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The Guide to Entrepreneurship by Michael Szycher Ph.D

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137
Chapter 7
Organizational Structure
7.1 Introduction
This chapter focuses on the crucially important task of building a new ven-
ture team. The point emphasized is that a rm’s new venture team doesnt
consist merely of its founders and its initial management and employees, but
of its board of directors (if it is incorporated), its board of advisors, its lend-
ers and investors (if applicable), plus all other professionals that compose the
stakeholders.
The founders must also be aware of the “liability of newness.” New ven-
tures historically have a high propensity to fail. The high failure rate of the
ventures is due primarily to three reasons:
1. The founders are incapable of adjusting to their new roles.
2. The rm lacks a “track record” with outside buyers and sellers.
3. Failure to assemble a talented and experienced founding team of
risk-takers.
7.2 The Founding Team
“The rst responsibility of the founder is to dene reality.
—Mark DePree
In nearly 80% of startups, there is a founding team. Particularly in the early
stages, the hours are excessive, the challenges are constant, and entrepre-
neurs nd themselves in the company of a few other people who they will
138The Guide to Entrepreneurship: How to Create Wealth for Your Company
work insanely hard with the goal of “getting the ship to port.” This initial
founding team is the anchor of every startup, and is what will ultimately
determine its destiny.
1
What are the main characteristics of an effective founding team?
Figure7.1 summarizes the ideal characteristics of an effective founding team.
However, for you (the founder), establishing a founding team is easier
said than done. Most seasoned executives are terried of leaving their com-
fortable day jobs in a large organization. Perhaps “downsized” executives are
your best bet for getting talent. Besides the founder, who actually composes
the founding team? Figure7.2 attempts to give objective answers.
An Effective Founding Team
Managerial capabilities – skills, knowledge, experience
Technical competencies
Common vision
Worked together previously
At least one member with experience in the industry
A network of industry contacts
Expertise in the basic functional areas of the business
Dedicated to the startup and able to endure any financial
constraints.
Figure 7.1 An effective founding team—The eight ideal characteristics that dene an
effective founding team.
e people who get to claim victory?
e scapegoats for a failed business or
investment?
e reason investors make investments?
e reason other people join the company?
e reason the company succeeds or fails?
Who is the founding team?
Figure 7.2 Who is the founding team?—If you are the founder, do you also have a
founding team?
Organizational Structure139
7.3 Hiring Your Executive Team
As hire As. Bs hire Cs.
People, people, and more people. More than anything else, the hiring of
your executive team will decide the ultimate fate of your company. In the
author’s experience, at the Board level (during our formative years), we spent
more time dealing with executive team “issues” than any other subject.
In their executive team, entrepreneurs should select people whose talents are
recognizably complementary to their own weaknesses. To select the optimal
executive team, start by objectively understanding yourself, what you know, and
what your weakest areas of expertise are. This is easier said than done because
self-criticism is as rare as rain in the desert, particularly after you have climbed
to the top of the ladder by talent, perseverance, and guts (Figure7.3).
In hiring your executive team, you will need to decide between a hetero-
geneous and a homogenous group.
2
The members of a heterogeneous executive team are diverse in terms of
their abilities and experiences.
In contrast, the members of a homogeneous executive team are similar to
one another in terms of their abilities and experiences.
Your Startup Executive Team
Setup for success Morale-building High standards Meritocracy
Executive Team
Fair treatment
Objectivity
Teamwork
Discipline
Hiring and
promotions
Technical
Sales/marketing
Product
development
Manufacturing
Innovation
Positioning
Account
management
Technical service
Distribution
Governmental
Industrial
Trade relationships
International
Recognized
authority
Authoritative not
authoritarian
Face reality
Fortitude
Human
relations
Personal
Qualifications
Competitive
Strategy
Regulatory
Ability
Figure 7.3 Your startup executive team—Select executives with complementary
skills to yours.

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