Self Aware Founders are the Exception not the Rule

But Mark Suster (of Upfront Ventures) is a visionary (now VC) who understands that sometimes extricating yourself from the role is best for you and the company.  The backseat driver syndrome that he describes is the least helpful behavior for all involved.  An excerpt from his 2011 blog post still resonates today ...

He said that when talking with the board and with investors he realized that he was no longer visionary in this particular field and certainly no longer passionate about it. It happens. But since he was still the CEO people still always looked for him to set the direction of the company. He was the founder, after all. He realized he needed to leave.

For Immediate Release:

Trachtman Commits to Scribing Book about The Dirty Secrets of Succeeding Company Founders

Why this process often goes awry

September 11, 2014

Annapolis, MD – Les Trachtman, most recently CEO of Crofton, Maryland-based Force 3, Inc. is writing his long awaited book on the dirty secrets of company founder succession.  He recently launched a Kickstarter campaign in which he committed to a Fall 2015 delivery date for the book.  The book is entitled: FOUNDed.

“The topic – at least the truth – about how founders get replaced and why many of these successions fail is not often talked about.  But every company has a founder and many of the more successful ones ultimately get replaced, sometimes more than once.  How, when, and by whom they get replaced can be the difference between wealth and failure,” Trachtman said.  “I’ve now done this five separate times, sit on the board of a third generation family company, and have talked to hundreds of founders and CEOs who succeeded them. I feel compelled to share this knowledge to enable founders, boards, investors, and professional CEOs how to increase their odds of doing this well."

The recent return of Michael Bloomberg to his eponymous company and the ensuing departure of the current CEO, Daniel Doctoroff, recently has again focused international attention on the company founder-successor issue. Trachtman’s experience is dead on when it comes to these kinds of topics.

The book with chapter titles including:  The Emperor Has No Clothes, Doing the Dirty Work, Family Matters, Can’t Anybody Here Play this game, and Try Before You Buy is bound to be a fun and compelling tale of Trachtman’s advice intertwined among his real-life stories and anecdotes of the good and the bad that he has experienced.

FOUNDed. is due out in Fall 2015.  Pre-orders, as well as author-inscribed copies are available on Kickstarter until October 31, 2014.

About Les Trachtman

Les Trachtman is the majority shareholder of Purview, LLC, an entrepreneurial endeavor focused on disrupting the business of medical imaging. Prior to that Les served in a serial progression as CEO of five ventures in each replacing the founder/CEO. Force 3, Active Endpoints, e-OneHundred Group, Transcentive and Metaserver, He’s led corporate development for Progress Software (PRGS) and Hyperion Solutions. Les serves on the board of directors of The Metro Group, where he is the sole non-family board member of a 90-year-old family corporation and serves as the Entrepreneur in Residence at Union College. Les received a BS in Electrical Engineering from Union College and a JD and MBA from Emory University.

Contact

To learn more about this book go to:

https://www.kickstarter.com/projects/trachtman/founded

For more information contact Les Trachtman

trachtmanles@gmail.com

203.848.4246

Mike Bloomberg Returns

Mike Bloomberg did no favors for his friend Mr. Doctoroff who left  his role as CEO rather than succumb to political pressure from insiders imbued with power from Bloomberg. This pressure was apparently enough to thwart any changes that Doctoroff attempted. Trends like this follow most founder returns.  And this one hits pretty close to home.

Cook at Apple is much better off (and performance shows).  No one around to second guess him. No wonder he is smiling.

Family Business

Over the past few decades, I've had several experiences with family businesses.  None were my family (which probably is the reason I've had to work so hard in my career).  But they are a special breed of entrepreneurial endeavor.  Recently, I was interviewed for an article in the Harvard Business Review about a fictional (at least the names were changed to protect the guilty) family business.  Attached is a link to that article.  The Ex-CEO Contemplates a Coup.

Back to School

Last Thursday I made what has become an annual pilgrimage to Cambridge, Massachusetts for a set of MBA classes at Harvard Business School and MIT's Sloan School.  In the classes, a combination of professors lead by Noam Wasserman present the Les is More X 4 case that was created several years ago.  Each year is both humbling and invigorating.  Humbling in hearing these smart students pick apart my actions at the various CEO engagements that I've had. (I sure wish I had carried around a pocket sized HBS class with me before I did some of the things I did.)  Invigorating, in that I get energized by the exuberance of the students and their intellectual prowess and innovative thinking.

This year however was a bit different than the four years prior.  First of all I was set up to do five classes in one day at the two Universities -three at Harvard and then two at MIT.  Even just physically, it is difficult to get "up" for each of five classes in about 8 hours of duration, as well as navigating through Cambridge across the river (Charles) and between these two schools.  But perhaps more interesting is how the day started and ended.

Typically I arrive on the Harvard campus about an hour before the first class.  This was no exception.  I was greeted by Matthew O'Connell, Professor Noam Wasserman's assistant.  He ushered me into Noam's office where we touched base about the logistics for the upcoming day.  This year, Magnus Thor Torfason, Assistant Professor of Business Administration, was joining in the fun and has been teaching a 3rd section of Founders' Dilemmas at HBS.  Our cordial conversation started off as usual with Noam mentioning innocently along the way that a partner from Northbridge Venture Partners would be attending the class as a guest.  Apparently Noam had not put together the name, Michael Skok with the case itself and was unaware that Michael was actually the Board member at Active Endpoints that had at the end of the case been the lead board member who fired me.  Awkward was an understatement.  Noam asked whether we should make different plans.  We both agreed that we would proceed as usual with Noam making me promise not to change anything about the way we had gone about presenting the case in the past.  For the uninitiated, the case ends with me playing the role of Michael as the student plays me, negotiating his role as CEO.

In any event, the class went on as planned.  I was quite aware of trying not to hold anything back and when it got to the time where I played my board in a mock phone call with the student, I gave as real a rendition of what actually happened as I could.

So how did Michael react?  He paid what perhaps could have been the ultimate compliment to me and to Noam the author of the case.  He said that he emphatically believed that what we had portrayed was completely authentic!  In the event that I have not, over the past 7 years, been able to vent my emotion over what happened that infamous spring,  I now am over it!

And so you ask, how did the ending top that?

In the last class which took place at MIT, I was finally and comfortably situated in the classroom in advance of the class.  Professor Matt Marx and I had decided that I would not be introduced to the class until about half way through when the students had (incorrectly as always) voted on what they expected the outcome of the Active Endpoints case would be.  Shortly after the class started, while interrogating my actions at Metaserver, my first venture as CEO, one of the students who was exasperated by the stupidity of one of my actions blurted out: "Les needs to put on his big boy pants" in order to become more mature in my approach.

When it came time for the vote and the class all voted as usual that I would save the day, Matt innocently points to me in the back of the room and asked whether or not the class was correct.  When I answered, I suggested that I would have to pause for a moment in advance and "put on my big boy pants" first.  The class erupted in laughter.  And the student who had made this statement was embarrassed.  But it was all in good fun and education as I took the floor and answered the eager questions from the students.

Afterward, by the way, I told the student to make sure he never backs down when he has thoughts like he did.  Because, although it might have been awkward to hear, he no doubt was correct!

Making Employees Smart Health Care Consumers

Each year executives across the country are faced with tough decisions regarding the provision of health care insurance to their employees.  Questions like what type of coverage to provide, how much employees should contribute towards this insurance, and which employees are covered, are coming under much more scrutiny than in the past.

The idea of employers owning the burden of providing health care insurance in the United States originated less than two generations ago during WWII.  Then employers found offering health insurance to be a way to get around the wage freezes, as an enticement to attract scarce workers.   In 1945, when President Truman failed to get his sweeping national healthcare programs passed, corporations offering health care insurance steadily became a standard part of the employment relationship that has continued through today.

Health insurance programs, usually offered to full time employees, have taken much of the risk of health care coverage from American employees.  However this risk has been replaced by a sort of malaise when it comes to employees making intelligent health care consumption choices.  Since many insurance programs don't discriminate among the various choices for the provision of health care services (for example choosing to visit your hospital emergency room for a bad cold), employees often don't act like smart consumers when it comes to health care choices.  Employees who fail to consider the most effective venues and treatments for their illnesses contribute to increasing costs of healthcare and significant inefficiencies in our system.

But as we all are becoming aware, our healthcare system in the US is changing, as are the ways in which we insure against these ever rising costs.  During the Obama administration our federal government has made the furthest inroads yet on prescribing who and how Americans procure health insurance.  A prolonged recession is putting extraordinary pressure on US corporate profits, causing executives to rethink this grand bargain. Technology is expanding the choices available to treat illness and extend life expectancy.

Does the relationship between what has become the benevolent corporation expected to offset the health insurance costs of the individual still make sense in the 21st century?

I personally believe it is time to rethink this bargain.  We must use market demand, consumer choice, and free market pressures to balance and align health care as we do in so many other consumer markets.  As employers we owe it to our employees not just to help subsidize the extraordinary cost of consuming health care through the offering of health care insurance, but also to help them make good choices.

One way we ought to consider changing the status quo is by offering subsidized health savings accounts coupled with high deductible insurance programs in lieu of many existing health insurance programs.  High deductible plans mean that for the first several thousand dollars of an employee's annual health care spend, they actually pay this out of their pocket.  I expect that involving the employee in actually paying real money for their health care consumption might encourage them to ask more questions, be more selective in their services, and think about costs rather than just plunking down their employer backed insurance cards. Subsidizing health savings accounts will help to take the sting out of the high deductibles paid by the employee - but still require the employee to physically pay the bills.

The cost to employers for offering these types of plans should end up being a wash.  High deductible health insurance should cost less than other plans.  That savings could be used to fund the subsidies for the HSAs.  Healthy employees can keep the money in their HSA and roll it over year to year, gaining value and maintaining that as a rainy day fund should their employment relationship change or something catastrophic occur.

As employers we need to start thinking about these kind of alternatives as our small way of participating in finding a solution to escalating medical care costs.

The Tyranny of the Urgent

http://www.theinsidetrac.blogspot.com/2012/03/taking-time-to-work-on-rather-than-in.html

Do Venture Firms Transition CEOs too Early?

Donald Katz talks about VC transitions of founders.

Don't Mistake Loyalty for Leadership

A common trait of founders, CEOs and in fact most executives, is the loyalty they command among their troops. During times of crisis (including most of the early years of a developing company, integration of mergers, etc), loyalty is a critical characteristic of the leadership team. But in order for a company to scale, leadership is much more important than blind faith alone. It's apparently quite difficult to separate the two. And clearly, the bonds born of loyalty are hard to overcome.

As companies mature and it becomes necessary for management decisions to distribute beyond a strong single central decision maker, loyalty alone is not sufficient to generate good decisions. So CEOs need to steel themselves to objectively view their teams as either capable or not to operate on their own. Coloring (or perhaps blinding) the decision of who sits in these important leadership seats is a mistake too often made.

Now these were some real Founders!

THE 4TH OF JULY Have you ever wondered what happened to the 56 men who signed the Declaration of Independence?

Five signers were captured by the British and executed as traitors. They were tortured before they died. Twelve had their homes ransacked and burned. Two lost their sons serving in the Revolutionary Army; another had two sons captured. Nine of the 56 fought and died from wounds or hardships of the Revolutionary War. They signed and they pledged their lives, their fortunes, and their sacred honor.

What kind of men were they? Twenty-four were lawyers and jurists. Eleven were merchants, nine were farmers and large plantation owners; men of means, well educated, but they signed the Declaration of Independence knowing full well that the penalty would be death if they were captured. Carter Braxton of Virginia, a wealthy planter and trader, saw his ships swept from the seas by the British Navy. He sold his home and properties to pay his debts, and died in rags. Thomas McKeam was so hounded by the British that he was forced to move his family almost constantly. He served in the Congress without pay, and his family was kept in hiding. His possessions were taken from him, and poverty was his reward.Vandals or soldiers looted the properties of Dillery, Hall, Clymer, Walton, Gwinnett, Heyward, Ruttledge, and Middleton. At the battle of Yorktown, Thomas Nelson, Jr., noted that the British General Cornwallis had taken over the Nelson home for his headquarters. He quietly urged General George Washington to open fire. The home was destroyed, and Nelson died bankrupt. Francis Lewis had his home and properties destroyed. The enemy jailed his wife, and she died within a few months.John Hart was driven from his wife's bedside as she was dying. Their 13 children fled for their lives. His fields and his gristmill were laid to waste. For more than a year he lived in forests and caves, returning home to find his wife dead and his children vanished forever. Some of us take these liberties so much for granted, but we shouldn't. So, take a few minutes while enjoying your 4th of July holiday and silently thank these patriots. It's not much to ask for the price they paid.

Remember: freedom is never free! - enjoy the fruits of their efforts this weekend and every day.