The Most Successful Startups Have Hands-On Founders
Research
by Rembrand Koning and colleagues says the best-performing startups
are those where the founder is hands-on with people management.
Startup founders with a hands-on management style are more
likely to retain employees and see their firms thrive, new research shows.
The results are particularly applicable to knowledge-intensive
technology firms, where human talent is the main resource that affects firm
performance, the researchers say.
Founders are usually very busy people—they recruit key
employees, raise funds, find a board, develop partnerships, set strategy, and
design the organization, to name a few responsibilities. What often falls by
the wayside as founders get pulled in all directions, according to the
researchers, is intensive mentoring and monitoring of staff.
“Because many young companies face both technological and market
risks, founders may prioritize dealing with these challenges rather than the
more mundane aspects of human resource management,” the paper says. “Our
findings suggest that … more intensive people management is a worthwhile
investment of a founder’s time.”
Effective human resource management is more than just keeping
the paperwork flowing. “You also need to focus on the strategic part of
managing people to make sure they are working on the rights tasks, that they’re
getting the feedback they need, and they’re happy in the firm so they’re less
likely to quit,” says Rembrand Koning, an assistant professor in Harvard
Business School’s Strategy Unit who was a coauthor of the study.
Koning’s
working paper, released in May, is titled Learning to Manage:
A Field Experiment in the Indian Startup Ecosystem. The coauthors were Aaron
Chatterji and Sharique Hasan, both of Duke University’s Fuqua School of
Business; and Solene M. Delecourt from Stanford’s Graduate School of Business.
In studying 100 founders of Indian software companies, they
found that those who exert more hands-on management—keeping close tabs on
workers with regular evaluations, setting expectations, creating shared
milestones, and tracking progress toward key goals—run better-performing
companies.
Learning from the network
If this intensive style doesn’t come naturally to a
founder-manager, the good news is it can be learned, Koning says.
“What’s encouraging about this paper is that we found that
hands-on management can be learned over time. This is something we think many
firms can improve. And if we can get people to manage better, we think they can
keep more employees and be more successful.”
Through social interactions with other hands-on managers,
founders can discover not only why they should use these tactics, but also how
exactly to implement them.
To study how these management skills can be acquired through
peer networks, the researchers partnered with the Indian Software Product
Industry Roundtable (iSPIRIT), a think tank that promotes the growth of Indian
software product companies. The team brought together founders of 100
growth-stage software product companies in India for a three-day executive
retreat.
Prior to the retreat, participants were surveyed to find out how
often they engaged in four management practices: providing structured feedback,
conducting performance reviews, setting expectations, and establishing shared
goals. They then grouped founders into 50 pairs, focusing on the pairs where a
high-intensity manager was partnered with a founder who was self-described as
more hands off. (A more hands-on manager might use these intensive practices
once a week, whereas others might do so once a month or less.)
During the retreat, the paired founders discussed their business
challenges and were told to provide advice about management and strategy to
their partners.
On the final day, the founders completed a list of changes they
planned to implement after returning to their companies. Founders paired with
intensive managers were more likely to include items related to management
practices. Eight months later, founders were surveyed to provide results from
changes that had occurred at their companies.
Hands-on wins in practice
Founders who received advice from hands-on founders were more
likely to adopt a similar leadership approach. The majority of these founders
made at least one substantial business change after the retreat. “Founders
talked at length about implementing particular action items,” the paper says.
“For example, founders discussed hiring a new product manager or reorganizing
their team to be more efficient.”
Founders who adopted a more intensive management style saw
positive results: These companies retained a higher percentage of their
employees and were less likely to close eight months after the retreat.
Founders who got advice from more hands-on managers saw 19.6 percent fewer
employees leave their firms, and these startups were roughly 20 percent less
likely to fail. Founders who already had a more hands-on management approach
were able to increase hiring rates.
The researchers make it clear in the paper that “we do not
assert that ‘more’ management is always better. To the contrary, excessive
‘micro-managing’ could have a negative impact on firm growth.” Effective
managers make sure their workers understand corporate goals, then trust them to
take charge of key responsibilities and make important decisions.
It’s easy to confuse hands-on management with micromanaging,
Koning says.
“Startup founders have a really hard time letting go, so they’re
the ones doing the customer interviews and trying to hire people. But no one
wants to work for a boss who’s doing everything or giving (workers) only the
bad parts of the task,” he says.
Companies should invest in peer learning
Companies often opt for formal training programs or consulting
arrangements with instructors who teach entrepreneurs how to manage their
companies. But these interventions can be expensive, often don’t work, and at
times are impractical for leaders who are working full-time on their
businesses, the paper notes.
Koning hopes the research shows founders that they should seek
mentor networks with the goal of picking up intensive management techniques
that they can use to more effectively manage and grow their own teams.
These types of exchanges are often more personalized than formal
training programs, because the founders tailor the discussion to a company’s
specific situation and share their own experiences. These discussions aren’t
likely to happen at networking cocktail parties, so it may take one founder
seeking out another for a more in-depth talk, says Koning, whose research
examines how businesses depend on the distribution of knowledge, technology,
and people across firms.
“When you think about building an advice network to discuss the
strategic direction of your company, it can be fuzzy and hard, so you should
think: Given the people I know, who should I be talking to more—and who should
I choose to ignore?” Koning says. “It’s a big decision.”
In fact, it might even determine how well your firm performs.
by Dina Gerdeman
https://hbswk.hbs.edu/item/founders-with-a-hands-on-management-style-grow-stronger-companies?cid=spmailing-17263016-Working%20Knowledge%20Newsletter%2010-18-2017%20(1)%20B-October%2018,%202017
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