Stephen Shu, PhD

"Losing your teeth is only a money-making proposition (from the tooth fairy) for a limited period of time," says father Shu to daughter Shu.

Same goes for business. You probably saw that one coming from a mile away.

There are countless people who recommend walking away from deals that are either too one-sided and/or are money losers (where you are losing your teeth) up-front with expectations on the come. While I’m more in agreement with the former than the latter, I anecdotally agree that it’s uncommon to see deals that are money-losers up-front generate dollars on the come. Exceptions that come to mind are if the loss process is tuned into the product or product line, if substantial investment is required for first-mover advantages (e.g., multinationals doing business in China and not getting returns for many years because of culture and economic structures), and if complementary product sales are part of the biz strategy (e.g., giving away video game players to make money on the game cartridges).

But I’m not such a hardliner on walking away from individual deals on the margin as some may be (even when factoring in cost of capital, provided that cost of capital is not ridiculously steep in some dimension). Based on my comment to my daughter, it was implied that one could make money for a period of time by losing one’s teeth. Heck counting teeth and quarters is easy. Just a little different kind of economics and counting when you are dealing with companies because you may be sizing up business development, controller, execution bandwidth, and partner capabilities in addition to the teeth in various intercompany agreements.

Just some other areas to consider before taking a deal on the margin:

• if you finding yourself praying that the deal will turn positive in the future ("spider sense" is tingling)
• if you are a small business, independent practitioner, or venture, consider the psychological role that momentum plays in entrepreneurial settings
• how you feel about how committed folks are on realizing post-deal value (if it’s too complicated on this dimension, then that may set off your spider senses again)
• if you personally have any biases that may be affecting your judgement in this particular deal.

I found this post at the Entrepreneurial Mind (indirect via Christian Mayaud here), which focuses on the topic of firing employees because of a lack of culture fit. The general tone of the article, in my mind, supports the case for small employers and ventures to let go of employees that do not fit into the culture fostered by the business.

In general, I can support such a notion, but there are some pre-conditions that should be met (some more than others):

• the manager should be very conscious that while discrimination is allowed, it is illegal for some classes/criteria explicitly protected by employment laws (e.g., gender, veterans)
• the manager should work with the subordinate as much as possible to make sure the subordinate is aware of areas where they could improve – can be a delicate subject, but things should be well-intended by the manager in any case
• the manager should clearly understand the terms of the contractual agreement with the employee (e.g., at-will employment, termination clauses)
• the manager should be cognizant of balancing culture fit, diversity, creative tension, and disharmony prior to making a termination decision.

I guess to frame things in a bit of a different light, as compared to larger companies, some ventures will only succeed if the chemistry is right up-front. As opposed to thinking about things as discriminating against those that don’t fit the culture, one can think about things as actively selecting those that fit with and/or complement the vision, culture, and needs of the company and shedding the rest. Shedding people is tough. In some cases, even if the manager doesn’t want to shed people, the whole company may be in a bind (or dead) if it doesn’t.

As a sanity check, I think that a manager also needs to reflect on when people are fired and feel at least a little bad. That sort of sensitivity keeps an organization in check and helps to ensure that firing someone for a lack of culture fit (for lack of better words) is not just rationalization for unjustified discrimination.

My partner over at The CIO Weblog, Prashanth Rai is addressing an interesting topic over at his personal blog on non-technical managers managing technical people.

As a person that has two engineering degrees but has been involved in management and business development for awhile, another interesting flavor is getting salespeople and engineers/programmers to work together. It is something that I face very frequently in my role at 21Publish.

Some things I would say about the sales & engineering linkage topic (some of which is generally relevant to Prashanth’s topic, even though what I describe is a peer-to-peer relationship versus a strict manager-subordinate role):

1. have respect for the strengths of the different parties in the different functional roles
2. know one’s own limits
3. expand one’s knowledge about what the other party needs to do on a day-to-day basis to win and try to help where you can (or at least be supportive)
4. remember that salespeople and business development folks are looking for opportunities to win customers and grow the business on a day-to-day basis (but they need to be careful of overselling)
5. recognize that engineers like to build quality/foolproof stuff … salespeople people need to listen carefully to what engineers are saying on issues, etc. because what they are saying is often rigorous and precise
6. at the same time, engineers need to recognize that salespeople need to boil things up, if only to be able to communicate with management associated with the sales prospect.

Update (8/4/05): A follow-on thought: salespeople should also try to tap into engineers and programmers for creativity. Getting sales, business development, and R&D to work together can spark innovation (or at least it can make for a fun environment).