The venture capital industry has seen it all in the recent past enormous enthusiasm for “anything dot com”, highly leveraged management buyouts (MBO) and management buy-ins (MBI) and the rush to exploit emerging opportunities.
Almost by definition the venture capital (VC) industry is a disciple of change. If an attitude of “steady as she goes” were adopted opportunities would be bypassed in preference to slow and steady progress or at worst stagnation. For change to be instigated a catalyst is needed and this usually takes the form of identifying an opportunity, assessing and charting the options for its implementation and evaluating the risk-reward ratios which are the lifeblood of a VC.
The composition of a VC backed team is, by definition, designed carefully to achieve the desired objectives. Adventurers are teamed with pragmatists and financiers with product and service specialists. Whatever the precise mix of elements, which are subtly different in each particular case, themes emerge. Ideas to be translated into reality are commercial opportunities awaiting exploitation.
But to achieve commercial success the basic rules of business must apply. Cash flows, sales, R&D, staffing to name but a few indeed all the considerations one would expect. These are assessed as part and parcel of the decision to invest and in the calculation and nature of a timetable for a profitable exit. They are mixed with the entrepreneurial ingredients and a decision is taken to invest.
A new or re-engineered business, however, is only as good as the manifestation of planned performance by the players in the well-researched but sometimes unpredictable market place. Circumstances, attitudes (of markets and players) and plans in the cold light of reality change and with those changes come variances from the original vision. Rapid reassessments and re-planning become the imperative. The original team, put together for its particular mix of skills, attributes and vision, may no longer be as it was. The need is for stability even in the very short term so that functions of the business continue to be managed with the utmost skill and care.
Those in the team who must hold their own teams and functions together must not allow themselves to be distracted. Extra responsibility or, at worst, re-deployment to fill an urgent need elsewhere in the business might prove to be disastrous when the business is already starting to show signs of stress. External assistance is required but for how long and to achieve what?
An established, proven and viable route that has been demonstrated as one possible solution to an unstable situation is to enlist a temporary manager. He or she is parachuted in with one objective to hit the ground running and perform a series of specific tasks identified with the client as imperatives to keep the business plan on track.
“Interims” cover virtually every skill and discipline from finance to sales and marketing via CEO’s and people management. Their common characteristic is that they are all skilled and experienced in their speciality and have at least 10 years senior management experience behind them.
Their adrenaline is stimulated by challenge from solving problems, managing crises, putting sustainable performance improvements in place and then handing what was the problem area back to the client and if appropriate a new permanent post holder. This approach allows a considered view to be taken of the longer term while the immediate problem is being contained. It enables the permanent management team and investors to properly identify and secure the right solution that will form part of the foreseeable future.
But in some instances a temporary manager being parachuted in at short notice may not be the answer. Given that changes to the original plan or predicted circumstances have been identified as desirable if not absolutely vital a study may be required to thoroughly assess the implications and practicalities of change. This is a classic case and rightly so for calling in specialist consultants who have deep industry knowledge and insight blended with perception and the ability to look at the business and its market, and performance pressure points, objectively.
One should not undervalue the benefit gained from objective and impartial advice. To capitalise upon the investment of time, energy and cost, the implementation of the advice sought and received must be properly and expeditiously undertaken. Implementation can itself cause the over-stretching of already fully engaged management team members. Solutions to this issue can manifest themselves in a number of ways varying from the irresponsible “put it off until we have time” attitude to assigning an existing team member to undertake the role of “change” or “transition” manager.
However, an alternative solution has increasing currency; that of bringing in an external specialist manager with an acutely relevant skill set specifically to manage the transition from “A” to “B”. This leaves the existing team to continue managing its own specialist and principal functions. But it might also be argued that an “insider” i.e. an existing team member is the best person to facilitate the necessary changes due perhaps to the projects inherent status as part of his area of responsibility. The solution here is to support the existing manager’s role with a temporary manager thus allowing the project to be implemented and “business as normal” during the transition. The same philosophy may equally apply at a strategic as opposed to an operational level. The seasoned business veteran as interim COO may ensure the infrastructure of the start-up properly supports the entrepreneurial visionary in those critical early days.
VC houses are increasingly recognising the benefits of investing in the services of specialist suppliers not only to enhance their investments’ performance and speed the implementation of change or return to stability but also to minimise unwarranted risk. They also see the mindset of professionals within this specialist and growing market as akin to their own. Quick to react, detached and objective, yet with a reputational driver to ensure clients’ chances of success are maximised. Firms with a Europe-wide presence and truly professional standards (which encompass salaried managers as opposed to assignment rewarded individual temporary contractors) lead the way in enhancing the VCs quest for success. Their services have never been in greater demand and their use represents additional asset value in an increasingly competitive environment.