BUILDING WINNING TEAMS

Patrick Turner IIT Bombay

Affiliate Professor of 22 October
Entrepreneurship 2005
INSEAD Asia Campus
 Game plan

1. General considerations
2. The importance of networks
3. Some thoughts on team
structuring

Building winning teams

 Game plan

 General considerations
 The importance of networks
 Some thoughts on team
structuring

Building winning teams

 Key points in team
formation

 the needs of the opportunity

 entrepreneur’s weak points
 values, goals and commitment
 definition of roles
 trust
 family support

Building winning teams

 Other key points

 in general, successful entrepreneurs

and their teams have prior experience
in and know well their particular
market
 avoid the temptation of equality for
everyone - someone has to take the
final decision. Democracy doesn’t work
 the same comment applies to financial
rewards, stockholding, etc
Building winning teams
 Always remember….

 team-building is a dynamic process,

and in a lot of cases, one or more of
the original launch team leaves or is
forced out after a while

Building winning teams

 Something to think
about...

 Forming and building a team is,

like marriage, a rather
unscientific, occasionally
unpredictable, and frequently
surprising exercise. Decisions are
partly based on emotions such as
admiration, respect and often
fierce loyalty.
Building winning teams
What an entrepreneur
must be able to do with
his team
 communicate his vision
 motivate the team so that
everyone shares his vision
 have the courage and lucidity
to remove anyone whose
performance or attitude is
holding back the venture
 lead
Building winning teams
 Key things the team
must realise and accept
 participating in a new venture is
rarely a get-rich-quick exercise - the
long haul is important
 sacrifices will be involved, both
financial and personal - especially
at the beginning it is a question of
long hours and no guaranteed
monthly salary
 the lead entrepreneur has the last
word Building winning teams
The golden rule...

 The key is getting and working with

the right partner or partners, and not
assuming that your best friend or
brother-in-law will do

Building winning teams

 Hire the best people
you can

 Bear in mind the Class A,B and C

idea
 Class A people will attract and hire
other Class A people
 Class B people will do that for Class C
people
 Class C people won’t attract anybody
at all
Building winning teams
 Hire people with the
right experience

 do as VCs do – go for clones

 if you are not convinced someone is the
right person, keep looking
 become your own in-house headhunter -
make yourself a hit list of people you would
love to have in your company
 look into the future and start planning today
the management team configuration that
you think will be optimal down the road
Building winning teams
 Why would the best
people work in start-
ups?
 A good many of them are already
 For those who aren’t…
 challenge
 chance to really influence things from
the most senior level
 fed up with large corporations
 all sorts of combinations of
circumstances
Building winning teams
 What do these people
look for?
 Great company
 well managed
 good fit
 great culture
 Great job
 demanding, stretching
 elbow room
 headroom
Building winning teams
 How to attract such
people
 Network, but targetted networking
 Be committed to what you are doing
and make it exciting
 Make your work environment an
attractive one
 Make your targets feel that their
contribution will be really valued
 Attach magnets to yourself (eg, strong
funding, very strong team, credibility-
giving advisors etc)
Building winning teams
 Outside directors

Outside directors can be of

inestimable value in:
 recruiting key management
 introductions to potential customers
 advising on deals
 locating additional funding
However, be careful with the legal implications
 adding credibility/prestige
affecting board members
 simply providing shoulders to lean
on
Building winning teams
Advisory boards

 in some cases, entrepreneurs

constitute a panel of outside advisors
into an advisory board
 this can add expertise, credibility,
reality checks
 avoids the legal implications attached
to formal board membership
 use your network to identify and
approach potential advisory board
members
 don’t be shy!
Building winning teams
Outside advisors
(eg, lawyers)

 consider them as part of the team

 never hesitate to consult them
 however, always remember that
they do not necessarily see things
from the businessman’s standpoint

Building winning teams

 Game plan

 General considerations
 The importance of networks
 Some thoughts on team
structuring

Building winning teams

 Two generic modes of
access
 Market intermediaries
 Head Hunting firms >> expensive
 Online job portals >> inefficient for senior
hires
 Personal networks
>> Can be low cost & efficient
How do you structure your network to
maximise access to top talent?
Building winning teams
 Network: Myth +
Reality
The set of relationships critical to your ability
to get things done, get ahead and develop
professionally
“Those who work at their networking are self-
interested and political”
“My network will develop naturally on its own”
Your power to mobilise resources rests on
your network
You have to know your network in order to
Building winning teams
 A networking model
Personality

Network Accessing
Structure Resources

Networking
Style
Your network influences your access to:
Knowledge (e.g. on undervalued talent)
Timely information (e.g. An ‘A’ player’s intention to be on
the job market)
Referrals (e.g. “low down” on a candidate)
Your network limits your ability to mobilise:
Opportunities (e.g. access to new talent pools)
Support (mentors, advisors, friends, trouble-shooters)
Building winning teams
 Personality

Personality

Network Accessing
Structure Resources

Networking
Style

Personality
Preference or predisposition
Involves both thinking and acting
Relatively fixed – genetic and early upbringing
Building winning teams
 Personality:
implications
Some aspects of personality promote
networking:
High-self monitors sense situations better
Extraverted people are constantly in the company
of others
Agreeable people are nice to talk from the first
interaction
Conscientious people are more predictable and
dependable

Be aware of how personality enables and

limits your choices:
We naturally prefer our own
Building personality
winning teams
 Networking style
Personality

Network Accessing
Structure Resources

Networking
Style Networking Style
* Behaviours
* Generally consistent with personality
* Maybe learned through skill, experience, or
awareness
* Can and does change over time
Building winning teams
 Networking guidelines

 Maximise the value of each interaction

 Invest time in developing relationships with
interesting people
 Keep confidences, build trust, be consistent and
predictable
 For key meetings, do research and be prepared
 Practice and expect reciprocity – balance give
and take
 Show respect and empathy with regard to time
and resources
 Only connect when all involved will benefit
Building winning teams
 Game plan

 General considerations
 The importance of networks
 Some thoughts on team
structuring

Building winning teams

 Team performance:
myth + reality

“Teams whose members work together

harmoniously perform better than those that
have lots of conflict”
“When people get together to do a job – the
job will probably get finished faster”
Most commonly, teamwork really takes
longer to finish or doesn’t even get done at
all
The likelihood of teams performing like
magic rests on how they are structured and
Building winning teams
 Three elements of
team design

 Incentives faced by team members –

including equity split
 Composition of the team
 Norms within the team

Building winning teams

 Team performance
model

Incentives
Quality of Venture
Composition Decision Performance
Making Outcomes
Norms

Member incentives, composition and norms

influence how team’s decision making
processes and this drives performance
outcomes
Building winning teams
 Team member
incentives

 Generally consists of -
 Salary (fixed + variable) & benefits

 Stocks / stock options

 In the early stages of the venture cash

rewards will be low / non-existent

Building winning teams

 Equity allocation –
some general
principles
 Share the wealth with those who helped you
create it
 Usually better to follow the Contribution
rule rather than the Equality rule for equity
allocation
 Build in flexibility since contributions of
members will vary over time
 Have clear stock holder agreements to
handle exits of founders and other equity
Building winning teams
 Money is important
but not everything…
 Obviously financial compensation is
important, but so are other things –
 environment
 culture
 people
 challenge
 future growth possibilities
 etc…

Building winning teams

 …and money is not
necessarily today

 Performance-related bonuses
 Shareholdings
 Stock options

Building winning teams

 Stock options
 Pros
 share in future value
 anticipated high future returns
compensating lowish (or
sometimes non- existent present
earnings)
 Cons
 worthless if no future value
 very difficult to negotiate if no
IPO Building winning teams
DEFT model of team
composition

Diversity within the team

Expertise of team members
Faultlines within the team
Totality of team’s skills

Building winning teams

 Assessing Totality of
team skills

Step 1:
Map the skills required – based on the
venture’s business concept & life stage

Step 2:
Identify gaps between skills required &
available in the team

Building winning teams

Assess Totality in
terms of…

 Functional skills
 Industry / domain skills
 Start-up context skills

Building winning teams

 Expertise of team
members
Use when task
interdependence
is low
skills Excellent

Grab
Technical
Adequate

Avoid Use when task

interdependen
ce is very high
Adequate Excellent
Inter-personal
skills
Building winning teams
 Two kinds of
Diversity…

Knowledge Diversity Social Diversity

Differences in Differences in
 functional areas  ethnicity
 industry  gender
background  age
 work experience  language etc.
 education etc.

Building winning teams

 …have different effects
on new venture
performance
 Knowledge diversity is beneficial
 Promotes innovation and creativity
 Flexibility in thinking
 Social diversity is likely detrimental
 Stereotyping leading to interpersonal
conflict
 Opportunity costs of resolving
interpersonal frictions
Building winning teams
 Faultlines

 Faultlines divide a team's members on

the basis of one or more attributes (e.g.
gender faultlines divide teams into male and female
subgroups)

 Faultlines become stronger as more

attributes align themselves in the same
way (e.g. when two new female hires share the
same nationality)
Building winning teams
 Potential Faultlines

CEO CTO VP Sales & VP Finance &

Mktg Control
Age 30 34 30s 30s
Ethnicity Western Wester Chinese Chinese /
n /Indian Western
/Western
Gender Male Male Male/Femal Male/Female
e
Team 2 years 2 years 0 years 0 years
Tenure
Functional Software Softwar Mktg. (no Finance (no
Area / e software software
Medicine expr) expr)
Building winning teams
 Team Norms

The leader (or the team collectively) must

specify core norms that demarcate the
team’s behavioral boundaries

The Profane – the few things that are NEVER

done
The Sacred – the few things that are ALWAYS
done
Building winning teams
 Summary – structuring
the team
Incentives
Quality of Venture
Composition Decision Performance
Making Outcomes
Norms
- Better to have a small share of large pie than 100%
of a non-existent pie – equity incentivises teams
- Be clear on the Contribution vs Equality issue.
Generally better to rely on the contribution principle
- Have flexibility to take care of changing
contributions of members as well as entry/exit
- Document procedures to handle founder or other
equity holders’ exit
Building winning teams
 Summary – structuring
the team
Incentives
Quality of Venture
Composition Decision Performance
Making Outcomes
Norms

Diversity: Maximise knowledge diversity; minimise social

diversity
Expertise: Maximise technical skills subject to adequate
interpersonal skills
Fault lines: Beware of strong fault lines that could distort
task conflict into interpersonal conflict
Totality: Ensure your team has the full complement of
task skills Building winning teams
 Summary – structuring
the team
Remuneration
Quality of Venture
Composition Decision Performance
Making Outcomes
Norms

What are the norms that define the behavioral

boundaries of your venture team?

The PROFANE - the one or two things that are NEVER

done
The SACRED – the one or two things that are ALWAYS
done Building winning teams