Developing your direct reports – it takes a village

Over the last few months , the TSYS leadership team has come into their own. I’ve been very pleased with how everything has come together.

I’ve realized that it is one of the key aspects the BoD has been helping me with. They’ve been invaluable in providing perspective , context , stories of high and low performing teams / organizations , feedback on how I’m managing managers etc.

One key thing in delegation is you have to delegate both authority and responsibility. With the orbiter demo , I laid out a clear list of high level objectives (developed in concert with the engineering team, the BoD, outside advisors) , handed it over to the team and let go. Many organizations have the project management roll up to the top level. This is a recipe for disaster. It’s a big adjustment for the dev team to actually have static deliverables. Most of the time , devs don’t really get underway on something cause they’ll get yanked around by shifting priorities.

I have removed myself from visibility into the project boards and I muted the team category in discourse. I’m only an @ mention away if I’m really needed , and my CTO and COO have a great relationship , so my COO can handle any day to day (procurement , site work like rebooting something etc).

I have learned quite a bit about management , and building effective teams over the last 7 years. I’ve made numerous mistakes , I’ve learned from them. Key is to truly delegate , be prepared for loss/mistakes/failure and to incorporate results from that into the next sprint. Deadlines are fraught with conflict. Rough guidelines and blocks of time and clear objectives are key.

CEOs should manage capabilities not capacity

This post (and most of my posts actually) is an outgrowth of a conversation with someone I am advising (a fellow CEO).

Over the last few years , TSYS has experimented with a number of management structures. Specifically with reporting structures and day to day operational management.

One key take away , is that startup (in particular) CEOs shouldn’t manage capacity ( execution , amount of work and output etc) . That should be delegated one layer down. For too long I tried to manage capacity and it was ineffective, as I was also trying to manage capability and product etc. Basically I brought in a CTO much later than I needed to. Once I stopped managing capacity and I focused on closing capability gaps , we’ve been able to move forward much faster and with way less energy. Of course a company still needs fantastic talent , and that’s where my exclusive focus has been . Identifying , recruiting for , closing key material capability gaps. That’s also a critical pre requisite for outside funding (which also I’m finally raising , much later than I should have). Self funding a startup the first few years is a trade off. However it’s allowed us to establish a very strong culture , be incredibly frugal and have our internal systems setup right (no “we will do this thing later , just focus on product). We also have achieved some revenue. So team/revenue being on a good trajectory puts us in control with fundraising.

Some legal resources I consume

http://siliconhillslawyer.com/

https://www.chinalawblog.com/

https://writing.kemitchell.com/

I’ve got various sources for more specialized material (ranging from capital and entity formation to regulatory expertise).

Remember most law is highly uniform , scales across situations etc. You very often do not actually need a lawyer , you always need todo your research though. Apply critical thinking, use the various ABA etc resources that are on the Net.

Oh Docracy.com has a great collection of material as well.

Self funded , sustainable business (pre profitability )CEO job description

I’ve been the CEO of an emerging LLC business for three years now. I want to share some of my journey and write a job description , this will be what I ask my board to evaluate me against.

Key deliverables for an early stage CEO:

1) formation issues. Deep thinking on entity structuring, balancing overhead , risk and execution.

2) building the initial board for submission to the LLC members for approval, growing it as needed over time and milestone achievement , changing the composition as warranted. Effectively utilize the board.

3) Putting the team together. Technology , ops, sales/marketing. In roughly that order .

4) Until you’ve achieved step 3, do those roles effectively. Found with no less than three people (one in each role), no more than five.

5) Fund the business. Be incredibly frugal , spend judiciously but invest where needed.

6) Set the culture, tone , character , tolerable behaviors etc.

The last three years saw us go from three untitled founders and a rough idea to :

1) Three solid lines of business

2) Four independent directors

3) CEO,CTO,CFOO

4) Director of r&d, director of swdev, director of hwdev, director of marketing (who also serves as the gm of a revenue generating line of business), director of business development

We’ve had four separations over that time period. Team members have changed roles , changed commitment levels etc. Change is constant , embrace it quickly and ride the wave.

We are now raising capital. Self funding and early revenue is a fantastic approach , however it has limitations. None of us draw a salary , we maintain primary income sources (“dayjob”) at various levels.

I have come to properly value and manage my time. I deploy it where it will generate the most return. I’ve delegated very heavily (essentially to the point of abdication ala buffet) and focus my energy on filling in final recruitment gaps , partner relationship building / vendor sourcing and capital raising.

Formation resources for Texas for profit LLC

So you’ve decided to start a for profit, cash flow positive, self funded, jump started business in the great state of TX.  You’ve done your research and found that you want to start a series LLC to provide maximum flexibility and asset protection. 

This is the exact route I took with Turn Net Systems. We were formed in the last days of 2015. Three years later (almost to the day) I have learned quite a bit about forming,  administering, governing, operating an LLC. Yes those are four distinct functions. 

Some presumptions:

  1. You are not immediately taking outside capital. You want to reserve that option for later. 
  2. You are granting equity to founders, with desire to retain option to pay salary later
  3. You want to run it as a real business , with a Board Of Directors , officers etc 
  4. You aren’t afraid to armchair legal/accounting all the standard off the shelf bits. 
  5. You are starting with ~10 total people , across directors and founders (split perhaps into officers (managers) and individual contributors. For reference as of 12/9/2018, TSYS has four directors, three officers (CEO/CFOO/CTO) and four individual contributors. Officers are authorized in the operating agreement to enter into contracts , they report to the board quarterly etc. Individual contributors have broad authority (including budgetary) but do not have ability to bind the company into contracts (and some other pro forma items). 

Here’s what I used to get started , with all the above in mind (80% of that was in place day 1, 20% evolved over 3 years)

Legal: 

https://www.lonestarlandlaw.com/

Buy his book: https://www.lonestarlandlaw.com/book-info.html

Taxes:

Buy the Nolo books

Use Quickbooks Online, neat.com, get TurboTax . Your taxes won’t be that complicated the first few years as you are starting up.  Keep good records, scan them to neat. Integrate neat to QBO. 

Here’s a collection of links I used when forming the LLC/drafting operating agreement etc. 

Entity Formation

http://www.baylor.edu/content/services/document.php/181957.pdf << a great article on what exactly is liability from a legal perspective. capital calls are given extensive treatment.

http://www.sos.state.tx.us/corp/forms/205_boc.pdf

http://www.lexisnexis.com/legalnewsroom/tax-law/b/federaltaxation/archive/2012/06/11/substantial-economic-effect.aspx << here be dragons. You don’t want to be subject to a “substantial economic test” it’s where laywers and IRS act like cats playing with mice before killing them.

http://www.swlaw.com/assets/pdf/news/2010/02/18/Series%20LLCs%20(BXS)_BaharSchippel.pdf << the professionals are nervous about series llc, but that is their job no?

http://apps.americanbar.org/buslaw/committees/CL690000pub/newsletter/200807/kean.pdf << lots of good tax info in here

http://thestartuptoolkit.com/blog/2013/02/equity-basics-vesting-cliffs-acceleration-and-exits/ << vesting basics

http://www.mosaichub.com/answers/question/how-to-create-a-vesting-schedule-for-a-company << vesting llc practical

http://www.brightjourney.com/q/actually-setup-vesting-agreement-co-founders-w-breaking-budget << more llc vesting stuff

http://www.baylor.edu/content/services/document.php/181957.pdf << withdrawl/expulsion of members. ties into vesting.

http://foundrs.com/ << equity calculator

https://www.clerky.com/yc-stock-plan-forms << equity vesting for yc companies

http://www.nolo.com/legal-encyclopedia/llc-operating-agreement-30232.html

Bizops:

http://firstround.com/review/Positioning-Your-Startup-is-Vital-Heres-How-to-Do-It-Right/
http://www.stmaryslawjournal.org/pdfs/Outenreath_Step12.pdf
http://comptroller.texas.gov/taxinfo/taxpubs/tx96_114.html

Here is a good collection of curated links on accounting:

https://bench.co/syllabus/bookkeeping/catch-up-bookkeeping-guide/
https://bench.co/syllabus/tax-deductions/small-business-tax-deductions/
https://www.irs.gov/publications/p535/ch01.html#en_US_2013_publink1000208623
http://blog.bench.co/how-to-go-paperless
https://www.odoo.com/documentation/functional/accounting.html
https://www.irs.gov/publications/p583/ar02.html#en_US_201408_publink1000269308
http://www.dwmbeancounter.com/tutorial/Tutorial.html

Most of the links were sourced from:

https://news.ycombinator.com/item?id=11239437

My approach to daily organization

I have a very simple pen/paper system for organization , maintaining notes and keeping on track.

It’s three notebooks :

The legal pad is used for note taking at meetings. I also use it for sketching out things with people. I’ve got a dedicated sketchbook and I bring that if I expect to do lots of sketching. I transcribe my notes to wiki page or email and I scan the intentional sketches . Then I shred the old pages.

The rite in the rain notebook is used for my daily/weekly focus sheet. It serves as a professional diary of sorts. It’s got one word entries , the actual details and work is stored in trello / OpenProject.

The little black notebook is used for quick notes (measurements, personal todos of administrative nature), scheduling reminders while on phone , grocery lists etc. it’s not for any permanent record or transcription .

I like this approach. Right tool for the right job , and mixing paper / digital works really well.

Thoughts on recruitment

I had a wonderful one on one last night with the CEO of a non profit that I serve on its board.

We talked about a number of key development issues for the organization. The one that really stood out and I want to discuss is recruitment .

1) build pipeline. Recruiting is just another form of sales. Just like fundraising and getting paying customers.

2) utilize a CRM. We’ve settled on suite CRM at TSYS. We use this across the brands.

3) once you’ve built your pipeline , start reaching out via email. Ask to have a 30 to 90 minute conversation. Or ask for referrals if they aren’t interested. The mail should be very short , a few paragraphs.

4) the goal of the conversation should be to quickly assess interest , fit, discuss the role.

5) have a small list of options. Three is the magic number I’ve found. Offer s range of commitment levels. Especially early in a startups life , people may want to try before buying.

6) be open with participation and auditing opportunities. Offer people the chance to join build sessions , meet the team, have dinner and drinks etc. team fit matters above all else.

7) offer real value. Discuss cultural fit , what kind of management style the person wants , ask what’s horrible about current position (as applicable). Have deep conversations and provide opportunity for true impactfulness and autonomy. Otherwise why bring someone in if you are just going to continue to (micro) manage.

Currently sitting in this framework

Here’s what I’ve been keeping in mind and skimming / re reading / thinking on over last few weeks

https://www.ribbonfarm.com/2017/11/09/ceos-dont-steer/

http://donellameadows.org/archives/leverage-points-places-to-intervene-in-a-system/

http://earlystagetechboards.com/

https://chrisbolman.com/strategy-develop-effective-framework/

I’m rapidly handing off the full product and operations aspects of TSYS to my highly trusted lieutenants. This lets me focus on capital raising . This requires incredibly deep strategic thought. Time to play chess at epoch a bunch I think ….

growing management team – some thoughts

So I recently brought a CTO onboard with TSYS. This has been a very good thing , it frees me up to focus on building redwood and fundraising the three massive funds. I’ll do a series of posts on that in the future.

I’ve also been handing off more CFO functions from myself to my COO/CFO (who also takes a daily ops role for Axios and really helped get that going).

Now that things are stabilizing , it’s critical to establish a proper team and hand off.

Here’s my “guide” on how to do that, basically just documenting what I’ve done . I’ll focus on CTO, since the CFO handoff has been continuous really and highly dynamic . I work very closely with my CFOO daily, she’s been with me since the beginning. There are some specific functions I’m handing off and that’s a blog post of its own, in proper LLC administration and some formation gotchas.

Ok enough qualifiers , let’s get to the actual subject!

1) have a one on one with the CTO. Cover personal matters , CEO/CTO relationship, areas of responsibility etc . Establish a solid relationship , make clear the empowerment and transfer taking place . Push CTO to hold you firmly in your lane and not come back and try to be CTO.

2) brief CTO on material risk and operational matters. They’ll be briefing the board on those matters instead of you at the next board meeting , so the CTO had best be fully informed AND EMPOWERED. The buck must stop with them. Keys must be handed over. This is for continuity reasons and for the CEO to truly hone focus and not be involved in product. Obviously this has to be done at the right time. Most startups try to start with a CTO. We didn’t , we hyper focused on direct customer to product/engineering conversations , demos, feedback etc. we were staring with a consumer product , the PocketOffice. So that made sense. With pocketoffice being ready for handing off to consultants to prepare for manufacturing, we are moving into a more complex product area (and have grown / refocused engineering along with that), a CTO coming on board makes sense.

3) have a transfer of power meeting with engineering , the new CTO and a member of the board present. It must be clear up and down the chain that the new CTO is the contact point. Leave the CEO alone , he’s got money raising todo.

Also of course , the CTO was vetted and approved by all of engineering and my outside counsel prior to being asked to join. Dinners were had etc. recruitment and true handoff is a delicate thing and must be done right.

Hopefully this post helps other bootstrapping CEOs to grow their management team.