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Put Your Money Where Your TEAM Is!
(July 6, 2010) Dr. Janice Presser on Putting Your Money Where Your TEAM Is!
Let's say you're a VC or an Angel, and you need to figure out which of many companies will survive, succeed, and become a profit-making 'star'. So, you follow a generally accepted set of guidelines. You evaluate the market, examine barriers to entry, rank the competition, and predict the outlook for product sales. You place a value on IP and examine cost projections for everything from the technology infrastructure to the coffee vendor. You often know the 'ballpark', and if you don't, you know someone who does, so you can easily make adjustments and allowances to refine the company's projections.
But there is one thing you can't do - or at least, you haven't been able to do 'til now - and that is to predict how well management will perform as a team.
What's Human Infrastructure?
For the past 100 years, business has viewed people as individual units of productivity and/or cost, a bias that is reflected in the terms 'Personnel,' Human Resources,' and 'Human Capital'. In a business plan, this bias shows up as "plug in two for R&D, one for Finance, five for Operations", etc. But has it occurred to you that this concept is way out of date? We live in a world where one person, sitting on a beach in the Bahamas with a laptop and a wireless connection, can execute work that - just 20 years ago - might have required the coordinated efforts of fifty people.
We have moved beyond the 'knowledge worker' economy and into one that is mobile, global, interconnected, interdependent, multi-lingual, and multi-cultural. When we stop thinking of people in organizations as 'interchangeable parts', we rise to a new level of awareness: that of Human Infrastructure. At this level, the quality of human interaction becomes a medium of exchange. Just as in an IT infrastructure or a physical infrastructure, a human infrastructure can have strengths and weaknesses. And, with the right methods,it can also be measured, valued, reinforced, and expanded, with predictable results.
When we are not cognizant of the quality of human infrastructure, we are vulnerable. How many companies with a great product, a game-changing business model, and a seemingly stellar team, have failed to survive--or at best, have survived but never came close to meeting expectations? Both research and empirical observation strongly suggest that in a large percentage (up to 70%) of venture-backed firms that fail, 'people problems' are the primary underlying cause.
Some human infrastructures are 'rigid' and can't move with the winds of change. Others are 'diffuse', like a house on makeshift stilts that could collapse without warning. To mitigate risk and accelerate progress, we need to be able to identify the characteristics of a human infrastructure that is coherent - an organization in which human synergy is optimized for cooperation and value creation. In a Coherent Human Infrastructure, people have a fundamentally positive orientation to working with others. There is a natural fit between each person and his/her job responsibilities, and also between the members of a team and the team's mission and objectives.
How Will You Know?
Up until The Gabriel Institute made its Role-Based Assessment (RBA) available online, almost everything anyone could know about a team member was based on the person's 'individual characteristics', as expressed through resume, personality testing, interviews, etc. In contrast, RBA was specifically designed to measure how people will behave when working with other people to benefit their group, overcome a challenge, or achieve a common goal. These measures are Coherence, Role, and Teaming Characteristics.
When you have a team that is Coherent, i.e., neither rigid nor diffuse, and the team members are doing the kind of work that resonates with their Role (a natural affinity for meeting specific types of group needs), and they all have Teaming Characteristics that align well with the business environment (industry, market conditions, customer relationships, etc.) you will have a human infrastructure that is structured to achieve successful, sustainable growth.
Where Do 'People Mistakes' Come From?
If we can agree that people problems seriously undermine business performance, then the first mistake an investor can make is to fund a company without first taking time to measure team synergy. (note: At least one VC firm's Managing Director has been using RBA this way for a while now, with strong positive results.)
The second mistake would be to swap out a seemingly 'weak' team member, and/or to fill a VC's Board seat, without first evaluating both the 'target' and the candidate for Coherence, Role, and positive Teaming Characteristics. Remember that neither 'gut feel' nor 'individual characteristics' have been able to reliably predict team performance. A single team member who is lacking in Coherence (is either 'rigid' or 'diffuse') can do a great deal of damage to team synergy, especially in startups and early stage companies where there is precious little tolerance for 'bad fit'.
The final big mistake is the pursuit of perfection. We all want to be perfect in every way-no weaknesses whatsoever in us or in those in whom we invest. We like to think we know ourselves, and so there is a strong tendency to select candidates that give us a 'comfort level.' But let's look at hard reality. Every entrepreneurial team needs someone with 'the vision', someone to make long range plans, someone to execute day-to-day action steps, and someone who will drill into difficult problems and solve them. Through RBA, we learn that these four 'work modes' represent four of the ten different Roles. You might find someone who seems capable of doing them all, but you will not find anyone who can be an 'A-player' in all of them.
The Bottom Line
Yes, the fundamentals are as important as they ever were: success absolutely does depend on the IP, and proper financing, and correct positioning, and a sound business model. But all of these factors are directly impacted, for better or worse, by team synergy. Building teams of highly Coherent people with the right Roles for that team's goals and objectives is the correct recipe for Coherent Human Infrastructure - a state of productive synergy that adds bottom-line value to any organization. And you can put your money on that.
Dr. Janice Presser
Follow Dr. Janice via Twitter!!, blogs on Wordpress at 'Ask Dr. Janice', 'CEO2CEO', and 'Tools4Careers' and networks on LinkedIn.
Originally printed in NASVF
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