Thursday, July 28, 2011

Difficulty closing the deal? Get a room.

No, not that kind of room.  This blog is intended to be interesting.  But not that interesting.

In my experience, the best way to get a challenging transaction signed is to gather all of the key decision makers on both sides in a conference room, laptops and blue pens in hand, but away from either party’s offices.  This group’s sole task is to close out all of the hard issues and actually sign the contract.  Both parties need to commit to this course of action in advance, allocating enough time to work through every open item.

There are several reasons that this approach tends to work.

First, “getting a room” forces prioritization.  If your organization is typical, you’re trying to do many things well.  Everything is a high priority.  Inevitably, this results in the more complex transaction not getting the consistent attention it needs to close.  The stops and starts are inefficient and often cause the deal to get bogged down unnecessarily.  Getting everyone together for as long as it takes ensures that the transaction gets the focus it deserves.

Second, using the conference room approach smokes out misalignment quickly, even within a negotiating team.  On each side of the negotiation there will be a divergence of skills.  This leads to divergence of opinion and behavior.  The lawyers will seem ready and willing to fight over minutiae and trade detailed redlines for months.  Meanwhile, one company’s CEO and VP of Sales may not have the same vision for a particular transaction.  It may not be clear who owns what issue, even on the same side of the table.  Sub-teams may have been created that drill into certain issues in a vacuum.  Getting everyone together encourages alignment by requiring each side to react and make decisions promptly in a coordinated manner.  Venture capitalist Mark Suster has written on a similar notion, which he calls “cutting out the middle man.”  

Third, this method encourages compromise, which is probably the single most significant requirement for the agreement to get signed and for the long term business relationship to succeed.   By committing to signature ahead of time, posturing becomes more difficult.  Teams are under pressure to compromise because leaving the conference sessions without signature will be considered a failure.  Usually, being face to face makes the discussion more cordial and friendly.  Developing that spirit of cooperation is much easier as you share meals and spend more time together.

Finally, gathering the key folks together in one place instantly cuts through bureaucratic systems that would otherwise cause tremendous delay.  Every company has systems and public companies will typically have strong internal controls.  Even when those responsible for these systems are communicative and aligned, getting through the line takes time.  Companies willing to close transactions in a conference room also have systems in place to streamline red tape when senior management requires it.  Whether that means sending a representative from the purchasing department or a revenue recognition specialist to the meeting, making clear to everyone that a contract is about to be signed can suddenly end the series of waiting games.

Try or revisit the all hands conference room approach.  In most situations, it will quickly pay meaningful dividends.

Tuesday, July 19, 2011

"Please just tell me I'm great."

This post was co-authored with human resources guru Lisa Youngdahl, SPHR, HCS.

The Atlantic recently published an interesting piece by psychotherapist Lori Gottlieb.  In it, she contends that the cult of self-esteem is dooming our kids to unhappy adulthoods.   The idea is that as parents we are trying so hard to make our kids feel happy and seem successful, regardless of the reality around them, that we are not preparing them for life’s ups and downs.  The Atlantic’s cover art summarizes the idea perfectly – a trophy adorned with a soccer player completely missing a kick with the tag “good try.”

This trend has been going on in corporate America as well.   Employees are sometimes so sensitive about feedback that we either sugar coat or just hold back key data to avoid hurting feelings.  The worry is that the employee might leave at an inconvenient time (“I must get this next release over the finish line before I talk to Sally”).  The informal office network is powerful and we wouldn't want to harm morale.

Management doesn’t necessarily fare any better.  The dying art of the exit interview is the proof in the pudding.   Companies will often throw out softball questions and lap up the pleasant answers from departing employees who don’t want to burn any bridges.  “I loved it here but just got a surprise opportunity that I didn’t feel I could pass up.”   Yawn.

It’s almost as if we all want to be lied to for the sake of keeping a smile on every face.  “Please just tell me I’m great.” 

Some refreshing honesty and self-awareness every once in a while probably wouldn’t hurt.  Take some time to be frank with yourself about strengths and weaknesses.  Strengthen your company’s exit interview process so that you’re asking hard, probing questions and reporting the blunt answers anonymously to management.  Tell a subordinate what they could have done better on the last assignment.  It doesn’t have to be cruel, rude or loud, but direct communication is ultimately…well, great therapy.

Thursday, July 14, 2011

"Top talent" not reading their own comp agreements

The controversial stock option arrangements at Skype have been receiving a great deal of attention in connection with the company's sale to Microsoft.

Detailed pieces have been written at TechCrunch, Bloomberg, CNN and Reuters.

The central twist of the Skype stock option arrangement is simple.  The company had the right to repurchase VESTED stock options from departing employees at the same price that the employees paid.  This means that departing employees, even if in the money on vested stock options, could walk away with nothing.

These provisions are unusual for most groups of employees.  There were other elements around the acquisition that were controversial, including several involuntary terminations.  The stock option treatment has been called everything from evil to likely fraudulent.  Whether one believes that these kinds of provisions are fair, there is little doubt that most prospective employees would look much less favorably at joining a company where such an arrangement exists.  It could be made up with higher salaries, but there should be a market penalty.

But, what is most interesting to me in the conversation is that most of the commentary acknowledges that the Skype arrangement was disclosed ahead of time.  The problem was that apparently the "top talent" at Skype didn't carefully read the legalese or consult a lawyer.  That's unfortunate.

"Employees had no idea what they were signing," according to TechCrunch.  According to Bloomberg, a product management employee at Skype whose blog entry triggered much of the attention "never bothered to read" a critical document relating to the stock option arrangement.

This is a remarkably clumsy habit that still seems to affect tech veterans in Silicon Valley.  How can these smart, accomplished business people simply ignore the specific elements of their own compensation arrangements?  How can they be counted on to serve their employers' interests in building the next great category winner if they aren't diligent enough to even protect their own interests?  

Sure enough, that product management employee at least is now singing a simple tune.  In his blog he advises, "LAWYER UP  it'll be worth your while to get an attorney to carefully review all employment documents so that you know what you're really getting into."