Month: April 2010

EntrepreneurshipVenture Capital

4 Types of CEO Behavior when Dealing with Boards

Posted on by Ed Sim

As I have stressed over the years, it is imperative for board members and their management teams to have open dialogue.  If you are a CEO, I encourage you to share more rather than less information.  One of the best tools that a number of our CEOs use is a weekly email summarizing by department what their goals are and what they have accomplished during the week.  In fact, they even share that email internally so everyone in the company knows what is going on.  For board members this eliminates redundant questions and allows us to focus on the issues at hand instead of fact gathering.  And yes, everything is in there – good or bad.  I have written some prior posts on this topic such as "Communicating with Your Board" and the "VC-Entrepreneur Relationship."  Along these lines, I would also say that I have observed that CEOs tend to fall into certain patterns of behavior when dealing with their board.  To that end, I have attempted to summarize some of these patterns and the pros and or cons related to them.

1. Yes-Man: This is pretty self-explanatory.  Whenever the board tells the CEO to go into a certain direction, he/she does.  If it means the board telling the team to launch a Facebook or iPhone app just like everyone else, then they do it.  Initially for the VC this may seem great but in the long run this can be quite detrimental to the company and value of the business.  If the VC/board member is dictating everything from strategy to product features, then what is the CEO and management team doing?  At this point, you are running the company and not the entrepreneur.  What this means is that it is time to get a new CEO.

2. No-Man: The No-Man is the CEO who gets ultra defensive whenever a board member asks for information or provides thoughts on how to help create more value for the business.  He/She always says no at any board suggestion and many times does not even have a good reason for saying so.  They say no simply because they don't give a crap about their board and they want to run the show and take zero advice. Saying no is not necessarily a bad thing as many board suggestions may end up having you chase your tail but as a CEO I would encourage you to use some tact when dealing with your board.  That is where CEO behavior #4 comes into play.  In the end, if a CEO is a No-Man then ultimately the board will replace him/her in the long run because it will be impossible to work with one another due to the hyper-defensive stance taken by the CEO.

3. Yes but No: This is one of the worst behaviors.  The Board asks the CEO to research a certain path and the CEO agrees.  The Board checks in 2 weeks later and nothing has happened.  The CEO consistently tells the Board it will do something but his/her actions are the complete opposite.  In fact, this inaction is really a Big F-U to the Board and tells us the CEO has no spine to disagree with the Board and probably does the same with his management team.  This kind of behavior is simply unacceptable and ultimately results in dismissal as well.

4. Open-minded: This is the best type of behavior.  This type of CEO usually says No immediately when something doesn't make sense and gives reasons why.  When he/she agrees with a suggestion, it is duly noted as well.  Finally, when this CEO does not understand something, he/she agrees to research further and get back to the board.  No our feelings are not hurt if you say no.  In fact we will respect you.  At the same time, we may have a few nuggets of wisdom to share as well so keeping an open mind is beneficial to all.  And if you don't know whether you agree, researching further can only help get a better answer.  This behavior is definitely conducive to a strong board relationship and will keep you in the CEO seat longer.  Yes, this does not mean that you can execute but this is definitely one measure of the many that board consider in their CEO success profile.

Ok so I outlined 4 CEO behaviors when dealing with boards, only one of which is positive.  At the end of the day, the Board-Entrepreneur relationship is a give-and-take one.  Both sides have to be willing to express their thoughts (diplomatically) and have an open dialogue.  The Board does not know your business better than you and if you disagree, tell us immediately.  If you agree, tell us immediately as well.  We all don't have time to waste and dancing around a topic does not help anyone get a better result.  As an entrepreneur, guide the board as well-tell us where you need/want help.  This relationship will have friction at times but don't let it get personal.  Friction is good-that is how everyone gets to a better decision point.  I hope this helps.  Remember the management team is running the business, not the board, and the board is there to help guide you strategically and make sure you don't make the same mistakes we have seen from numerous other companies.

Web/Tech

The Ongoing Data Revolution

Posted on by Ed Sim

In early 2006, I wrote a post titled "The next generation web, scaling and data mining will matter."  In it, I highlighted some thoughts on the future:

I truly believe the next battleground will be based on scaling the back end and more importantly mining all of that clickstream data to offer a better service to users.  Those that can do it cheaply and effectively will win.  The tools are getting more sophisticated, the data sizes are growing exponentially, and companies don't want to break the bank nor wait for Godot to deliver results.

Ok, clickstream data and data mining sound kind of geeky, but with every one of our calls, clicks, and purchases being tracked and logged it is an important topic.  My friend Scott Yara, co-founder and President of Greenplum (full disclosure-my fund is an investor), wrote an interesting post the other day which is more mainstream calling this ongoing revolution the "Your Data" revolution.  

The point here is that data can be a wonderful thing if used the right way and if controlled by us.  For example, Scott points out;

Your Data can lead you home with turn-by-turn directions on Mapquest. It can find you love by sorting through the profiles of 20 million other lonely hearts on eHarmony. It brings you up-to-the-second stock prices, sports scores, and flight delay alerts. It helps doctors fight diseases and engineers design safer cars. It gives environmentalists the power to track the movements of endangered animals and biologists the tools to map the structure of our genes.

Your Data, in short, is transforming everything.

However, with all of this data comes great responsibility and opportunity.  As Scott points out:

We also need to make sure we can use all the information we're collecting. That means better schools that will turn out kids who are able to cope with the age of Your Data. And we need better, cheaper technologies to enable companies of all sizes, as well as organizations and individuals, to get all the information they want and do something useful with it.

Knowledge is power, and we know more than any previous generation could even conceive. We're moving into a world of infinite information. The challenge we face is turning all that information into insights, conclusions, and revelations — in other words, turning that knowledge into wisdom, without letting it be turned against us. We need to make sure Your Data doesn't oppress us, but serves us. And we need to do that fast, because the revolution is well underway.

From a VC and entrepreneurial perspective, what excites me is that we are just scratching the surface of what to do with all of this data and how to turn it into actionable, meaningful insight.  In order to make data and insight more accessible to everyone we first need the back-end technology that makes data storage and analysis better, faster, cheaper (enter companies like Greenplum-ok, shameless plug 🙂 ).  We then need great entrepreneurs to continue to build new services that help end users seamlessly and implicitly help everyone make better decisions, discover new things, and empower and motivate us to do more.  In addition, we also need to consider cultural factors.  For example while privacy still needs to be at the forefront of the Your Data revolution, we also need the ability and power to choose what we want to share and when with the world.  Little did we know that four years ago, more people than ever would be willing to share their whereabouts through services like Loopt or Foursquare or Twitter and their every thought through Facebook or even their credit card purchasing data through new services like Blippy.  It is clear that the once sacred walls between private and public information are increasingly disintegrating based on these cultural factors. While we clearly have to be careful not to extrapolate too much from early successes like Blippy and Foursquare, we also cannot underestimate the power of these cultural factors as once young start-ups like Facebook and Twitter have exploded in growth.  The question is who will create the next great back-end technologies and new web services that drive a whole new conversation and new way of thinking about what we do with the data that is around everywhere.