January 2, 2006

Is That You Humming?

Posted in BOD, CEO, culture, management at 3:23 pm by scottmaxwell

I spend a lot of time trying to help my portfolio companies develop management approaches that help the management stay focused on important activities. The core issue with every company is that there are too many things to do and never enough time to do it.

For example, how does management focus on its short-term execution targets while also focus on building for the long-term? Because it is incredibly difficult to think long-term while you are executing short-term and equally difficult to execute short-term while you are thinking long-term, some companies only focus on short-term issues at the expense of longer-term strategy and other companies focus too much on longer-term strategy at the expense of getting things done in the short-term. What is the right balance between the two and how do you manage the balance?

My observation is that the best managers set up and manage a daily, weekly, monthly, quarterly, and yearly rhythm that allows for both short- and long-term focus. (They get into a rhythm that requires short-term execution most of the time, but also requires longer-term thinking part of the time.) A second observation is that every company can improve its rhythm, as I have never seen a company get this perfectly right. In addition to balancing the short- and long-term issues, “getting into a rhythm” helps employees’ attention and activities stay aligned over time, and the regular, coordinated “change of pace” and change of focus helps to keep everyone in the organization fresh.

The CEO sets the beat…

Just as great marketers develop a marketing rhythm for their customers, great CEOs set the beat for the overall organization. I highlighted below an illustrative rhythmic beat that an expansion stage CEO could set for the overall organization. (looks something like a EKG measurement of a heart beating, doesn’t it? Perhaps this is why companies with a great rhythm seem to come alive?)

This particular chart has several characteristics:

  • The CEO sets the focus for a 3-month time horizon at the beginning of each quarter and then ramps down the time horizon focal point as the quarter continues (i.e., the organization is focused on this quarter, so as the quarter progresses the time horizon gets shorter), making sure that everyone is focused on nailing this quarter’s goals.
  • About 3-weeks into each quarter, the CEO has all the data to step back with the senior managers and Board of Directors (BOD) and review results for the prior quarter as well as make adjustments in plans for the rest of the year (the time horizon for these meetings is the rest of the year. Note the decline in time horizon as the year goes on. Each quarterly BOD discussion has a time horizon that ends at the end of the year, as the major focus needs to be to execute for this year!)
  • At some point during the year (I prefer the July/August timeframe, as it is generally a lighter period), the CEO, along with the senior managers and BOD, step back to think about adjustments to the longer term (2-3 year time horizon) plan in the context of the market environment and progress to date.
  • Later in the year (mid-November seems about right), the CEO, senior managers, and BOD can use the results from the strategic review and progress for the year to rough out the plan for the following year.

(Just so that it is clear, the point of this chart is not to show you the rhythm that you should have, but rather to give you an example of a solid rhythm to spark your thinking on your current situation and adjustments that you might want to make.)

Organizations with a rhythm have a real hum to them. Perhaps this is why people in high performing companies say “we are humming!”

Note1: I am really making two separate points in this post. One point is about the need to create rhythm and the other point is about the rhythm associated with short- vs. long-term focal points. There are clearly many dimensions of rhythm, but all the dimensions should follow the same general beat.
Note2: The chart illustrates a company that is focussed on quarterly numbers. Many companies are also focussed on daily, weekly, and/or monthly targets. The chart would clearly change depending on your time horizon at each point in the year.

January 1, 2006

Board Composition- David Cowan’s Thoughts

Posted in BOD at 12:12 pm by scottmaxwell

David Cowan of Bessemer Venture Partners has some good thoughts on the Board of Directors in his post today Control Roullete: A Bet on Red or Black.