Observations, deductions and feelings fueled by tequila, tea and tobacco

start up organisation

In Entreprenuership, Ideas on May 29, 2007 at 01:37

Start with only a handful of individuals (e.g. in a IT-led logistics company, one to develop and manage transportation routines, another to negotiate with and manage transport providers, another for sales and marketing stuff and one to keep the team together, help in whatever role required, manage the beans, and supply them with random stuff to keep it going).

However, when choosing each of these few individuals, don’t be miserly – pick the very best (get an IIT CS nerd to be the route planning manager, the toughest asshole on all your bschool projects to be the transport manager and the fella with best understanding of S&M ground realities and an ability to get in the buck to be your S&M guy. For the final role, pick someone who understands the lingos that each of these talk – gibberish, triggerish, dollarish, etc – as well as the big picture but is yet not above doing small chores to keep the boat from sinking). Don’t pay them astronomical sums yet. In fact, don’t even pay them par for their batch. Instead lure them with a share of the profits or a stake in the business1. To this young, ambitious, motley crew, add as a part-time aid an experienced, conservative financial controller.

With the core team in place, start to get the basic operational setup in place. Use common extension telephone lines to manage communication2. Use common cash pools to bootstrap daily operations. Beg/plead for long credit lines from suppliers and upfront cash from buyers. Keep it a ragtag operation internally but present a uniform, professional behaviour with personal touch to the customers. Be deadly strict with the costs.

And once you get a half-decent customer in, ask each of these (now your operations manager, your partner relations manager and your sales manager) to start build their teams. The criteria for them while building teams – LOW cost, high skills, experience & brand names not required3. While they check the applicants4 on these params, you – the executive manager – check them for attitude, aptitude and commitment levels. Finally, train them on whatever you’ve learnt so far, but not too much. Let these new fellows also bring in some new ideas, some fresh air.

You’ve got a core team in place (your future VP – planning and IT, VP – Partner Relations, VP – Sales and Marketing and you – the COO). They’ve got their own people in place to manage the moderately growing business on current process basis.

Now bring in some chaos. (Ask the sales head to plan for and increase sales 10 times in 12 months. Get the planning head to prepare processes and systems that are modular and flexible enough to support this growth as well as any new operating model. Get the trade relations head to integrate the partners more closely, slash costs by half and prepare atleast 3 different operating models with complete supporting analysis). Make them prepare a plan for their stretches and to execute it on a war footing. Bring in a full time finance guy.

The chaos has succeeded. You’re in a higher, faster trajectory. Give everyone a promotion. (Your VPs become Presidents. The rookies they hired 18 months back become AMs and those rookies get to hire new rookies on the same criteria. Rate your AMs on topline growth and get the presidents to squeeze them on costs). Focus on Costs. Growth. Costs. You, as the COO, now also start looking to set the ground for next shock.

Reshuffle. (The geek you hired as planning and IT guy is to manage the trade relations. The tough trade relations fella moves into the smooth talking sales guy’s office. The sales honcho has to look after the back end operations management). Force them to develop skills in other functions. Give them the stretch targets that the previous guy took. Give them the plans that the previous guy lay down. Give them the team that the previous guy built. And give them your and the previous guy’s support to enable them to succeed. Create a mesh at top.

You have a scalable organisation and operations model in place. You have a highly developed second line in place. They have their second and third lines of owners in place. Growth is good and getting better. You still haven’t completed 3 years. You’re all still young. Turn out your first profits. Get in a CEO. Move out of day-to-day roles and promote 4 of your most promising 3rd line staff to those president and COO positions. Watch, learn, sometimes guide… but mostly just count the moolah coming in.

You’ve started up.5

This was one simplistic routine of starting a business (the organisational part) that I thought up today.

What do you think of it? The biggest flaws, the strongest points, the critical elements? Will look at another model soon and then might get to compare the two.

1 A lot of people suggest against this. And for good reason. They suggest against it because they assume that in a few years’ time frame you’d be selling out and thus need to maintain a big chunk with yourselves initially a.la. the dotcom times. In my view, if you’re in the business for making a running success of it, give out the stakes to your key members early on. If you’ve chosen the people correctly, you’re selling the shares at a massive premium. Ofcourse, if a good selling opportunity is all that you’re preparing for right from the start, then keep those shares to yourselves and give them hefty packages, the bottomline wouldn’t matter anyway as long as growth is strong.

2 Designate the fellow with least outside company interaction to pick up the phone. He answers in a professional voice with the company name and ‘forwards’ to the concerned manager. Gives all outsiders a uniform and professional view while ensuring order internally.

3 Experience & Brand Names – for an innovative and startup operation you don’t yet require skills built up at big foundries of managers. Skip the premium tags, go for raw diamonds – net margins on your human resources would be much higher.

4 Applicants – If they don’t come to you, go to them. Skip the professional colleges, they’ll get enough opportunities in safer sectors. Go to the degree colleges, recruit from the local service providers to franchisees of organised players in other service industries. If you look properly, this is where you’ll find ambitious, intelligent youth who didn’t get an earlier chance. Give them their chance and take your high performing resources.

5 Culture – The culture that your organisation develops is amongst the most important elements that would determine its level of success. Though I didn’t explicitly touch upon that topic in here, I guess some – rather many – of the smaller decisions that I’ve jotted down do point to the culture that’d be developed.


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