Timing is Everything [ENT 600 Week 6]

Timing enters into a lot of our decisions as founders.  For example, back in 1990, I lived in Cincinnati at time when the Bengals were an NFL powerhouse that sold out every game at the old Riverfront Stadium.  I had just graduated from college and devised a scheme to make tiger striped tie dye t-shirts and sell them in downtown Cincinnati before and after the games.  The shirts were staggeringly popular and I sold out every game (until the police gave me a warning about permits and such ahem).  Of course, my Bengals had won the AFC Championship that year and Cincy was rocking the tiger stripes then.

Fast forward to 1996, the Bengals–during their miserable “lost decade” became the losingest franchise in the history of any sport ever in the world–mostly due to sticking with a hiring blueprint that was failing: hiring coaches from within the organization and the owner’s personal network, and keeping lots of “nice guy” C-Player placeholders on the roster.   It got so bad a season ticket holder once actually gave my friend and I $5 each to take his extra tickets.  Not a good time for tiger striped tie dye.

Hiring is all about the timing.  The kind of people you might hire as a founder (and possibly CEO) of a start-up are usually different from the people your investors might hire in subsequent years of your company.  So says Noam Wasserman in The Founder’s Dilemmas and Stanford Project on Emerging Companies (SPEC) Studies beginning in 1994.   Researchers determined that start-ups tended to follow one of five (of 36 possibilities) so called “blueprints” which tracked bases of recruitment, rewards, and control of hires.

From “Organizational Blueprints for Success in High-Tech Start-Ups: Lessons from the Stanford Project on Emerging Companies,” 2002

Wasserman points out that as a founder, you’re more likely to hire “commitment” blueprint employees out of your personal network “believing such employees would take more responsibility, make more sacrifices, and be more proactive for the company” like the founder of Pandora did. (212)  As the start-up progresses into scale up and requires more venture capital to sustain growth, investors often insert “spies” into the operation–most often a CFO to monitor how the money gets spent–and leaning toward a more authoritarian or bureaucratic approach to new hires.

James Baron and Michael Hannon in “Organizational Blueprints for Success in High-Tech Start-Ups: Lessons from the Stanford Project on Emerging Companies” discovered that “among firms no longer being led by a founder, 76% had changed the blueprint in some respect (often in the direction of a more bureaucratic model), and 40% had changed it along two or more dimensions.”  This tracks closely with other topics we’ve discussed here, including the King vs. Wealth model and hetero- vs. homogeneous make-up of the founding team.  We start out as Kings of our homogeneous castle and  move toward heterogeneous wealth as need dictates, as we acquire more diverse employees and investors with more varied agendas as well as social and work capital.

This growth also alters the company hiring blueprint.  Why is that?  Wasserman points out that “Evaluating a hire’s fit with the start-up can be much harder than evaluating his or her skills,” (216) especially, one supposes, if that hire comes out of the founder’s personal network.  Baron and Hannon posit that “‘built to flip’ replaced ‘built to last,’ as entrepreneurs and their financial backers raced to cash in…”(1) with their nod to the wealth model.   Wasserman also refers back to role dilemmas, were founders who initially assigned themselves C-level titles shed those more administrative roles as they determined the company was better off with a professional at their post. (218)  Finally, there’s a need in the early days for people who know a little about a lot, so called jacks of all trades, to “pitch in wherever needed.” (225)  But as the business grows, the need for more specialists grows along with the ability to hire more people to perform more specific tasks.  And of course, as any enterprise of any sort grows, organization gets more and more difficult to manage and people tend to fall back on familiar constructs….like bureaucracy.

So what was the effect on the start-ups?  Baron and Hannon, say “efforts to alter what might be thought of as a company’s genetic material, including its blueprint for employment relations, are destabilizing.” (18) Wasserman points out that “sticking with the chosen blueprint was a vital factor in a startup’s success” and that the very few that changed along all three dimensions were 2.3 times as likely to fail. (211)  But change is inevitable and the guy you hired at startup probably wouldn’t even get a look 2-3 years in.  Because timing is everything.
 
Fortunes for my Bengals eventually turned for the better, thanks to a great blueprint busting coaching hire (an African American out of the rival Baltimore Ravens organization), along with several good years of drafting and development of players.  Most notably, they traded in the nice guy placeholders and instead started offering second chances to inexpensive high level performers with attitude and/or legal problems.  This was a huge deviation from the team blueprint and worked out beautifully with players they spent almost nothing to get who became long term A-Players for the team.  Oh, and you can buy a tiger striped tie dye at the Bengals shop now.  Someone else had that good idea at a good time.
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Resources:
Baron, James, and Hannon, Michael. “Organizational Blueprints for Success in High-Tech Start-Ups: Lessons from the Stanford Project on Emerging Companies.” California Management Review, Spring 2002.

Wasserman, Noam.  The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.  Princeton University Press, 2012.

 

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This is not only my Professional Blog where I post my assignments for my Master of Entrepreneurship program at Western Carolina University, it’s also my Professional Blog on my actual business web site for my actual functioning business!  Since they overlap so neatly in my personal Venn Diagram, I think clients, potential clients, or just idle passersby will find some value in my analysis as much as my classmates and instructors.  Enjoy!

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4 Comments

  1. Your personal story highlights the truism that it’s better to ask for forgiveness than permission. I continue to struggle with how one can best determine that the past blueprint is not appropriate for the current situation. It seems unlikely that one is going to realize this. However, the investors have their own agenda and they may not be the best either in determining this point. Perhaps the company needs an external advisor that is less biased.

  2. Hi Arjay,
    As you discussed, many successful companies change their blueprints and those that do not are 2.3 times more likely to fail. This is understandable since some companies have a good plan, but things change, people change, goals change, everything changes. To think that your original plan will be the final and last plan is unrealistic and can be detrimental to the success of your business. Your story about the tiger striped tie-dye shirts gave a real-life synopsis about good timing for the success of your business (legal or not) and the outcome of sticking to a failed hiring blueprint. Thanks for the visual example!

  3. I love your tie-dye tiger shirts story this got me interested in the post and kept me reading for more! Hiring the right people at the right time is so important as you discuss here, and I like that you tied your ending back into the Bengals story. Great work Arjay!

  4. Arjay,
    I love your story about the tie-dyed tiger stripped shirts. Permits, smermits! It was a great idea! You’re stories give a nice touch to your posts and play a huge support role on the information that you supply in them. It’s a wonderful balance! Were your shirts better than the ones you can now buy in the Bengal’s shop?

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