The right management team can accelerate scale and help founders work on the business rather than in it. But how do you recruit or develop talent? What do investors look for in a senior team? And what should you expect from a NED?
We spoke to three members, and two partners, of the Club to hear the lessons they've learnt when hiring, incentivising and developing a senior team fit for scaling up.
Below we've transcribed the interview featuring:
- Monique Drummond, Founder of Relish Research
- Luke Smith, Co-founder of Croud
- Nick Patrick, Co-founder of Sempre Analytics.
- Tim Hastings, CEO of executive recruitment specialist Ford Hastings
- Edward Keelan, an investment director at Octopus Investments.
Leading a senior team to scale
Emma Jane Packe: We know how game-changing finding the right senior leadership team can be for a scaling business. Driving performance and helping to improve productivity and allowing the founder to work on the business and not in it.
So today, we’re going to be exploring how you identify what you need, how you find it, and then how you develop it.
Should you recruit directors from outside, or develop your managers?
Luke Smith: We did go down the recruitment of more senior talent route. Hiring in big MDs to run some of our offices in different locations. And frankly, it never worked out. The people that we hired in were not of the same calibre, they weren’t the same crowd. It meant that they didn’t have the same crowd mentality that we see in the more junior people within our in-house teams.
And our philosophy was look, we’ve got the talent, we are good at recruiting, we’re good at hiring. So why not develop those really smart guys that we’ve brought into the business, into those roles? Because the mid-level guys of today are going to be the senior guys of tomorrow somewhere, right? So give them the opportunity through mentorship and development.
How do you motivate and incentivise your senior team?
Fundamentally I want everyone to be part of the business, to feel part of the business, to be owners because owners care more. And I want, you know, when an event happens, I want everybody to enjoy and be part of that event.
So that’s why we did it. In terms of what I would have done differently, given away less share to start with. You get very kind of flamboyant with the shares at the start and then probably less so when most of it’s gone.
Monique Drummond: I don't believe in share options. I very rarely have met anybody who’s benefited from them. we don't have a sale imminent, and for most of the age of the team I have working for me, the idea of the never-never, or a share option for the future isn’t enticing. And I don't believe share options anchor loyalty or change performance.
However, I also moved away from the word ‘bonus’, because that’s very much linked to individuals in a sense of it being variable. And so we have a profit share scheme which benefits everyone almost on a ratio to their salaries, depending on their performance.
We set aside a pot and it is always divvied out, so non-performance might get a little bit less. There are a number of breakthrough points on it, but we certainly find it’s worked a lot better than having a promise of a share option or a bonus which may or may not be paid out.
Members often work with a coach or mentor to build and manage their senior team.
I think there are a lot of challenges, especially as a female in business. And my tendency is to mother hen everybody. And I realise that I needed to make some pretty tough decisions, and I needed the inner resolve to do so. and I recognised I didn’t have it.
So I found a mentor really useful in making me see where I wanted to be and then helping me get there. And certainly, it was a vast improvement I think after I took on a mentor.
Nick Patrick: So non-exec has helped us improve performance in the business as a whole through something as simple as helping us deliver clarity and focus on what we’re doing. That, in turn, has meant everyone else in the business has clear goals for themselves, as well as being aligned to a company goal. That means they know when to pitch for business when to walk to away from it crucially, something we never did. So walk away from the business. When to target, what industry, all these things became very apparent when we had clarity and focus. And our team has fallen in line behind that, and that - the knock-on effect of that is growth on our peer now, higher win rates, so we’re doing more business for less effort.
What should a founder expect from a Non-Executive Director (NED)?
Tim Hastings: In my experience, the real value a Non-Exec can bring is in operating as a sounding board to the CEO or founder or senior management team. Effectively leveraging their network, bringing some new ideas, adding credibility to the board, and holding the senior management team to account to the business plan.
The main misconception I come across is that the Non-Executive Director is going to come in and try and run your business when that’s not the case. And that’s normally seeded in the thought that we know we need a Non-Exec, but were not quite sure what they can do for our business.
Undoubtedly, the most effective Non-Exec Director to help you, if you’ve raised finances, someone who has raised finance themselves, and actually deployed it effectively. That not only gives them a very good network, but it gives them a real understanding about the due diligence that’s required when you’re looking at fundraising. It adds credibility to your board and helps in the eyes of potential future funders.
How can your leadership team impress an investor - or put them off?
Edward Keelan: I think that people that maybe try and hide the problems within their organisations, investors are almost always going to find them out. So better to be honest and show that you recognise them and that you’re dealing with them. So I think the three most important things that investors look for in leadership teams are first and foremost, can they attract talent? Do they have a passion for their business that will resonate with people that they’re trying to hire?
I think the ability to be adaptable and show that they can pivot and change their way of thinking, I think is really important because, with growth companies, things are always going to become different as time goes on.
And finally, really understanding the key drivers of their business. Do they understand their numbers, do they understand the metrics that drive this business, because when you scale, it’s really those that are going to be the most important things to be thinking about.
Adam Goff: I think the thing I found most interesting about today was having your team into the profit share, into the annual pie. So as opposed to just giving away shares necessarily, and all the complications that can bring, you can actually incentivise people with money, but cut them into the annual pie, don’t necessarily run them a separate bonus scheme. Have them understand the numbers of the business and then reward them based on how the business actually performs. So that was great.