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Human Capital Risk For Investors ©2008 Chris Dawson

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Chris Dawson
Chris Dawson

This document discusses human capital risks that investors face. It notes that while financial, technical, and market risks receive more attention, human capital risks are equally important but more difficult to assess and manage. The root causes of most business failures are people and culture issues, yet investors typically only address human capital risk by hiring or firing the CEO. The Dawson Consulting Group offers solutions to help companies manage human capital risks related to strategy implementation, organization design, culture optimization, and executive effectiveness. When a company's execution capabilities do not support its business plan, it increases investment risk.

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Proprietary Material Do Not Copy or Distribute ©2008 Dawson Consulting Group 1 www.DawsonConsult.com 650 773 2925 cdawson@DawsonConsult.com
Investors face many risks in seeking an above-market return: – Financial, Technical, Market risk get the most attention Human capital risk is no ‘less’ a risk, but commonly assigned less importance – Only because it is less easy to assess and manage, not because it is truly less of a risk – People and Culture are the most common root causes for business failure – yet investors typically address this entire universe of risk with a single, simple tool: hire or fire the CEO Dawson Consulting Group offers proven, research-based solutions in the human capital space in the area of: strategy implementation, organization design, culture optimization, individual and team executive effectiveness When execution capabilities do not support business plan requirements, risk increases: How many ‘A-players’ do you have managing your investment? – Is the right team culture in place to execute the ‘pitch’ you bought? – Are performance metrics and rewards aligned with execution objectives? – Does the leadership team have a disciplined execution roadmap? – Is the executive team functioning as a high performance team? – 2 ©2008 Dawson Consulting Group www.DawsonConsult.com
3 ©2008 Dawson Consulting Group www.DawsonConsult.com
Values & Strategy Drift Misalignments in Structure, Culture, Process Requiring Leadership Continuity Significant Transformation Following Founder Exit Mergers, Acquisitions, Culture Re-Alignment with Divestitures New Business Challenges IPO Accounting and Process Rigor New Talent for Different Business Challenges Acquisitions Executive Transition, Search, and Integration Operational Processes, Team Optimization Infrastructure & Metrics Culture Definition Focus on building strategic Goodness of Fit in organizational capabilities Organization Design Hiring Key Players Role Definition Stable Structures Performance Strategic Roadmap Talent Selection Liquidity Re-Assessment and Human Capital transformation Roadmap Linked to based on external Strategy Return on Scale Up realities and vision of investment for initial new leadership investors Stable Production capability Founding team and execution transition or exit Momentum Formation Formation of competent team well New venture suited to product requiring launch business plan & leadership 4 ©2008 Dawson Consulting Group www.DawsonConsult.com team
Phase Formation Stable Scale Up Liquidity Performance Momentum Challenge •Leadership •Product offering •Production •Investor ROI •New strategy Business validated by capability •Business Plan •IPO? or new •New offerings, Challenge sales growth •Reliable accounting rigor markets •Funding execution •Acquisitions? •Merger/acquisition •New growth •Innovative growth Design •Execution •Process •Define & fill new Human •Org •Functioning team discipline discipline executive •Role Definition Capital required for competency •Building stable •Performance •Right Talent Challenge public scrutiny requirements management capabilities •Key Metrics •Founder •Define revitalized •Defined culture •Professional transition & exit or blended M&A management culture •Missing •Tolerance of •Failure to •Complacency •Missing capability Investor capability mediocre talent develop or about raising the or executive talent Risk replace bar for the new •Wrong talent •Increased team executive talent strategy conflict •Mismanaged •Fuzzy metrics •Unmanaged founder exit •Unintegrated •Misaligned executive acquisitions culture •Bad or chaotic transition acquisitions •Transformation failure 5 ©2008 Dawson Consulting Group www.DawsonConsult.com
RE-INVENTION Resilience Maturity Value INFRASTRUCTURE Stability Creation GROWTH DECLINE Arrogance Dominance Scalability Structures Loss of Complacency Discipline “The Chasm” Go-Go Sales Security Risk Aversion Infancy Survival Eclipse Startup REVENUE & SIZE 6 ©2008 Dawson Consulting Group www.DawsonConsult.com
Start-Up Infancy Go-Go Scalability Stability Phase Challenge Growth Creation Concept Survival Sales Planned Value Business Challenge Family culture Action-oriented, trap – ‘one to of major Founder’s Transition Systematization Cultural opportunity-driven man show’ professional organizational processes Entrepeneurialism Challenge organization Few systems or bottleneck Process discipline Delegation Labor of love rules Conflict between outstrips Clarification of mission Revenue Negative cash flow ‘new’ and ‘old’ cultures Management by infrastructure and vision Everyone does crisis Values crisis Reactive marketing Performance focus everything Get it done and sales Focus on profitability Fluid & ambiguous and sustaintability People more Problems become roles important than crises rapidly processes Entrepreneur, Deal-maker Hard-Driver, Delegation, planning, Executive level Entrepreneur, Deal-maker Hard-Driver, Delegation, Executive Leadership visionary competitor and process managerial skills and Alliance Competencies management partnerships Leadership style Product Decisiveness development Strategic focus – out dependent on strategy Active involvement clarity and Role of the tactics selling in all parts of the differentiation Persuasive business Professional Professional Personal energy Selecting the right management people – talent upgrade Team selection & leadership ©2008 Dawson Consulting Group 7 www.DawsonConsult.com
8 ©2008 Dawson Consulting Group www.DawsonConsult.com
Founded in 1989 – Silicon Valley, California Value Proposition: Increase shareholder value through application of research- based human capital tools and methods Pragmatic, business-oriented, not touchy-feely. Rapid-cycle engagements Seasoned, senior professionals with background in psychology and human resources. Average 20+ years of experience as trusted advisors to C-Suite Office locations in Honolulu, Silicon Valley and New York Services: Strategy implementation – Organization Design – Culture Change – Individual and Team Executive Effectiveness – 9 ©2008 Dawson Consulting Group www.DawsonConsult.com

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Human Capital Risk For Investors ©2008 Chris Dawson

  • 1. Proprietary Material Do Not Copy or Distribute ©2008 Dawson Consulting Group 1 www.DawsonConsult.com 650 773 2925 cdawson@DawsonConsult.com
  • 2. Investors face many risks in seeking an above-market return: – Financial, Technical, Market risk get the most attention Human capital risk is no ‘less’ a risk, but commonly assigned less importance – Only because it is less easy to assess and manage, not because it is truly less of a risk – People and Culture are the most common root causes for business failure – yet investors typically address this entire universe of risk with a single, simple tool: hire or fire the CEO Dawson Consulting Group offers proven, research-based solutions in the human capital space in the area of: strategy implementation, organization design, culture optimization, individual and team executive effectiveness When execution capabilities do not support business plan requirements, risk increases: How many ‘A-players’ do you have managing your investment? – Is the right team culture in place to execute the ‘pitch’ you bought? – Are performance metrics and rewards aligned with execution objectives? – Does the leadership team have a disciplined execution roadmap? – Is the executive team functioning as a high performance team? – 2 ©2008 Dawson Consulting Group www.DawsonConsult.com
  • 3. 3 ©2008 Dawson Consulting Group www.DawsonConsult.com
  • 4. Values & Strategy Drift Misalignments in Structure, Culture, Process Requiring Leadership Continuity Significant Transformation Following Founder Exit Mergers, Acquisitions, Culture Re-Alignment with Divestitures New Business Challenges IPO Accounting and Process Rigor New Talent for Different Business Challenges Acquisitions Executive Transition, Search, and Integration Operational Processes, Team Optimization Infrastructure & Metrics Culture Definition Focus on building strategic Goodness of Fit in organizational capabilities Organization Design Hiring Key Players Role Definition Stable Structures Performance Strategic Roadmap Talent Selection Liquidity Re-Assessment and Human Capital transformation Roadmap Linked to based on external Strategy Return on Scale Up realities and vision of investment for initial new leadership investors Stable Production capability Founding team and execution transition or exit Momentum Formation Formation of competent team well New venture suited to product requiring launch business plan & leadership 4 ©2008 Dawson Consulting Group www.DawsonConsult.com team
  • 5. Phase Formation Stable Scale Up Liquidity Performance Momentum Challenge •Leadership •Product offering •Production •Investor ROI •New strategy Business validated by capability •Business Plan •IPO? or new •New offerings, Challenge sales growth •Reliable accounting rigor markets •Funding execution •Acquisitions? •Merger/acquisition •New growth •Innovative growth Design •Execution •Process •Define & fill new Human •Org •Functioning team discipline discipline executive •Role Definition Capital required for competency •Building stable •Performance •Right Talent Challenge public scrutiny requirements management capabilities •Key Metrics •Founder •Define revitalized •Defined culture •Professional transition & exit or blended M&A management culture •Missing •Tolerance of •Failure to •Complacency •Missing capability Investor capability mediocre talent develop or about raising the or executive talent Risk replace bar for the new •Wrong talent •Increased team executive talent strategy conflict •Mismanaged •Fuzzy metrics •Unmanaged founder exit •Unintegrated •Misaligned executive acquisitions culture •Bad or chaotic transition acquisitions •Transformation failure 5 ©2008 Dawson Consulting Group www.DawsonConsult.com
  • 6. RE-INVENTION Resilience Maturity Value INFRASTRUCTURE Stability Creation GROWTH DECLINE Arrogance Dominance Scalability Structures Loss of Complacency Discipline “The Chasm” Go-Go Sales Security Risk Aversion Infancy Survival Eclipse Startup REVENUE & SIZE 6 ©2008 Dawson Consulting Group www.DawsonConsult.com
  • 7. Start-Up Infancy Go-Go Scalability Stability Phase Challenge Growth Creation Concept Survival Sales Planned Value Business Challenge Family culture Action-oriented, trap – ‘one to of major Founder’s Transition Systematization Cultural opportunity-driven man show’ professional organizational processes Entrepeneurialism Challenge organization Few systems or bottleneck Process discipline Delegation Labor of love rules Conflict between outstrips Clarification of mission Revenue Negative cash flow ‘new’ and ‘old’ cultures Management by infrastructure and vision Everyone does crisis Values crisis Reactive marketing Performance focus everything Get it done and sales Focus on profitability Fluid & ambiguous and sustaintability People more Problems become roles important than crises rapidly processes Entrepreneur, Deal-maker Hard-Driver, Delegation, planning, Executive level Entrepreneur, Deal-maker Hard-Driver, Delegation, Executive Leadership visionary competitor and process managerial skills and Alliance Competencies management partnerships Leadership style Product Decisiveness development Strategic focus – out dependent on strategy Active involvement clarity and Role of the tactics selling in all parts of the differentiation Persuasive business Professional Professional Personal energy Selecting the right management people – talent upgrade Team selection & leadership ©2008 Dawson Consulting Group 7 www.DawsonConsult.com
  • 8. 8 ©2008 Dawson Consulting Group www.DawsonConsult.com
  • 9. Founded in 1989 – Silicon Valley, California Value Proposition: Increase shareholder value through application of research- based human capital tools and methods Pragmatic, business-oriented, not touchy-feely. Rapid-cycle engagements Seasoned, senior professionals with background in psychology and human resources. Average 20+ years of experience as trusted advisors to C-Suite Office locations in Honolulu, Silicon Valley and New York Services: Strategy implementation – Organization Design – Culture Change – Individual and Team Executive Effectiveness – 9 ©2008 Dawson Consulting Group www.DawsonConsult.com