required to take the company to 10x and this is why I say that this has more to do with what they discussed during the hiring process.
Overall, I don’t think the founders are incorrect (a small company, even one trying to take it big, needs to be aggressive, quick and usually doesn’t have too much money to spend…and time is also money), but the important thing is whether they are sure and authoritative to say that their sales plan can get them to 10x and the processes needed to setup can be done within 2 months in this scenario.
All said and done, are you trying to tell me that the “startup” have 45 lakhs to pay to ONE guy? WHAT A WASTE man …
Thye should be ashamed if they are calling themselves a startup. And more than that we, as the pluggdin community should stop talking about these “startups”.
So sorry for rude comments but 45 lakhs is crazy. Ever large companies cant afford that kinda salaries!!
FYI – some of the ‘well funded’ startups have given 2X salary to Engg mgrs of ‘an’ internet company to join them as director..
It aint anything shocking in real world.
Sanjay – Interesting scenario. let me nitpick first:
1. A company “in business for a few years” and “profitable” is no longer a startup, its just another private/public company. I think a lot of companies hang on to the ‘startup’ tag for too long, when they should be clearly labelled as ‘struggling companies’. In this case the company is profitable, so I will not call it struggling.
2. This is probably the first company where the President/COO is expected to get sales ramped up. That particular person would typically be the “VP – Sales” and this person is probably on board even before the President/COO was hired. Else where are the sales coming from?
Having got the nit picking out of the way, I can clearly see that the issue with the company is not of more immediate sales, but one of “how do we scale up for the future?”. The goal I believe is one of how to get to 10x. Thats not a 4 month job. There is structure that needs to be in place, or if one is in place, it needs to be ratified.
The COO/President seems very logical, and is “on the money”. Going to 10x is not a matter of hiring a single high flyer nor multiplying your sales force by 10. It is a matter of:
- expanding your product portfolio
- expanding your geographies
- going up the value chain.
All of the above for the simple fact that there may be no market for 10x of what you are selling in the current market. From the post, the President/COO is saying all the right things to scale up the company. Also, note that he has asked for more resources, and if that is the case he has asked for these resources against a plan and is now ready to execute.
If the founder CEO was expecting “sales/margins” results in 4 months, he should hire a high flyer senior sales person (whatever be the title), for whom the drive is the sales commissions and is not bothered about how one can deliver post sales. You dont hire these guys as President/COO, a post where rest of the functions of the company may also report into. Not sure if the CEO is a victim of his own success, but with a short term attitude like that expressed in the scenario, I am surprised that the company even is profitable and lasted that long!
@Saurabh – you would need to look at the 45 lac compensation in context. If a person that you pay 45 lacs to can generate 45 crores revenue, would you hire? If a person that you pay 45 lacs can lay the foundation of a 1000+ person company from a current base of 100, would you hire him? When you look at it in that context, expecially the CEO saying that this is a profitable company for a few years in business, I would think you are getting such kind of person cheap. Country managers for Indian operations of US/Other based startups get upwards of Rs 50 lac (and this was a couple of years back from my knowledge) and they dont even have sales responsibilities!
@Ashish – if real startup CEOs are agreeing with the CEO in the scenario, i still wonder how come there are a lot of these ‘struggling startups’ that keep getting multiple rounds of VC funding with no revenue or profitability in sight, yet they are ready to fire a COO in 4 months. So the CEO gets a few years (3-4 years) of latitude, but 4 months for the COO is too much!
Great analysis Hemant, Cheers
I think questioning which companies can be classified as startups or not is an exercise in futility.
Startup or no startup – growing 10x is not a joke, whatever the baseline is. Being the CEO of a profitable company I think the CEO would understand this.
There seems to be 2 sticking points in this whole debate:
1. How do you grow by 10x?
You set the org up with a static target – do this and grow to 10x OR you grow 2x and then 4x and then 8x … and change the organizational structure as the Revenues grow
(An excellent piece on scaling up is Sheryl Sandberg’s talk here: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2236)
2. How much preparation is sufficient preparation – when you are getting your first deals, its better to run through 1000s and throw 990 away to get to the 10 thats a perfect fit. However, when you are thinking of moving from 10 to 100, you really can’t throw the rest 990 away. You have to engage with them and maybe change for them.
2. For a seasoned professional like the
this sounds similar to guruji.com story !
“If you don’t know where you are going, you will never reach there!!”
I wish to resonate with what Hemant & Chirag articulated well.
I personally empathise with both the President and the Founder CEO-for they were both reacting in hindsight. Its a classic case when people fall for first impressions. 4 months too late to part!!
The right time to address it -was when they first met each other-and define the objectives of the engagement-with milestones & budgets.
Like the popular saying ‘horses for courses’- most jobs can actually be classified as either ‘maintenance’ or ‘development’ roles-depending on which stage the lifecycle of the company is in. And believe me-each one needs a different temperament.
Large organisations have the luxury of having a large systems in place-and so it is essential to ‘remove the halo of the brand’ while evaluating the exact contribution of the person.
In contrast, a startup has to constantly change its act in the midst of chaos-and so the right FIT while one multi tasks, one needs to have lot more of soft skills..bucket loads of passion, rock solid attitude, absolutely hunger for success.
Not to mention-the ability to defer gratification!
Better luck to both the President & Founder CEO. Happy hunting!
amazing post…(Just don’t know why i have never seen this site till)
@Hemant I think probably titles are incorrect for the story but issue remains the same. Even the same issue comes when you hire developers for startup. And about keeping a tag startup is not correct for such company.
Another scenario i saw is while “hiring” developers. For startup, as said here there are no plans, Its about an idea and every one develops it. Do documents, no training (That’s more like spoon feeding for some). No multiple hierarchies…
And expectations; They understand product problems, They should be self starter, Write excellent code , And design for flexibilities, understand customer…do good testing (as can’t afford a QA) etc…:), and of course ‘sasta walla’…:)
I believe here issue comes with term ‘hiring’. For startup, you don’t “hire” people (At least one from which you expect all of they above), You make them ‘partner’. partners in success and failures. Its not about giving them stock options but its about rewarding and punishing for the success/failure of company/project/product. Of course, emphasis on punishment should be less as you are the one who had vision and hired and handled a person. So first guilty is you. So if punishment x is to be given, Its 2/3 for you first..:)