Start-Ups

10 pitfalls of rookie management teams

Inexperienced execs may make mistakes -- but the smart ones will learn from those mistakes and pick up sound strategies from seasoned leaders. Here's some advice to get you on the right track.

I've worked with and consulted for hundreds of startups, entrepreneurs, and relatively inexperienced management teams. I also was an inexperienced executive myself, once upon a time. Lots of water under the bridge, I can tell you that.

Now, I wouldn't begrudge anyone the unique growth experience of learning from his own mistakes, especially the wisdom and humility that only failure can impart on the executive ego.

That said, savvy managers listen to the voice of experience. They may choose to ignore the advice, but they still listen. Information is power, forewarned is forearmed, and all that.

When asked in a CNBC interview what keeps her up at night, Christine Day, CEO of fast-growing, high-flying athletic apparel maker Lululemon Athletica, said, "Scaling the growth. Our growth has been phenomenal, and that puts a lot of pressure on a young management team."

Day, who spent 20 years at Starbucks, most recently as president of the Asia Pacific Group, knows her stuff. Scaling the business is on my list of novice management pitfalls, along with nine other rookie mistakes.

Note: This article originally appeared as an entry in BNET's The Corner Office blog. It's also available as a PDF download.

1: Thinking you've got it all figured out

Or thinking that the answers are self-contained within your four walls. One of the biggest differences between mature execs and novices is the understanding that the management team and the board do not have all the answers. Source far and wide, debate, then make decisions.

2: Failing to say no to opportunities

One of the biggest pitfalls is taking on too much, starting too many projects, spreading resources too thin, and failing to focus on what's most important: execution and growing the core business.

3: Staying the course too long

Entrepreneurs often stay the course when there are clear signs that they're pointed in the wrong direction -- for instance, customers want B instead of A, customer traction isn't happening as planned, or the market isn't materializing.

4: Hiring other inexperienced executives

If you're scratching your head and wondering how dumb is that?, you're not alone. I can never figure out why entrepreneurs do this, but they do, and their boards, VCs and all, let them. It happens all the time. The result: the blind leading the blind.

5: Hiring executives just for their experience

All too often, entrepreneurs know they need to complement their relative inexperience with executives who've been around, so they hire people with big corporate backgrounds and overlook key qualities, like how well they'll do in a fast-paced, collaborative, entrepreneurial environment.

6: Underscoping the challenges of scaling the business

This is huge for high-growth companies where it's critical to scale the operation -- human capital, IT infrastructure, processes, facilities, equipment -- in sync with growing demand. It's a real tightrope to simultaneously maintain growth, quality, and profits.

7: Failing to moderate risk-taking

In an effort to maintain the entrepreneurial spirit that got them where they are, inexperienced executives will oftentimes shy away from organizational processes and systems that are needed to facilitate growth. That often results in a shoot from the hip mentality or, even worse, a constantly shifting strategy du jour.

8: Suddenly becoming overly risk averse

Clamping down on calculated risk-taking based on sound risk-reward analysis is just as bad an idea as playing it fast and loose. In today's highly competitive global market, playing it safe won't help you maintain market share. Quite the opposite is true.

9: Lacking marketing competence

All too often, especially in the technology industry, marketing competence is an afterthought. Executing on the product or service and customer traction are the keys for startup success, no doubt, but marketing intelligence will improve the odds. Finding competent marketers seems to be the rub.

10: Going public too soon

There are benefits to an IPO -- primarily as a source of capital and currency for acquisitions. But the downside -- SEC and public scrutiny, Sarbanes Oxley, and most important, management team distraction -- can negatively affect a company's ability to execute when it needs to be firing on all cylinders.

The flip side

In light of all that, you'd almost be tempted to avoid inexperienced entrepreneurs and executives. But that, my friend, would be a mistake. Anecdotally speaking, those with experience don't necessarily do any better than their novice counterparts. I guess experience has its own pitfalls. Hmm ... sounds like a subject for another blog post.

3 comments
danielsweb
danielsweb

Nothing comes down to experienced team, you can achieve double the results with half the human resources. Not to mention having to take out time and money to train new staff. Also risks need to be taken to be able to make money, believe me.

insuranceman1
insuranceman1

I was a part of a tech company that elected to go public waaaay before we ready for that madness. I've seen firsthand the damage caused by going IPO. It's listed as pitfall #10, but should definitely be #1.

premiertechnologist
premiertechnologist

Before beginning that trek into the wonderland of Executives, it may be well to look at a few publications of interest: "The Management Trap" by Dr. Chris Argyris; "Moral Mazes" by Robert Jackall; http://www.sciencedaily.com/releases/2005/10/051002115557.htm If you want to ultimately fail at business, don't just lie -- get all the people who work for you and work with you to lie. An environment of lies will cause everyone to be delusional and think everything is going great. Moreover, when people find out management is lying, they will become apathetic. Listen for, "Nothing ever changes around here". Then, when there's even the slightest hint that action can be taken, expect rebellion. I know that believing that lies are bad flies in the face of research on "Executive Ability": http://www.srcd.org/journals/cdev/0-0/Talwar.pdf My counter intuitive advice: Be honest. Be honest with yourself. Expect honesty from your staff, colleagues, superiors (if any). Tell the truth -- even if it is unpleasant. Have the courage to relate facts. Avoid speculation: Anyone who prognosticates anything these days is a fool. Moreover, have stringent, streamlined, effective policies, standards and procedures in place. Follow them. Make no exceptions. Business is not experimental. It is not a personal growth experience. By setting policy, you can avoid psychopaths and sociopaths shipping on. They will find the honesty something they can't work with and they will move on. Or... You can set your goal to make a huge short term profit, milk the business for all it is worth, create a dysfunctional venue of lies and maximize your gain. Just make sure you abandon it before it all comes crashing down and take the money with you. Remember that it's not personal -- it's business. Then set up camp somewhere else and repeat the "success". It's all in the practice of deception with just the right timing and projecting an attractiveness which is truly style over substance. Just like everybody else these days.

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