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Team Development

Key Takeaways from Kennet Partners’ Dinner Panel on High Growth companies

The following story is part 1 of a 2 part series on a panel Kennet Partners held for high growth companies. 

What do great high growth private companies have in common?  My partners and I hosted a conference for high growth companies and executives last month around the INC 500 event in National Harbor, Maryland to discuss this topic in detail.   Our motivation for the panel topic came from a book called “The Breakthrough Company” by Keith McFarland (review here) that explores this topic in detail – think “Good to Great” for companies going from $5M to $250M.  McFarland’s book covers several themes relating to growth: shifting goals from the founder’s success to that of the company; investing in new markets and approaches (including how and when to do that); and making the transition from being nimble to competing with scalable advantages.  In the spirit of the book, we invited a great group of capital-efficient founders to discuss some of the books major themes and their personal experiences.  The panel speakers, listed below, all led fast growth capital-efficient companies that achieved high value outcomes.  

  • Bill Edwards: Bill was part of the founding team of Siebel where as CTO/VP of Engineering he helped the company grow revenues from zero to nearly $2 Billion in 6 years, through an IPO and a successful exit to Oracle. 
  • Scott Hammack: Previously, Scott was CEO of Cyberguard which he turnaround and sold for $295 million to Secure Computing.  Prior, Scott founded and was CEO of MasterChart, a company he bootstrapped, grew rapidly and sold to Allscripts for $125 million in 2000.  Scott is currently the CEO of Prolexic, a Kennet portfolio company in the cyber security space.
  • Frank Fawzi: Frank is CEO of Intelepeer, a fast growth VoIP provider of on-demand, cloud-based communications services that recently filed an S-1 with the SEC for an IPO (the company is a Kennet portfolio company).  Prior, Frank founded, built, and subsequently sold CommTech Corporation, a bootstrapped, fast growth leader in the communications software sector, to ADC for $178M. 

In the first part of the panel discussion, we discussed the topic of team development.

Team Development – Power of the Team versus the Power of the Founder

A big challenge we often find in bootstrapped companies between $5-$100m in revenue is that the company can be founder centered.  Decision-making is really the founder working with department heads to make key decisions. This can work early on but the company runs into trouble as it grows.  Founders/CEOs need to focus their employees on the company’s success rather than the founder’s success. As organizations grow, the organization’s ideas, decisions, and employees need to focus on building the company.  McFarland refers to this important step as “Crowning the company”.

Panel Question: How important is a strong CXO team? How do small companies attract and recruit important CXO hires?

Bill Edwards (Selected Quotes):

“A company needs to have a big vision to recruit top executives.  A big vision will attract and retain high quality / senior executives.  Siebel had a big vision from the beginning.  This vision attracted high quality people that can run their respective business units through each stage of growth. 

For example, Siebel’s marketing accomplishments are largely attributed to its marketing executive.  Siebel wanted to create a tradeshow around CRM (Customer Relationship Management) when none existed.  DCI was one of the companies running tradeshows, and they were not convinced of the market potential of CRM.  DCI wanted a return, so a deal was struck that guaranteed them a profit.  Siebel would cover any DCI losses.  In return, DCI would highlight Siebel in all CRM tradeshows as the biggest sponsor and give Siebel all the keynotes in perpetuity.  Moreover, by carefully managing expenses and ensuring strong partner sponsorship, the first (and all subsequent) shows were profitable.  Only a highly capable executive could have pulled this off.”

“Another important lesson in team building is to replace people that are not working quickly, especially people that do not fit with the company’s values.  Siebel went through a number of CFOs in its first several years until one with the right skills was found.

“Using references, particularly blind references from your network, is critical to recruiting top quality people.”

“In addition, recruiting people that are doers is important.  Some people have impressive backgrounds, but CEOs, founders, and managers need to understand what they did, not just what the company did.”

Frank Fawzi (Selected Quotes):

“Company’s also need to keep in mind the timing and revenue stage of the company in making hiring decisions.  As a company scales, the company needs to bring in more experienced executives that have managed larger organizations in the past.   Founders and CEOs also need to make the right judgment calls and hire/let go of executives at the right time without delaying the process, since it becomes harder to terminate someone as more time passes – especially if the founder/CEO develops loyalties with early employees”.

“Creating a strong work ethic in the company is also crucial.  Companies with great teams need to create a culture where expectations are set very high for every employee.  Employees and executives need to constantly deliver and exceed expectations.”

Scott Hammack (Selected Quotes):

“If the company is a startup in a basement, similar to my first startup called MasterChart, then the founder/CEO needs hard working managers that are very smart and hands-on operationally.

If the company is broken and is more of a turn-around situation, similar to my CEO role at CyberGuard, then the founder/CEO needs to bring in new people and replace underperformers quickly. 

If the company is working well, but missing key positions, then it needs to ensure all positions are filled with great people that can continue to scale the company.”

“Leadership and teamwork are crucial at every point in the company’s life. I would set a plaque in the offices of all my managers to emphasize an important principle: Leaders build teams that build a business.” “Another key lesson learned building teams and companies is tracking employees using KPI’s.  A company needs managers that can measure an employee’s performance effectively. Even in positions that are not easily measurable, leaders need to create new ways to measure people.  For example, if a manager cannot track someone using sales figures or project deadlines, then measure an employee’s task completion status.”