In this installment of the podcast series for the Wharton-CERT Business Plan Competition, Michael Useem, Wharton professor of management and director of its Center for Leadership and Change Management, discusses blueprints and other things that entrepreneurs need to develop successful leadership teams. The following are edited extracts of the conversation.
Arabic Knowledge at Wharton: When entrepreneurs launch start-ups, it is obviously critical to have the right leadership team in place. What kind of people should the entrepreneur look for?
Michael Useem: The act of being an entrepreneur is indeed an act of leadership. You are creating something out of nothing. One of the great defining qualities of leadership is taking circumstances we have now and getting to a better place, a new era, or in the case of an entrepreneur, taking an idea and turning it into reality.
Having said that, the act of getting an enterprise going should be followed by a self-conscious effort to build a team. You simply can’t do it all yourself unless you want to be a one-person show and keep the firm at about that size. You just don’t have the time to engage in everything. Creating the initial team is absolutely critical — the top management team can come later as you expand beyond that.
Drawing on a long research tradition in my field, if you are looking to forecast the performance of a company and you can know everything there is to know about the chief executive officer — in this case, the entrepreneur — or you can know everything there is to know about the CEO plus the team, you definitely want the latter, in terms of getting the job done and then later for measurable performance. [It’s important] to have a team around you that appreciates your view of the world, understands the strategy going forward and can then map out who ought to be on that team, [making sure that] everyone is on the same page when it comes to the mission and vision and how to build and execute a strategy.
You want people who don’t look just like you. But your ability to be innovative as you build, your ability to be creative and smart about the world you are trying to capture as a start-up, depends enormously on the diversity of experience and background of the people in the room…. It’s great if you have people in there with different functional backgrounds — marketing, accounting, operations, supply chain, and people who have worked in different industries and different worlds. But having them there is only half the formula. Leading that team well, gathering their ideas, actively listening and integrating is a pretty good formula for development.
Arabic Knowledge at Wharton: Is there a difference between the team you need as a start-up compared to when a business is more established? And, if so, what is the difference? What skills do you need?
Useem: There would be the common ground. Whether it is running a huge company like GE or a rather large company like eBay or a start-up with, say, five or six people, that team has to have a united vision of where to take the enterprise. There has to be an agreement on the strategy for doing so. They have to be able to execute around that.They need to be people whom you can rely on, with impeccable integrity. They have to be effective at communicating what the company is and what it stands for to employees and — as you build out — customers and obviously private equity representatives or whoever may be backing the enterprise. Those would be the common threads.
In the early phases of a start-up, you want people who can do specific functions and just about everything else. If somebody says, “Look, I only do accounting,” that’s probably not the person for your team. In later phases, though, by virtue of size and the daily activity of getting highly technical tasks accomplished — say, opening a new marketing campaign in China — you want people who are dedicated marketing people on that top team. But the formula does apply whether it’s for a start-up of only six people or at a mid-point of development with, say, 500 employees — that team is going to be as good as it should be if there is a commonality of purpose, if the mission is unequivocally clear and the team works [together]. That is not going to be the product of any accident. That will be the product of your ability to lead, mold and develop the team.
Arabic Knowledge at Wharton: What considerations should you keep in mind as you expand the team beyond the initial core group?
Useem: [There are two things]. Number one, you create a blueprint … of how you operate in the early months. Are meetings open? Do people receive compensation on a fixed basis or is it all stock driven? Is your idea the only idea that drives the company or is there some kind of collaboration to bring ideas from all directions? Once you create — as a leader and entrepreneur — a way of operating, it is really hard to change. Thus, being conscious about that blueprint in the early phases [is important] because it may last your lifetime.
Number two: When a company has six people, communication is direct. Camaraderie is usually fantastic. It is an energizing world to operate in. When it goes from six to 60 — or 600 — what’s going to carry your vision, ideas, strategy, methods, to those who are one, two, maybe three steps removed is your ability to create a common — call it — mindset, culture, or [set of] values and norms.
In the early phase, I wouldn’t worry about culture. But as this blueprint is mapped out pretty quickly, you need to think about the culture or mindset you want and become active in articulating that, saying, “This is who we are. This is how we operate. I reward people for doing these things. I represent the best of our culture. “It’s very important to build that up.