Why Birds of a Feather Shouldn’t Always Flock Together… In Business

Birds of a feather, as the old adage goes, they all flock together. And with that, it can also be reasoned that any flock, or team, for the purpose of this discussion, no matter if we are discussing a football team or a global media conglomerate, is only as strong as its most valuable members. In the world arena of startups, putting together a strong team can mean the difference between, failure, mediocrity, and overall success. Founders face many quandaries in the beginning, from deciding between building homogeneous teams and heterogenous teams, to choosing the best candidates for every position in the company, starting at the top with cofounders, moving on down to managers and employees. And when it comes to putting together an entrepreneurial force to be reckoned with, should you stay with the flock? Or should you spread your wings and fly in a different direction?

Let’s pretend for a moment that you are going to pursue your dream of starting a construction company which builds student housing apartment communities. For the last 10 years, you have been a project manager at your current company, which does that very thing. Great! Your best friend, Rob, has had success in the past with a startup company and he has an MBA from Harvard Business School. Even better! His cousin, Joseph, has been a contractor who is responsible for building two student housing developments within the last 5 years. Perfect! Together, you will rule the world! Not so fast, my friend. Let’s think this through for a moment, shall we? Building a homogenous team, such as this one, can have it’s perks, but it can also become a become a very uncomfortable and dangerous thorn in your side if you are not careful.

When deciding on who your cofounders will be, it’s best to keep a few things in mind. While choosing cofounders may seem like the “quickest and easiest solution,” and offers the benefits of  a  “shared common language that facilitates communication,” “higher confidence” you will be able to trust your counterparts, and you may be able to “consider alternative view points without splintering,” there are other viable reasons you might want to forgo this route, such as “overlapping human capital,” which presents as “redundant strengths” and “missing critical skills,” not to mention, since your dynamic already seems like family, that can “create an impasse in the growth of the company” (Wasserman, 2012.) Choosing your founding team wisely may mean forgoing teaming up with friends and family; however, it makes better sense to go with others who are better suited to the roles you need filled to generate the most success, i.e., dollars, in the long run.

Now, let’s say, after comparing the pros and cons, you have decided to carry out your plan of bringing Rob and Joseph on board. Although you have decided their technical skills are essential for starting your company, have you considered whether or not each of these individuals are strong leaders with impeccable management skills? Further, do they have what it takes to help you attract others who will help keep your dream afloat when you need to have a life outside of work? Colin Drummond, Vice President of Sales and Operations at Progressive Business Publications, “requires his team leaders to be coaches, not just managers,” directly impacting how employees perform in a way that “force[s] [them] to think for themselves, diagnose their own problems, and take ownership of solutions” (Herrenkohl, 2013) Remember, your team is only as strong as its talent. Are Rob and Joseph the right fit for such a task? It’s imperative to make the right call.

It is easy to see it is not always easy to choose the right partners or the right employees. A lot of thought  and planning goes into making these huge decisions. Your need for a strong team may transcend the boundaries of personal relationships. Sometimes, it is good to fly with the flock. Other times, it is even better to fly the coupe. My point is, whether you decided to build a homogeneous team or a heterogenous team, choose wisely.

Resources

Herrenkohl, E. (2013). How to Hire A-players: Finding the Top People for Your Team- Even if You Don’t Have a Recruiting Department. Hoboken, N.J.: Wiley.

Wasserman, Noam. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, N.J: Princeton University Press, 2012. Print.

Social Capital, Financial Capital, or Both?

Building social and financial capital are both necessary components of establishing a business that is destined to become successful in the long run. Without them, aspiring entrepreneurs could be setting themselves up for failure right from the beginning. Many new organizations are lacking either a strong social network or essential funding or both. Seeking these assets in the early stages of planning a business venture is the best course of action.  But, what is social and financial capital, and why are they so important?

Social Capital

On the most basic level, social capital “refers to the benefits derived from one’s place in information and communication networks” (Wasserman, 2012.) It’s all about who you know when you do not have the skills or resources to achieve certain tasks or goals within a startup. Having a strong team is a priceless asset for a business. The more social capital a business possesses, the better, as this will create an avenue to abundant resources, bringing value to an organization. The market place is always changing and it is very important to develop strong interpersonal relationships which will withstand the test of time. According to Investopedia, the two most common forms of social capital are “bonding and bridging”—Bonding occurs  when a certain group of individuals with common interests form “connections to one another,” and bridging “arises when members of diverse groups forge connections to share ideas and information…” (Investopedia, 2018.)  These tools allow new startups to “gain access to many outside resources,” which is essential when it comes to making the best decisions about reaching out for extra funding or finding qualified partners or employees, for instance (Wasserman, 2012.)

Financial Capital

In the book, “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup,” Noam Wasserman describes financial capital as “the money or other tangible resources that can be used in the founding process” (Wasserman, 2012.) A limited amount of financial resources can be a serious issue for a new business and can lead to big problems such as legal issues and possible bankruptcy down the road. In the short term, having proper funding allows a startup to do such things as “buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, i.e. retail, corporate, investment banking, etc.” (“Financial Capital,” 2018.) There are many ways to obtain financial capital, for example, asking family and friends, applying for traditional loans, or requesting assistance from an investment company.

The Tie-In

So, how do the puzzle pieces of social capital and financial capital fit together? It could be problematic to try to get a startup off the ground without each of these tools. As we have established, social capital brings about more opportunities for growth by providing a strong foundation of human resources. The more people you have on board with launching your company can be helpful when it comes to obtaining financial backing as those people may be willing to provide financial backing or prove to be helpful in obtaining those prospective resources through other outlets. Therefore, we can conclude, although it may be possible to have one without the other, it is not very probable.

Resources

“Financial Capital.” Wikipedia, Wikimedia Foundation, 9 Sept. 2018, en.wikipedia.org/wiki/Financial_capital.

Staff, Investopedia. “Social Capital.” Investopedia, Investopedia, 5 Aug. 2018, http://www.investopedia.com/terms/s/socialcapital.asp.

Wasserman, Noam. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, N.J: Princeton University Press, 2012. Print.

The Benefits of Relinquishing Control

According to Paul B. Brown, contributor to Forbes, “There are many different ways of being a CEO and unfortunately a majority of people gravitate toward the old command and control model where the boss’ fingerprints can be found on everything” (Brown, 2014.) Micromanaging in the name of getting rich can be extremely time-consuming and exhausting for a busy entrepreneur. Yet, some find it very difficult to let go of the reigns, even if it means building social capital, human capital, and financial capital for a business. Each of those resources are pertinent for a growing venture to continue to thrive. Greed can be a treacherous human flaw—one that has left many business founders broke and wishing they had done things differently from the beginning.

Jim Payne, former CEO of MoPub said it best, “You can hoard the whole pie for yourself, but it’s a team sport you’re playing” (Shontell, 2014.) With this mindset, Payne not only set himself up for success, but he also set his employees up for success. He allowed those employees to contribute their own ideas and to buy stock in the company. When Twitter finally bought the organization for a hefty price tag of $350,000, many of those employees acquired an enormous amount of wealth, along with Payne. A very valuable lesson can be learned here. It is safe to say the company most likely would not have grown to be worth such a substantial amount if he had gone the route of ignoring the rich amount of human, social, and financial capital his employees had to offer. If more entrepreneurs followed Payne’s model, we could see a significant increase in successful startups in this country and around the world soon.

So, what does this mean for me and others as we work toward our Masters of Entrepreneurship degree? It means a lot. We can see that the trend of being the bearer of the first and final word and being the one who wants to hoard every dime does not always pay off in the end. As a matter of fact, just the opposite is true. But if we follow Payne’s example and the examples of others like him, we stand a very good chance of getting off on the right foot the first time, or even the next time, we decide to create a startup.

References

Brown, Paul B. “Want To Build A Successful Company? Give Up Control.” Forbes, Forbes Magazine, 16 Apr. 2014, http://www.forbes.com/sites/actiontrumpseverything/2013/09/08/want-to-build-a-successful-company-give-up-control/#16a6948a3114.

Shontell, Alyson. “How 3 Startup CEOs Gave Up Fortunes To Turn Half Their Employees Into Millionaires.” Business Insider, Business Insider, 4 Sept. 2014, http://www.businessinsider.com/non-greedy-startup-ceos-who-turned-employees-into-millionaires-2014-9.

The Accidental Entrepreneur

Ten years ago, I started an automotive repair business with my, now, ex-husband. We had no capital, no education, and no idea what we were doing.  He was a mechanic by trade and I was a young mother who had experience as a part-time assistant manager in the restaurant and retail industries. We had no mentors and no money. Yes, I said no money. We had five bucks in the bank. The adventure began in the two bay workshop behind our house with only a home computer, a land line telephone, and the tools he had acquired over the years.  Everyone we knew told us we were crazy, and maybe they were right, but we managed to go from making around $40,000 the first year to running a very lucrative six figure business in a real repair shop, complete with an office and a waiting area for our customers two years later. Not too shabby!

Looking back, I know it was an absolute miracle we achieved that level of success because we jumped in with the blinders on. Honestly, I do not recommend that route to anyone who wants to achieve long-term success and staying power in their respective industry. I also do not advocate starting a business with your significant other, but that is another story for another time. I learned a lot about what to do and what not to do when starting a business. It is not a responsibility that should ever be taken lightly. As you can probably guess, from the direction this is going, the business we created together no longer exists. I do not have any regrets, though. It was certainly a learning experience that helped me grow into the person I am today. Mistakes should be viewed not as failure but as stepping stones to do things in a better and more creative way the next go round.

While I have taken a step back to gain some much needed direction in my life, and I have since gone back to working for someone else other than myself, I still feel the calling to put myself out there one more time. But first, I am taking a small detour. I have decided I need to educate myself this time and to execute my next business adventure with a plan in place. I am older, wiser, and I’d like to think I have something significant to offer others, even if it’s in the form of advice on what not to do when just starting out. (Boy, do I have a lot to offer in that department!) I guess once you have gotten a taste of a life filled with creativity and innovation, it is very difficult to turn back.