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BUILDING WINNING TEAMS
IIT Bombay22 October2005
Patrick TurnerAffiliate Professor ofEntrepreneurshipINSEAD Asia Campus
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Building winning teams
Game plan
1. General considerations2. The importance of networks
3. Some thoughts on team
structuring
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Building winning teams
Game plan
General considerations The importance of networks
Some thoughts on team
structuring
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Building winning teams
Key points in team
formation
the needs of the opportunity
entrepreneurs weak points
values, goals and commitment
definition of roles
trust
family support
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Building winning teams
Other key points
in general, successful entrepreneurs
and their teams have prior experiencein and know well their particularmarket
avoid the temptation of equality foreveryone - someone has to take thefinal decision. Democracy doesnt work
the same comment applies to financial
rewards, stockholding, etc
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Building winning teams
Always remember.
team-building is a dynamic process,and in a lot of cases, one or more ofthe original launch team leaves or isforced out after a while
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Something to think
about...
Forming and building a team is,like marriage, a ratherunscientific, occasionallyunpredictable, and frequently
surprising exercise. Decisions arepartly based on emotions such asadmiration, respect and oftenfierce loyalty.
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What an entrepreneurmust be able to do withhis team
communicate his vision
motivate the team so thateveryone shares his vision
have the courage and lucidityto remove anyone whoseperformance or attitude isholding back the venture
lead
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Key things the team
must realise and accept
participating in a new venture is
rarely a get-rich-quick exercise - thelong haul is important
sacrifices will be involved, bothfinancial and personal - especially
at the beginning it is a question oflong hours and no guaranteedmonthly salary
the lead entrepreneur has the lastword
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The golden rule...
The key is getting and working withthe right partner or partners, and notassuming that your best friend or
brother-in-law will do
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Hire the best people
you can
Bear in mind the Class A,B and Cidea
Class A people will attract and hireother Class A people
Class B people will do that for Class Cpeople
Class C people wont attract anybody
at all
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Hire people with the
right experience
do as VCs do go for clones
if you are not convinced someone is theright person, keep looking
become your own in-house headhunter -make yourself a hit list of people you would
love to have in your company look into the future and start planning today
the management team configuration thatyou think will be optimal down the road
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Why would the bestpeople work in start-ups?
A good many of them are already
For those who arent challenge chance to really influence things from
the most senior level fed up with large corporations
all sorts of combinations ofcircumstances
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What do these people
look for? Great company
well managed good fit great culture
Great job demanding, stretching elbow room headroom
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How to attract such
people Network, but targetted networking
Be committed to what you are doing
and make it exciting Make your work environment an
attractive one
Make your targets feel that theircontribution will be really valued
Attach magnets to yourself (eg, strongfunding, very strong team, credibility-
giving advisors etc)
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Outside directors
Outside directors can be of
inestimable value in: recruiting key management
introductions to potential customers
advising on deals
locating additional funding adding credibility/prestige
simply providing shoulders to lean
on
However, be careful with the legal implications
affecting board members
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Advisory boards
in some cases, entrepreneursconstitute a panel of outside advisors
into an advisory board this can add expertise, credibility,
reality checks
avoids the legal implications attachedto formal board membership
use your network to identify andapproach potential advisory boardmembers
dont be shy!
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Outside advisors
(eg, lawyers)
consider them as part of the team never hesitate to consult them however, always remember that
they do not necessarily see things
from the businessmans standpoint
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Building winning teams
Game plan
General considerations
The importance of networks
Some thoughts on team
structuring
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Building winning teams
Two generic modes of
access
Market intermediaries
Head Hunting firms >> expensive Online job portals >> inefficient for senior
hires
Personal networks>> Can be low cost & efficient
How do you structure your network tomaximise access to top talent?
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Building winning teams
Network: Myth +
RealityThe set of relationships critical to your ability
to get things done, get ahead and developprofessionally
Those who work at their networking are self-interested and political
My network will develop naturally on its ownYour power to mobilise resources rests on
your network
You have to know your network in order to
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Building winning teams
A networking model
Personality
NetworkingStyle
NetworkStructure
AccessingResources
Your network influences your access to:Knowledge (e.g. on undervalued talent)Timely information (e.g. An A players intention to be onthe job market)Referrals (e.g. low down on a candidate)
Your network limits your ability to mobilise:Opportunities (e.g. access to new talent pools)
Support (mentors, advisors, friends, trouble-shooters)
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Building winning teams
Personality
Personality Preference or predispositionInvolves both thinking and actingRelatively fixed genetic and early upbringing
Personality
NetworkingStyle
NetworkStructure
AccessingResources
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Building winning teams
Personality:
implicationsSome aspects of personality promotenetworking:
High-self monitors sense situations betterExtraverted people are constantly in the companyof othersAgreeable people are nice to talk from the firstinteraction
Conscientious people are more predictable anddependable
Be aware of how personality enables andlimits your choices:
We naturally prefer our own personality
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Building winning teams
Networking style
Networking Style* Behaviours
* Generally consistent with personality* Maybe learned through skill, experience, or
awareness* Can and does change over time
Personality
NetworkingStyle
Network
Structure
Accessing
Resources
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Building winning teams
Networking guidelines
Maximise the value of each interaction
Invest time in developing relationships withinteresting people
Keep confidences, build trust, be consistent andpredictable
For key meetings, do research and be prepared
Practice and expect reciprocity balance giveand take
Show respect and empathy with regard to timeand resources
Only connect when all involved will benefit
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Building winning teams
Game plan
General considerations
The importance of networks
Some thoughts on team
structuring
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Building winning teams
Team performance:
myth + reality
Teams whose members work together
harmoniously perform better than those thathave lots of conflict
When people get together to do a job thejob will probably get finished faster
Most commonly, teamwork really takeslonger to finish or doesnt even get done atall
The likelihood of teams performing like
magic rests on how they are structured and
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Building winning teams
Three elements of
team design
Incentives faced by team members including equity split
Composition of the team
Norms within the team
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Building winning teams
Team performance
model
Member incentives, composition and normsinfluence how teams decision makingprocesses and this drives performance
outcomes
Composition
Quality of
DecisionMaking
Venture
PerformanceOutcomes
Norms
Incentives
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Building winning teams
Team member
incentives
Generally consists of- Salary (fixed + variable) & benefits Stocks / stock options
In the early stages of the venture cash
rewards will be low / non-existent
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Building winning teams
Equity allocation some generalprinciples
Share the wealth with those who helped you
create it Usually better to follow the Contribution
rule rather than the Equality rule for equityallocation
Build in flexibility since contributions ofmembers will vary over time
Have clear stock holder agreements to
handle exits of founders and other equity
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Building winning teams
Money is important
but not everythingObviously financial compensation is
important, but so are other things environment culture people
challenge future growth possibilities etc
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Building winning teams
and money is not
necessarily today
Performance-related bonuses Shareholdings
Stock options
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Building winning teams
Stock options
Pros share in future value anticipated high future returns
compensating lowish (orsometimes non- existent presentearnings)
Cons worthless if no future value very difficult to negotiate if no
IPO
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Building winning teams
DEFT model of team
composition
Diversity within the team
Expertise of team members
Faultlines within the team
Totality of teams skills
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Building winning teams
Assessing Totality of
team skills
Step 1:
Map the skills required based on theventures business concept & life stage
Step 2:
Identify gaps between skills required &available in the team
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Building winning teams
Assess Totality in
terms of
Functional skills
Industry / domain skills
Start-up context skills
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Building winning teams
Expertise of team
members
Avoid
Grab
Inter-personal
skills
Technical
ski
lls
Adequate Excellent
Adequate
Excelle
nt
Use when taskinterdependence is very high
Use when taskinterdependence
is low
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Building winning teams
Two kinds of
Diversity
Knowledge Diversity
Differences in functional areas
industry
background work experience
education etc.
Social Diversity
Differences in ethnicity
gender
age language etc.
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Building winning teams
have different effectson new venture
performance
Knowledge diversity is beneficial Promotes innovation and creativity Flexibility in thinking
Social diversity is likely detrimental Stereotyping leading to interpersonal
conflict Opportunity costs of resolving
interpersonal frictions
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Building winning teams
Faultlines
Faultlines divide a team's members on
the basis of one or more attributes (e.g.gender faultlines divide teams into male and femalesubgroups)
Faultlines become stronger as moreattributes align themselves in the sameway (e.g. when two new female hires share thesame nationality)
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Building winning teams
Potential Faultlines
0 years0 years2 years2 yearsTeamTenure
Male/FemaleMale/Female
MaleMaleGender
Finance (nosoftware
expr)
Mktg. (nosoftware
expr)
Software
Software/
Medicine
FunctionalArea
Chinese /Western
Chinese/Indian
/Western
Western
WesternEthnicity
30s30s3430Age
VP Finance &Control
VP Sales &Mktg
CTOCEO
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Building winning teams
Team Norms
The leader (or the team collectively) must
specify core norms that demarcate theteams behavioral boundaries
The Profane the few things that are NEVERdone
The Sacred the few things that are ALWAYSdone
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Building winning teams
Summary structuring
the team
- Better to have a small share of large pie than 100%of a non-existent pie equity incentivises teams- Be clear on the Contribution vs Equality issue.
Generally better to rely on the contribution principle- Have flexibility to take care of changingcontributions of members as well as entry/exit- Document procedures to handle founder or other
equity holders exit
Composition
Quality of
Decision
Making
VenturePerformance
OutcomesNorms
Incentives
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Building winning teams
Summary structuring
the team
Diversity: Maximise knowledge diversity; minimise socialdiversity
Expertise: Maximise technical skills subject to adequate
interpersonal skills
Fault lines: Beware of strong fault lines that could distorttask conflict into interpersonal conflict
Totality: Ensure your team has the full complement oftask skills
Composition
Quality of
Decision
Making
VenturePerformance
Outcomes
Norms
Incentives
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Summary structuring
the team
What are the norms that define the behavioralboundaries of your venture team?
The PROFANE - the one or two things that are NEVERdone
The SACRED the one or two things that are ALWAYS
Composition
Quality of
Decision
Making
VenturePerformance
OutcomesNorms
Remuneration