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Born Leaders
A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
May 21st, 2004


By Brent Holliday
Greenstone Venture Partners

"There goes my hero
Watch him as he goes
There goes my hero
He's ordinary" - Foo Fighters, My Hero

I'm beginning to understand how Ann Landers recycled a few columns over her career... This is roughly my 200th attempt to inform, speculate or rant about the technology industry from two perspectives, that of early stage companies and/or British Columbia. How many ways can you say, "It's very hard to make a big technology company from scratch"?

Without further adieu, here is a topic I have covered before. Hopefully, this time you will benefit a bit from my evolving understanding of the topic. And three years from now, when I write about it again, I bet I will have new insight because you never stop learning in this business.

The biggest motherhood and apple pie statement out of the mouths of venture capitalists (VCs) is, "Success in early stage depends on three things, management, management and management." If you look at the CEO of any start-up, the trait most scrutinized is that of leadership. Sure, you want domain knowledge, tons of experience, charisma, honesty and handful of other "nice-to-haves", but the critical ability is leadership. The rest of this thesis is based around the CEO, but can easily be applied to any level of manager in an organization. Leading a team requires key abilities similar to that of leading a company.

I am now firmly in the camp that leaders are born, not made. You either have it or you don't. The leadership gene should be mapped somewhere in the genome so we can develop a simple blood test early on and save tons of money and tons of anguish on those that try to lead, but fail miserably at it. There is a nice cottage industry in books, seminars and personal coaching for leadership skills. Head over to Amazon.ca and look at the latest nest of Leadership books: Five Temptations Of A CEO, First, Break All the Rules: What the World's Greatest Managers Do Differently and my favourite du jour, Leadership Sopranos Style: How to Become a More Effective Boss. Lesson number one from the Sopranos Style is how to make cement boots for non-performers.

Each of the books and seminars should come with a warning label: If you are not born with it, there is no way you can learn it from a book. I may be over-stating it a bit. Those with certain capabilities can learn to become better at leading. Experience does teach us tactics to improve upon the status quo. The best leaders have tried many tactics and by process of elimination have honed their skills based on what works.

Here's the thing about being a leader… Your employees have a small neural connection from their nose to their brain that never, ever fails. They can smell it when you are not a leader. Independently at first, then in small groups in the hallways, employees have a basic instinctual capability to ferret out those who are merely trying tactics from the latest book and those that can truly lead. It's not that they can do better, in most cases. Often times, they can not articulate what a person is doing right or wrong. It's just that there is near universality in identifying and rallying around born leaders.

One critical piece of leadership is the ability to inspire. Some have incredible enthusiasm and charisma, the sort of "rah-rah" leader that really gets the juices flowing in meetings or presentations. Some are quiet inspirers, those that lead by example and action. Think of the confident leaders in other situations, from armed conflict to hockey games, the kind of "follow-me-boys" leaders that we have all run across in fiction and in life. The quiet leaders are more perspiration leading to inspiration because they work so hard and accomplish so much. They can be just as effective without the adrenaline inducing speaking capability that others have.

Another critical piece of leadership is effective decision making. Once again, there are different styles. The autocratic "don't-worry-I-know-what-to-do" decision maker vs. the supportive "gather all of the information and opinion" decision maker who includes everyone in the process. Naturally, we think the latter is a better decision maker, but that is not always the case. Autocratic decision making works. But only if the decision maker owns the responsibility of those decisions and takes the heat when things go wrong. I'll get in to the worst kind of leaders in a minute, but among the worst are those that make decisions and then point fingers when things go awry.

The last critical piece of leadership is the ability to think strategically as well as tactically. This is especially true of the demands of a CEO vs. a manager. Tactics are what to do when. A kind of litany of experienced or taught things to do when reacting to a situation. Strategic thinking is a kind of proactive, out-of-body capability where the really good ones can divorce their personal urges and needs from those of the greater good, i.e. the company. They can think "laterally" about situations. They can create new ideas and critically take them apart in their minds to see if they will stand to scrutiny. This last piece is important because some of us can spout ideas like a stream of consciousness... uncontrolled brainstorming so to speak. The really good strategic thinkers keep and discard some of the more ridiculous ideas before spouting them.

Back to my thesis that leaders are born, not made. These critical pieces of leadership are really core parts of your personality. You either have charisma or you don't. You were born with a love for hard work or you are lazy. You have self-confidence oozing from your pores or you have self-loathing. You can take intense scrutiny, divorcing attacks and criticism of your work from personal attacks, or you are defensive and easily upset. You are intuitive, with tons of common sense, or you are impatient and impulsive. And most importantly, you are honest with yourself and can see where your faults lie.

Sounds like I can really see what makes a good leader, eh? Surely, with this checklist, I can only pick those that will win, right? Ah, well, here's the problem. You really cannot learn about a person in a few short weeks of diligence and reference checking as a venture capitalist. More often than not, you don't find out about a person's full set of characteristics for a year or more, which is far too long to make a decision in our game. That's why VCs tend to go back to those individual leaders that they have worked with before. It's also why they tend to avoid those that did not work out. As for the rest of the time, it's a gut call.

We have had situations where a person is very impressive in the first few meetings. Typically these are the very charismatic types with a good idea and a good team. But peeling away the onion can reveal some of the worst types of leadership combinations, like the aforementioned autocrat that never takes ownership of their decisions. Or, the leader that demands a ton of the workers and leaves at 4:30pm to play golf. How about the leader that flies first class and tells the sales staff to stay at Motel 8? Did you hear the one about the CEO that changed strategy about as often as he changed his underwear? What about the really tough leader that used only the stick and created a culture of fear and intimidation, but was generally affable to the public, kind of like the serial killer that neighbours said "was really quiet and nice"?

Personally, I support a mix of carrot and stick for getting the most out of your employees and them respecting you. It's sort of like raising your kids. Bill Gates is the most notorious screamer ever to be labeled an unqualified success. What Bill was able to do was temper his outbursts with back-patting where appropriate and incredible, charismatic vision about the future, such that his employees believed they were all going to be successful. If your style is confrontational and hard driving, you had better be able to inspire in other ways or you will lose your employees.

I could go on for hours. The common theme here is that poor leaders will inevitably lose their credibility to those keenly aware employees. And once that has happened, it's game over. Investors and Board members are usually the last to learn that the credibility has been lost and every VC has a story about the one that they thought was going well and then imploded suddenly, when really it was happening slowly all the time.

Great leaders have differing styles and different tactics they use for success. But they all have a common set of elements that allow them to bubble up to the surface and become CEOs. I have only delved one layer below the motherhood statements about management here in order to expose some of the characteristics of successful leaders. Every situation in every different company requires a unique set of skills. Often companies go through a few CEOs before getting to be huge companies. Without specific case studies, it's easy to generalize and hard to get a clear answer to your specific situation. But make sure that if you are the CEO, or you want to be one that you look in the mirror and ask if you are the complete package. Were you born with it?

Letters From Last Time –

Brent,

I just now came back from India and was reading your article in BC Tech. I agree with your view. People confuse the size of operation with local vs. global company. I would any day prefer 5000 people IBM operation in Vancouver vs. a 1000 people locally grown company. Ego does not have much place in global economy.

Also, if we can create multiple small companies, grow them and even if they get acquired, it is great for local economy. It helps in terms of cash flows in local economy. Key is how to make BC competitive so that operations remain and grow in BC.

That is where countries like India are benefiting. Some of the largest operations in India today are by companies like IBM, GE, Accenture etc. Some of them have grown by acquisitions. However, it has helped the country in any case.

Thought of sharing my views.

Pankaj

Thanks Pankaj. You have a unique view as an active BC technology community member along with your India-based business. I'm not sure that everyone shared my point of view that we don't need specific policies to keep companies in Canada. In fact, I started out in this business thinking with my heart. But as you experience more and more of the globalization phenomenon, you begin to realize that it simply does not make sense to force the issue based on patriotism.

What Do You Think? Talk Back To Brent Holliday

 



Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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