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The Veteran’s Dilemma is Our Country’s Dilemma

After a 15-year career with IBM, I had the good fortune to be one of 12 founding members of a Joint Venture.  Success for the company came fast and furious. My years with IBM provided excellent tools, but I learned more in the first couple of years with the new venture than I thought possible.

About the time of my three-year anniversary I found myself in a meeting with an IBM executive with whom I had a close professional relationship. In a candid discussion I asked him, “If I were ever interested in re-entering IBM, what weight would my current experience carry in opportunities afforded me?” His response was immediate and revealing. He said, “Your time away would be viewed as nothing more than a gap—it would count for nothing.” Even though I had developed important skills in this new company, it was completely discounted by my former employer.  From his perspective I might as well have been in a coma for three years.

That is how I believe many veterans feel when they leave the military looking for ways in which they can put their hard-earned skills to productive use. We are bombarded daily with platitudes regarding how veterans should be honored for their service. Our politicians admonish us to take care of them; many employers create HR programs to do just that. So what’s the problem?

The problem, first and foremost, is that the loci of these programs cater to the least common denominator. If there is one thing the Washington Elite should have learned from this last election cycle is that this is a flawed approach. Republicans and Democrats in Washington offer rhetoric regarding the need to help the “middle class”, but their policies and actions are aimed at the least common denominator. For example, we hear about raising the minimum wage as a way to help the middle class. Last I checked, our middle class typically makes more than minimum wage. Their problem isn’t minimum wage. There problem is ever diminishing opportunities to succeed.

Similarly, employers and politician too often view our veterans as victims looking for a meets-minimum job, so we can “help” them assimilate back into the civilian world. Our veterans weren’t in a coma while serving! The vast majority of them were developing highly coveted, and much needed hard and soft skills that translate exceedingly well in civilian life. These talented young men and women are looking for opportunities to put those skills to work as productive citizens. They do not want our “help”. They want to be honored for what they have to offer. Anything less is at best ignorance, and at worst arrogance, on our part.

So, the next time we thank a veteran for his or her service, maybe we should ask how he or she is now serving, and whether our collective investment in his or her personal and professional development is being put to good use.  Our veterans are not museum pieces to be put on a shelf and admired.  They are valuable assets that this country needs in order to remain an innovation powerhouse.

Building HPTs Rule #3: Strategic Fit is a Must

The late George Harrison frequently paraphrased the Cheshire Cat in chapter 6 of Lewis Carroll’s Alice in Wonderland by saying, “if you don’t know where you are going, any road will get you there.” He often used this phrase when describing his good fortune in knowing as a small child that he wanted to play guitar. The most casual music lovers know of George Harrison as one of the Beatles. More serious aficionados of 70s music also know him from his solo career, from his earliest works (Wonderwall Music and Electronic Sound) to his more notable contributions (All Things Must Pass, The Concert for Bangladesh, Living in the Material World).

What few people recognize is that Harrison was one of the greatest guitarists of his time. His studio collaborations were numerous, including co-writes and guest appearances on recorded songs with well-known singer-songwriters such as Eric Clapton, Bob Dylan, Dave Mason, Billy Preston, Dave Lynne and Tom Petty, to name a few. In referring to Harrison, Tom Petty said, “He just had a way of getting right to the business, of finding the right thing to play.” Rolling Stone founder Jann Wenner described him as someone who “played exquisitely in the service of the song”. Said differently, Harrison understood strategic fit within the purpose of the song.

This brings us to rule #3 for building a high-performance team (HTP): When considering new programs we will challenge each other to ensure a proper fit within our strategic map. I will offer a simple 3-step approach for implementing rule #3.

Step 1 – Develop an easy to remember optic to describe the strategic map for the team—the simpler you can make this, the better.  When building Drexel University’s Baiada Center for Entrepreneurship we defined our primary focus as having two desired outcomes regarding entrepreneurship; creating interest and passion, and promoStrategic Map Opticting thought leadership and best practices. Once that was determined we created a simple chart with interest & passion on the Y-axis and thought leadership & best practices on the X-axis. Once complete, we looked at every prospective program relative to if/where it fit on the map. This accomplishes two things. First, it ensures that we expend effort only on programs that fit within the map. Secondly, if a fit exists, it also informs where on the map it fits, allowing us to build complementary programs.

Step 2 – When making day-to-day decisions regarding programming and strategies, it is important to consider those decisions in the context of the strategic map. More importantly, that consideration should be made aloud.   This helps to reinforce the team’s sense of purpose, vision and mission daily, and also provides an ongoing compass.

Step 3 – Encourage each member of the team to challenge one another regarding strategic fit. Each member of the team falls in a different spot along the spectrum between discovery and delivery skills. For example, I am stronger in discovery skills. As such, my tendency is to continually conceive new ideas for programs to offer our constituents. I am also good at convincing myself that  my idea is stellar, which they are not, making it important that I shared my brilliant idea with my partner expending delivery effort. My partner would earnestly listen to my idea,then often question the strategic fit in a professional manner. This process always resulted in one of two outcomes—both good. In some instances it gave me an opportunity to explain the strategic fit, providing my partner a better perspective of our vision. In the early days this occurred with about 2% of the ideas. The majority of instances (98% of the time) it helped me to quickly see that my brilliant idea was not strategic.  Another interesting outcome was that over time, my partners understanding of our vision was so complete that if she challenged the strategy, 99.8% of the time it was not a good fit.

Houston We Have a Problem: Creating the Right Fiduciary Approach

In this series we are focusing on six factors critical to success for founders of startups within a larger organization. In the 10/31/14 post, I discussed the importance of building grass roots support. In this post I want to comment on the best way for the host organization of a startup venture to structure fiduciary matters. I will also offer suggestions for the startup team regarding fiduciary control.

Dealing with the budget process of a large organization is like dealing with an adolescent boy. It is clumsy, predictable, and is prone toward bad decision-making. In the quarter preceding the fiscal year, each department is asked to develop a proposed annual budget for its department. The proposed budget is reviewed, challenged, “negotiated” down to a lesser number, and approved. Notwithstanding unforeseen circumstances during the year, the department manages to the budget throughout the year. The advantage to this approach is that it allows senior executive the ability to delegate spending authority within established limits, and more accurately forecast spending for the year.   The disadvantage is that it encourages department heads to spend their entire budget each year regardless of need.

My first experience with this dynamic was as a young financial planner for IBM. One crisp autumn morning, as I was leaving a meeting in the Engineering building, I stuck my head into a colleague’s office to say hello. There, I noticed him crouched over an equipment catalogue. My first thought was that he was trying to design a new part, and was looking for some specialized piece of equipment to complete his important work. When I asked him what he was looking for, his response startled me. “I have no idea. My manager told me to browse the catalogues for stuff to buy, so we can make sure to spend all of our budget by year-end.” When I told him I thought that was a complete lunacy, he said, “Yea, but if we don’t spend all of our budget this year it will get cut next year.”

This same scenario plays all the time in most every large institution in the country, where a process designed to manage spending instead promotes spending. I am not suggesting that budgets are bad. Even in our personal lives, it is good to develop a spending budget. It helps us forecast our cash requirements for the year, and provides limits, forcing us to make necessary trade-offs.

“I can either buy that new set of golf clubs or make my mortgage payment.”

With our personal budgets, cash we conserve is carried over into the next year’s beginning balance. This can provide a much needed a reserve for any surprises we might face.

”What do you mean, you’re pregnant!”

For a department in a large organization, though, there is often an inverse carry-over effect. While you may get a pat on the head for spending below your budget this year, next year’s budget may get cut. Why? Because it is easier to scrutinize budgets based on percentages and ratios than on circumstances. It is easier to ask all departments to limit next year’s spending to a 3% year-on-year increase than to actually review the detailed requirements of each department. Much like what we see in government, this shorthand approach to allocating resources creates a survival mentality based on spending more. Instead of encouraging participants to conserve and make smart tradeoffs, it encourages them to spend as much as they can get away with so they will have a bigger base to compare year-to-year. I could devote an entire series on this topic, but it will suffice to say that it does not work for startup ventures.

To build a successful startup from within, you need equal parts prudent leadership and fiscal autonomy. First, you must ensure the founding team has demonstrated an ability to handle the fiscal autonomy given. There is a reason trust funds are not paid out to adolescents. While aptitude and intent are often difficult to gauge, the due diligence necessary to detect the willingness and ability of the leader to handle fiscal matters is rather simple—check his or her record. If her experience is limited to large institutions look for spending patterns over the years. It is easy to find the big spenders. Look for telltale signs around some of the more discretionary items like travel, meals and entertainment. If he has started a business in the past, how effective was he at conserving cash while managing growth? This is straightforward, but takes some digging.

Once you are confident you have a fiscally responsible leader, treat him/her as one. The most effective way to do this is by employing a funding process outside of the normal budgeting process, managing the new initiative much like a Venture Capital firm manages its portfolio companies. Working with the management team of the new venture, determine the amount of financial capital required to start and sustain the new venture until the next significant inflection point for the new venture. It can take five or more years before the new venture will expect to reach an inflection point, so the funding should be set aside exclusively for the new venture and held in a separate account to me managed by the leadership of the new venture. While the funding can be doled out in tranches based on milestones, the leadership team needs the ability to manage spending independent of fiscal year budgets.

When building Drexel University’s Baiada Institute for Entrepreneurship, our small team started with a promise of $2 million over 10 years. The funds were deposited in our exclusive account in increments of $100,000 every six months. Through fiscal diligence we found that we could manage with less than $200,000/year in the early years, allowing us to preserve cash to help fund significant growth during the later years. Because of the success we enjoyed our annual spending exceeded $200,000 by the five-year mark. Our reserves, combined with additional funds generated through our programs and services, we were able to sustain our growth until becoming a university institute (inflection point) in year 11. The beauty of this approach is that it rewarded good behavior, eliminating the cognitive dissonance that often accompanies the annual budget approach.

With the annual budget approach an all too familiar scenario would have likely occurred. Trying to be fiscally responsible, the leadership team would have only spent $115,000 in year-one, resulting in a time-consuming battle for more funds the following year. The leadership team would quickly learn the importance of spending the entire budget—prudence be dammed—to avoid the battle for budget the following year. What makes this pattern so insidious is not just its wastefulness. Spending $200,000/year in the early years would have eliminated any reserves, making it unlikely we could sustain our growth prior to reaching our inflection point.

As mentioned earlier, creating an effective fiduciary approach only works with the right leadership team in place. In the next post I will posit the need for building a high performance team.

Houston, We Have a Problem: Putting out a BOLO on the host organization

In this series we are focusing on six factors critical to success for founders of startups within a larger organization. In the last post, I discussed the unique challenge these founders face in trying to move quickly while ensuring that the goodwill of the host organization is protected. In this post I will discuss a close cousin—the need to ensure that the goals and strategies of the new venture are nested within the goals and objectives of the host.

When starting a new venture, it is easy for founders to become seduced by the weightlessness of space flight. Not bound by the gravity of the host organization’s normal bureaucracies, and empowered with a growing domain expertise different from that of the host’s, founders run the risk of believing they are the smartest guys in the room. This newfound autonomy can be catastrophic without a strategic roadmap consistent with the goals and objectives of the host.

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.”  Samuel Langhorne Clemons (A.K.A Mark Twain) could have just as likely been describing the attitudes often exhibited from the founding team members of a spin-off. All too often, these people act out like children testing the newfound freedoms of adolescence. They suddenly feel enlightened, and convinced that mom and dad are, at best, clueless or at worst, stupid. It shows up in both their decision-making and in their interpersonal relationships with members of the host organization.

I saw this dynamic play out several years ago as a founding member of a startup joint venture, where I witnessed otherwise savvy professionals behaving like rebellious teens. These seasoned corporate executives; formerly with a Fortune 50 company that happened to be one of the venture partners, and our largest prospective client, were frequently combative and renegade in their decision-making. Our early performance was astounding, far exceeding our best-case scenarios. We experienced meteoric growth, going from the initial 12-member team to roughly 6,000 employees in just three years. This unprecedented growth only fueled the renegade behavior of many of the founders. Instead of viewing our success as an opportunity to create allies within the parent company, they saw it as the perfect opportunity to gloat to the naysayers and haters, which were prevalent during the launch and early years.

Anyone who has been fortunate enough to experience this type of success knows that, sooner or later, something is going to go terribly wrong.   At the end of year-three we stubbed our toe badly, and two months later only three of us from the founding team remained. The rest of the founders were removed by the board and replaced by a new team of seasoned executives.

The moral of the story is not to shrink from the freedom of space travel. The moral of the story is that with freedom comes responsibility—the responsibility to ensure that new programs and initiatives are always in line with and/or nested within the overarching goals of the host organization. To do this you must thoroughly understand the strategic intent, goals and objectives of the host. Here are three suggestions for gaining this understanding:

  • Study—Carefully study and internalize the strategic plan. Know it as well as your own, and you will likely know it better than many of the folks in the host organization.
  • Observe—Dialogue extensively with the senior executives from the host about their goals and objectives. More importantly, observe the strategic decision-making. The best way to do that is to follow the money. For where your treasure is, there your heart will be also.” (Matthew 6:21) If you pay attention to where investments are being made, you will quickly learn the strategic intent of the organization.
  • Communicate—It is not enough to develop strategies consistent with the host organization. Whenever and wherever possible describe your strategic decisions in the context of the host organization, helping others see the positive correlation and your contribution to their success.

Starting a new venture from within an existing organization can, and should be, all consuming for the founders. Like starting a new business, the tendency is to expend all of your effort on becoming expert in the market space you occupy, and building a sustainable venture. When you are building from within, it will more likely succeed if you put out a BOLO on the host. BE ON THE LOOKOUT for the strategic intent, goals and strategies of the host organization, with an eye on how your strategies rationalize with them. In the next post I will speak to a tried-and-true method for acquiring necessary infrastructure support for your startup venture.

A Billionaire in Gardener’s Clothing

When I was in High School I had a small business selling and servicing swimming pool cleaners. In the early 1970s a robotic pool cleaner that operated unattended was a cutting edge technology, and I was the sole distributor in the Greater Cincinnati area for a company out of Florida that invented and manufactured these little gizmos. It was by far the easiest item I ever had to sell. They were such a novelty at the time they sold themselves.

My clients ranged from the upper middle class to the very wealthy. One Saturday afternoon I had an appointment to demonstrate my product to the second wealthiest man in Cincinnati. As I drove up to his estate in my yellow 1965 Ford Falcon I noticed what appeared to be the gardener at the front of the main house. Hunched over in the bushes with his tattered shirt and a Camel cigarette hanging from his mouth, he seemed only mildly interested in this visitor in the yellow car. Because my dad always taught me to treat everyone with dignity and respect, I stopped in front of the man with the dirty face and said, “Good afternoon sir, sorry for the interruption, but I was wondering if you could tell me where I might find Mr. Heekin?” He said, “What do you want him for?” “My name is Mark Loschiavo, and I have an appointment with him about a swimming pool cleaner” I answered. His response startled me when he said, “I’m Herb Heekin, and I’ll take it”. “Nice to meet you Mr. Heekin, but you haven’t even seen it yet”, I stammered. “Young man, you treated me like I owned this place, even when you thought I was a hired hand. I admire that. I’ll buy the damn thing even if it doesn’t clean my pool?”

I went on to sell him a pool cleaner that day, and in the weeks and months that followed I sold—or more accurately he sold—many more of my pool cleaners to his friends, family and associates. Remember to treat everyone you encounter with dignity and respect. You never know when you may be talking to a billionaire in gardener’s clothing.

©Mark P. Loschiavo

The Changing Role of The CFO: Has the pendulum swung to far?

Title: The Changing Role of The CFO: Has the pendulum swung to far?
Location: Philadelphia Country Club
Link out: Click here
Description: CFO Alliance: Breakfast Roundtable
Prior to the 90s the main focus for the CFO was fiduciary responsibilities. In the 90s the focus shifted more toward strategy. Then came Enron, Worldcom, and Sarbanes Oxley. Has the pendulum swung too far?
Start Time: 7:30 AM
Date: 2009-09-16

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