Axe The CEO!

By Gerry Langeler, Guest Author

Here is a sure-fire bet: Gather a bunch of entrepreneurs to talk about venture capitalists, and before long the conversation will turn to the issue of control. “If we take VC money, the next thing you know, they’ll be in control, and we’ll be out on our collective ears.”

Now, try the reverse. Gather a bunch of VCs and before long you’ll hear something like this. “If we invest in them and we don’t have the ability to take control, these young hot shots may run right over the edge of the cliff, and take all our money with them.”

The problem, of course, stems from the following: Entrepreneurs often have mixed goals in starting a business. They want to deliver on a product vision, want to grow a major enterprise and make money, and also want to be the boss. Venture capitalists have only one goal, they want to make money for their investors and themselves. Sometimes, if the company gets off track or is headed there, and management doesn’t seem able to fix it quickly, VC’s feel they need to be able to bring in people who they believe can.

So, if you are the entrepreneur-CEO, how do you avoid this potential conflict point? First and foremost – perform! The last thing a VC wants to do is change management. It is messy, risky, and often leads to a wash out of the previous round of investment. And no VC in their right mind wants to take the reins themselves. We know how hard you work!

Fail to perform, and no set of terms and conditions or ownership position can save you.

Perform, and you have all the control you’ll ever need.

In that spirit, here is a checklist that I’ve found useful over the years in serving as a Board member in a number of firms, both public and private. It doesn’t cover every situation, and covers some that only tend to appear as companies get beyond the startup stage, but you may still find it useful. If you, as the CEO, can put this list up on your bathroom mirror – and every morning tell yourself you aren’t running afoul of any of its tenets, then you have a long, successful career ahead of you!

With all due respect to Stephen Covey – here are the Seven (Deadly) Habits of Highly Likely To Be Fired CEOs.

1. Poor leadership

* Lack of confidence by key personnel

* Hires/retains weak people in key positions, lack of urgency or failure to fill key roles

* Fails to grow/retain key players (ultimately including a successor)

2. Poor vision

* Lacks clear understanding of where business is going

* Organization lacks focus and clear priorities

* Not able to strike key industry partnership relationships

3. Poor results

* Sustained poor financial performance or consistently missed operational targets

* Major loss of market share or competitive position

* Inability to forecast timing/nature of recovery events

4. Poor understanding of business

* Misses key industry trends and changes

* Lacks understanding of fundamental profitability factors

* Cannot crisply define what it takes to win

5. Poor work habits

* Does not put heart and soul into business

* Sets bad example/role model for others

* Is not viewed within industry as a key player

6. Poor management style

* Allows top management infighting, not working as a team

* Decision processes are unpredictable, leaving organization too scared to act

* Starves key programs, but spares sacred cows

7. Poor board candor or communication

* Controls flow of information/agenda preventing focus on, or sufficient time for, critical issues

* Does not allow ready access to VPs and other key individuals

* Keeps favorite non-strategic programs or perquisites out of board review/approval process

Significant evidence across any one of these categories should be enough to render a board wide-awake to the potential for trouble. Two or more should cause a responsible board to act.

Venture capital boards are like normal boards, only more so! They have little time to spend developing management in the face of fierce competition and dynamically moving markets. They are much more ready to act to change management to fix something that is broken, or to keep a rocket from coming off the rails.

So – avoid the Seven Deadly Habits for CEOs. You’ll find your venture capitalists supporting you every step of the way!