Some of the most valuable resources might be your future competitors and, without a doubt, people sitting across the table from you in any number of meetings may offer valuable advice. Whether you're marketing your product or service or raising funding, the customers, lawyers, venture capitalists and accountants who work with early-stage companies could offer you priceless advice.
Chapter Eight offers a view from across the table. Springboard advisors and investors offer you advice from their own playbooks. Pay attention to what Cal Hackeman has to say about presenting your financials to potential investors in his article, "Why Some Ideas Get Millions and Others Get Zilch." Be sure you understand your own financial models and the assumptions upon which they are constructed. No one's financials at an early stage or in a high-growth business ever prove to be totally correct. The things I pay closer attention to are the assumptions upon which the financials are built. This is where an investor gets insight into the CEO's thinking about how to build the business. Understanding the assumptions and accessing them to be valid is one way potential investors can size up a deal.
Lauren Flanagan offers her perspective on what investors want to see before investing. In her article, "Seven Things Investors Love to See," she sets forth her checklist for investing. Lauren is a GP in BELLE Capital, is on her third investment fund and is often cited as one of the leading angel investors in the country. She knows how to judge investment-grade companies, and entrepreneurs should take her advice seriously. Ask yourself, "Can I meet these standards?" If you can't, keep working on your business until you do, to give yourself the competitive advantage you'll need when vying for investor dollars.
You will find more valuable advice from Pamela Contag, serial entrepreneur and a board member of Springboard in her article, "Five Ways to Close the Deal." Kelly Fitzsimmons, also a serial entrepreneur and investor, shares her experiences with strategic investors, especially learning to read how they think. Many entrepreneurs underestimate the amount of time and number of resources it takes to get deals done with large corporations. Kelly gives advice from hard-won experience on how to cement that deal.
Practical advice on compensation issues is offered by Jessica Catlow, an attorney who specializes in employment law. Knowing the regulations setup in your state of business can save you costly lawsuits from disgruntled employees later on. Ellen Corenswet, a longtime advisor and lawyer for dozens of early-stage companies, takes you through what you should know about term sheets before you set out on the process of fund-raising.
Last, but not least, Dana Ardi shares her vast experience in shaping the management teams of legions of high-growth companies in her article, "Seven Predictions for the Future of Work." She has condensed this information from her acclaimed book, The Fall of the Alphas: The New Beta Way to Connect, Collaborate, Influence-and Lead.
Take advantage of what these experts share with you. Find out what they're thinking. Many have benefited from their experience, and many more would have if only they had access to their clear thinking. It is my hope that you will be among the fortunate who will benefit. I wish you all success in business and life. And when you achieve your goals, please come back to us and share your wisdom so those who follow will share in your knowledge. Pay it forward: That is the Springboard way.
Why Some Ideas Get Millions, and Others Get Zilch
Cal Hackeman
If you want investment, you need to learn investor-speak.
Entrepreneurs come up with gazillions of great ideas every year. They all require financial capital, as well as human capital, to become successful businesses. Obtaining that financial capital is one of the biggest challenges of being an entrepreneur.
So why do some ideas get millions of dollars of investment, and others get nothing?
Speak investor.
One part of the answer to that question lies in how you present your financial forecast to your potential investors. You need to present a compelling financial case for them to invest, just as you present a compelling case for the need for your idea and the likelihood that it will achieve market acceptance. Your financial forecast should have enough specifics to be credible but not so much information that your potential investors lose interest as they wade through spreadsheet after spreadsheet. The numbers you present must comply with generally accepted accounting principles, because one day you will have to compare your actual financial performance to the forecasts in your pitch packet. That should be an apples-to-apples comparison.
How much financial information is enough? What is too much?
As a potential investor, I want to know what you are going to do with the capital I give you, and what I can expect to receive as you use that capital to turn your idea into a business. I don't need to know the details of how you are going to spend every dollar.
Start by thinking about your business. Which activities are critical, and how much revenue will they generate? I suggest grouping the critical activities the way you will manage your business and then preparing your financial forecast using those categories. As a rule of thumb, if an activity is not going to require more than 5 to 10 percent of your expenditures, or if it is not going to generate 5 to 10 percent of your revenues, it probably doesn't need a separate line in your financial forecast. Instead, lump those expenditures or revenues together with a similar category.
Make sure your financial forecast is on solid ground.
Do not assume that cash coming in or going out of your business will result in revenue or expenses, respectively. When it comes to financial reporting, accounting and cash flow are very different things. Your potential investors will want to know your forecast for both. They will be the first to point out the errors of your ways if you tell them they are going to be the same.
Revenue is a particularly challenging and important number in your financial forecast. Make sure your financial advisor knows how your business should recognize revenue in accordance with generally accepted accounting principles, and prepare your forecast on this basis. If you and your financial advisor aren't sure, seek professional guidance from a CPA who has other clients in your business.
Presentation can make all the difference.
One of my pet peeves is financial forecasts that supply exact dollar amounts (e.g., $169,478 of marketing and sales expense) out into Year 3. If you are that good at predicting the future, you should probably skip going into business and just predict the future for a living.
Rounded amounts (e.g., $169,000) give your potential investors all the information they need and will help them stay focused on the big picture. I would also avoid truncating your financials ($169K or worse yet, $.169M) in the early stages of your business and capital raising. Truncating will come later when your sales and operations are so large that the amounts no longer comfortably fit in your financial results.
Forecast a reasonable profit within a reasonable period of time.
Potential investors are expecting to earn a return on their investment. They are taking a risk by investing in your idea and they expect to be rewarded for doing so. If your financial projections do not show revenue growing faster than expenses after the initial start-up phase, you probably should rethink your business model.
On the other extreme, the "hockey stick" growth curve is tough to achieve and most likely not realistic in today's economy. If you are projecting hockey stick growth, you will need to be prepared to defend it with very convincing and reliable market data. Remember, you are starting or growing a business, not a charitable organization. That means you should be forecasting a reasonable profit within a reasonable period of time.
Make sure it all syncs.
Finally, make certain that your financial projections are in sync with the language you use to describe why an investor should give your idea serious consideration. If you say that there is a huge market for your product or service, your financial projections should show that you are going to capture a reasonable share of that market over time and do so in a way that provides capital for future investment and provides a return of capital to your investors.
After you finish your financial projections, put them away for a day or two and then take them out and look at them without the rest of your pitch packet. Do your financials tell potential investors what you are going to be doing and how you are going to do it? Do they present convincing evidence that will entice an investor, or do they just raise a lot of questions as to what your business model is all about? Hopefully they are convincing, not confusing, and will add to the excitement your would-be backers already feel.
KAY'S TAKEAWAYS:
Prepare clear and concise top-line financial projections.
Make sure your assumptions are in sync with your business storyline.
Be prepared to speak confidently about your financials. Investors want to know that you understand the proposition you are offering.
Seven Things Investors Love to See
Lauren Flanagan
Want investors to take your start-up seriously? Here are seven things you need to do.
Raising start-up money is never easy. For women, minorities and entrepreneurs located between the coasts, it can be like weightlifting on Venus.
These seven proven strategies will help elevate your start-up in the eyes of potential investors.
1. Field a strong core team.
Investors bet on the jockeys. If you can recruit top talent on a shoestring, that shows you've got leadership ability. Investors also look for domain expertise, and for prior entrepreneurial experience among the founding team. Teams that have worked together before are preferred-this should not be your first rodeo. Likewise, teams that have generated prior successful exits for their investors generally get funded more quickly and at higher valuations.
2. Fill an unmet need for a billion-dollar market.
Investors look for "must-have" rather than "nice-to-have" solutions to big market problems. Big markets mean that you have room to succeed despite mistakes, and that your solution will be more attractive to potential acquirers. Make sure to accurately calculate your addressable market, and to build sales projections from the bottom up. Statements such as, "This is a $3 billion market, so once we get 5 percent of it, we'll have $150 million in revenues," just aren't credible. Few companies achieve even 1 percent market penetration.
3. Fill the gaps in your management team with experienced board and advisory members, and use the best professional service providers.
A good start-up board has three members: the CEO, a seed investor representative and an independent industry expert. The latter two should be making customer/strategic partner and investor introductions. Your advisory council should comprise a mixture of industry and domain experts.
Adding successful entrepreneurs can also give you invaluable insights and cachet. Sign them on for two to three years and pay them with stock options. Engage top law firms (general and intellectual property) and financial advisors (CPA, taxes, auditor). Forming a strong board and hiring top professional service providers shows investors you know what you're doing, and showcases your value proposition before you can pay much in the way of fees.
4. Demonstrate sales traction with your reference customers.
Nothing smells like success to big-name customers like sales. If your product or service is still being tested, sign market-leading customers to paid pilots, get them to agree in advance to success metrics and ask them to serve as references for investors and other potential customers.
5. Form strategic partnerships that give you competitive advantages or economies of scale.
The best capital is the capital you don't have to raise. Seek transformative partnerships that help you get to market faster, distribute more widely or manufacture more cost-effectively. Then structure a deal that tightly weaves your start-up into the fabric of your partner.
6. Show how your business will make money and achieve scale.
Investors want to know how they will make money. Eighty percent of investor exits come from mergers or acquisitions of less than $200 million; 50 percent are under $50 million. Early-stage investors want to make ten to twenty times their investment within five years. Show how your start-up will make money, how it will scale, and cite investments in comparable companies at comparable stages to illustrate the potential returns to investors.
7. Develop a detailed financial model and capital plan.
Build your financial model from the bottom up. Try to project monthly cash flows for the first two years, and quarterly cash flows for the next three years. Estimate how much cash you will need to get to each major value driver before you reach cash flow break-even. You need to be able to answer the key investor question: How much total capital is required to get your start-up to exit?
Make sure you're targeting investors interested in your market segment, but don't let "no" slow you down. Your skin will get thicker and your pitch more persuasive. Keep on hunting until you find the right investor fit.
KAY'S TAKEAWAYS:
Build a strong team of managers, advisors and strategic partners.
Fill the need of an unmet market that can support your business to scale.
Show investors how you will make money for them.
Five Ways to Close the Deal
Pamela R. Contag
When do you just need to hang in there, and when are you being strung along? Some tips to get you on the right track.
Over the last eighteen years, I have been inside almost every Big and Small Pharma company pitching a deal of some sort for one company (my own) or another (not my own).
Some years ago, I had a very cool technology that would fit perfectly into another company's product. I contacted the CEO, who agreed with me, and we set out to do our due diligence and, hopefully, close the deal.
While we came to an early understanding of how the companies fit together, the specific terms of the collaboration seemed to take forever to work out. As the months dragged on, I thought daily about calling it quits, but pinged the company weekly in hopes of getting to a quicker close. There was even a time when my CFO said, "Let's at least threaten to walk." My response was, "Rome wasn't built in a day."
Each week we made some progress, especially on the trust side. The timeline stretched to nine months, during which I was told that they loved the deal and were motivated but needed more time to work on it internally.
At the end of the sixth month, it finally happened. We heard that the delay had nothing to do with us but everything to do with internal financials. Our patience was rewarded. We got the terms nailed down and signature pages completed. Threatening to walk away would have ruined the trust between us. The deal turned out to be a great opportunity for both parties, as I originally envisioned.
That experience has guided me through all my subsequent transactions, including the road show for my initial public offering, the sale of my company and the raising of capital for several businesses.
Here are five things I have learned about closing deals:
Start every deal with a clear view of how both sides benefit by knowing the core business.
This, to me, is always the hardest analysis. You need to know what the value of the deal is. You can't ask for less than the project is worth, of course, but overreaching can also kill a deal. Sometimes the added value of the deal is intangible. I try to paint a picture for all showing just that.
The hardest deal to close is the one that you need to stay alive.
Never believe that one lost deal will be the downfall of your company.
Work to build trust.
Get to know the people you will be in business with and, more importantly, how they work best. Posturing erodes the trust you have built.
Patience is a virtue.
No matter how much you want the deal to close quickly, deals always take time, patience and an understanding of what the person on the other side of the table is dealing with internally.
Don't be biased by your contact's title. Remember that even if the person across the table isn't the final decision maker, they will likely be your first internal champion.
Deals never happen quickly or the way you originally envision. But if you approach them in the right way, patience, honesty and trust can go a long way.
KAY'S TAKEAWAYS:
Start the process by knowing how each participant will benefit from the deal.
Build trust among the parties. When the negotiations get to the final strokes, some decision makers rely on trust to close the deal.
Strategic Partnerships: The View from the Other Side
Kelly Fitzsimmons
As an entrepreneur, your partnership with BigCo might be the most important thing your company has going right now. Chances are BigCo doesn't see it that way.
For some entrepreneurs, this is the dream: Find a tiger-a large, global company that can provide sales, distribution and branding for your product or service-and ride them to the promised land.
What the entrepreneur often fails to see, of course, is how this relationship looks to the tiger! We picture ourselves as important, helpful, a meaningful contributor. But to the tiger, we may be a flea, an annoying gnat or just a chatty spider monkey bouncing up and down for attention.
To avoid being ignored or worse, eaten, the entrepreneur needs to understand the tiger's perspective.
Beth Bronner, managing director of Mistral Equity Partners, has a tiger's perspective. She spent decades as an AT&T executive, guiding multiple strategic partnerships. Bronner is blunt: "It is unusual that the partnership is as important to the global player as it is to the start-up." That's not to say the partnership doesn't have value, Bronner emphasizes. "Large companies need help with creative solutions. They often have problems with innovation and need the partnership."
She advises start-up entrepreneurs to cultivate patience-a trait often lacking in the average start-up CEO (self included)-and be ready to wait. By planning long lead times into any partnership plan, you can avoid the pitfall of being too optimistic too early.
In March, I participated in a panel discussion about strategic partnerships hosted by the State University of New York Levin Institute. Here's what I've learned-from my own experience, from Bronner and from my fellow panelists.
1. Large, global companies are not nimble and tend not to move fast.
Don't set the relationship up to fail by insisting on unrealistic deadlines or trying to convey a false sense of urgency.
2. When waiting for a response, try not to go around your contacts.
Chain of command matters, and someone who feels like you've attempted an end run can easily get you blocked from the account.
3. Be prepared!
Come to your meetings armed with detailed questions that will help you quickly assess how the partner has worked in the past with other start-ups similar to yours.
4. Do not give out too much information too early.
Invite more interest by providing tantalizing tidbits and highlighting the possibilities.
5. Make sure to get the right nondisclosure agreements in place early on and have them reviewed by your attorneys.
Without diligence here, you can give up valuable rights and even intellectual property in the NDA.
6. Make it easy for your sponsor to help you.
Clear and direct requests show that you are considerate of their time and understand their pressures.
7. Be likable.
People help those they like. And if you don't like them, chances are that they don't like you either. Find a new contact or move on. Otherwise, you are wasting your time.
8. Your sponsor is only one window into the organization and may not be aware of forces working against you.
Try to triangulate your relationship quickly as possible in parallel. (See No. 2.)
9. Share good news along the way, and do it often.
A partner will be more interested if they can see tangible progress over time.
10. Cultivate a pipeline.
Partnerships work a lot like customer acquisition. Not every one works out. Make sure that you have multiple partners at the table.
11. Do your homework.
If you show up asking basic questions about your partner's business, consider the relationship over. Fortune smiles on the prepared.
KAY'S TAKEAWAYS:
While you may value a partnership with a big global brand, you will not be as important to them as they are to you, so be patient.
Large companies are generally slow. Allow for long lead times.
When meeting with your contacts at the firm, come prepared and be considerate of their time. Do your homework.
Make it easy for your sponsor as the partner to help you. Be clear and concise when making a request.
Cultivate relationships and share good news. Be likable and respect the chain of command!
The Two Biggest Pay Mistakes You're Making-and How to Avoid Them
Jessica Catlow
Looking at employment laws now will save you headaches later.
You have your great idea, your business plan and some seed capital from friends and family; now you are ready to build out your team. At this critical stage, often overlooked are the various rules governing the employment relationship, especially around compensation. This oversight then comes back to haunt you when potential investors are kicking the proverbial tires during your first major capital raise and they want your company to make representations and warranties regarding the company's compliance with various compensation and employment laws.
These are two common mistakes made by start-ups. Avoiding these can spare you from unnecessary headaches and save money:
1. Don't misclassify employees as independent contractors.
One of the most common practices of small companies is to engage a host of "freelancers," sometimes referred to using the misnomer "1099 employees," because, oftentimes, the company cannot afford to have dedicated full-time staff. However, just because you call someone a "freelancer" (and they agree to be so called) does not mean they are not considered employees in the eyes of the law.
Employers are required to withhold income, Social Security and Medicare taxes from employee compensation, pay unemployment taxes on wages paid to employees and provide state workers' compensation coverage. Employers are not required to do so for properly classified independent contractors. If you misclassify an employee as an independent contractor and fail to make these required withholdings and tax payments, your company could be subject to penalties, interest and back taxes.
The Internal Revenue Service and most state agencies use a twenty-factor test to determine whether a person is properly classified as an independent contractor. The factors focus primarily on behavioral control, i.e., the "when, where and how" in providing the services. The IRS and state agencies view the classification narrowly, and the general assumption is that the individuals are employees.
Unless you are engaging someone to perform a discrete one-time project or provide a service unrelated to your business (think of the contractor painting your new office space), it is usually a better practice to assume that the individual should be classified as an employee.
2. Don't fail to pay certain employees overtime pay.
Another common mistake made by young companies is to pay their employees on a salary rather than hourly basis, and assume that, because they are paid a salary, those employees are not entitled to overtime pay.
Under both federal and generally all states' laws, employees are entitled to be paid time and a half for all hours worked over forty in each work week, unless they are properly classified as executive, administrative or professional employees. Whether the employees fit into one of these categories and therefore are not entitled to overtime pay depends largely on the nature of their primary duties. Generally, only employees with authority to make independent decisions over matters of significance are properly classified as exempt from overtime. You should carefully consider whether an exemption is available for a particular employee. Failure to do so can be costly: Federal laws and many state laws will award punitive damages and attorneys' fees, in addition to the unpaid overtime, on wage claims brought by employees.
I know you have many things to focus on in your venture but, as the saying goes, an ounce of prevention is better than a pound of cure. It's better to get it right in the beginning than pay the consequences down the road.
KAY'S TAKEAWAYS:
Decide whether to classify workers as independent contractors or employees.
Determine which employees must be paid overtime.
Ten Things You Should Know about Term Sheets for Equity Financing
Ellen Corenswet
Raising money, even in the best of funding environments and with the hottest idea, is time-consuming and challenging.
The terminology-"pre-money," "priced round," "Series A," "participating preferred"-is like learning a foreign language. Valuation alone may not be the most important measure of the best term sheet.
And you're supposed to learn and handle this successfully while you're growing and running your company.
The following tips should prove helpful in navigating the equity financing arena, particularly in your first professional angel or venture capital round.
There is no one size fits all.
What is a good or bad term sheet will depend on a number of factors, including the stage of the company, the nature of the existing and new investors, the credentials of the management team, the "hot" fundable ideas du jour, the amount and terms of funds you've raised to date and the investment environment.
Raise enough money to take you to the next valuation inflection point.
Fund-raising is tremendously time-consuming and you will almost always need more money than you think to get to the next stage. How much funding do you need to achieve one or more milestones that will truly make your company more valuable in the next round of financing?
Evaluate the proposed valuation in the context of the entire term sheet and the quality of the investor.
The highest valuation may not be the best overall deal. And a high valuation can lead to unhappy investors if the next financing is at a lower valuation. Also, if you have the luxury of choosing among lead investors, consider who will make the best partner to work with going forward-who shares your vision, really understands the space, shows enthusiasm and trust.
Build your own pro forma cap table showing post-deal equity ownership. Include the cap table in the term sheet.
This will help you understand the impact of the proposed economic terms on management and existing investors and will reduce the chance of a misunderstanding between the company and the investors regarding how the proposed terms actually work. The cap table should include an equity pool reserved for employees and other service providers that is adequate to attract the necessary talent to take the company to the next level (typically 10 to 20 percent of total shares).
The principal factor affecting "real" valuation is the liquidation preference.
Is the preferred stock participating or nonparticipating? Is the participation capped? Prepare a model of how the proceeds of a sale of the company would be split among the equity holders at different sale prices.
Control of the company is driven by the terms of the investment documents, not just the percentage ownership.
Investors will have veto rights over later financings, a sale of the company and certain other actions, no matter what percentage they own. Also, the agreements will address investor representation on the board of directors and may dictate the "slots" for the entire board and board committees. Try to build a balanced board of directors, including industry experts who are neither management nor investors.
Do your own diligence on the investors while they do theirs on you and the company.
What is their industry knowledge and network, their "dry powder" for later rounds? How have they conducted themselves with other portfolio companies?
Pick your issues.
Don't negotiate every term. Make sure you understand what each proposed term means, whether it is "standard" and what the alternatives are.
Understand the role of the CEO/founder in the term sheet negotiation.
As CEO, you are negotiating on behalf of the company (your stockholders/members), not on behalf of yourself. You can-and should-make sure you are adequately incentivized, but that is a separate and parallel negotiation. Note that employment agreements are rare in early-stage companies.
Engage an experienced lawyer to assist the company in the transaction.
Your "friend" or "personal lawyer" may be the closest to you and the least expensive on an hourly basis, but having a lawyer who has handled numerous venture transactions and represented numerous emerging companies will, in the end, make the transaction go much more smoothly and at a lower overall cost.
KAY'S TAKEAWAYS:
There is no one size fits all in term sheets. Be prepared to modify according to stage of offer, valuation and investor's appetite.
Valuations are tough, but equity and terms are equally important.
Understand that as CEO you are negotiating for the company. Separately, have representation for yourself before completing the deal.
Kicked Out of Your Own Company: What to Do
Susan Strausberg
It happens more than we admit: Entrepreneurs get kicked out of their own companies. What to do when it happens to you.
As the cofounder and CEO of EDGAR Online, I ran the company for thirteen years. For the vast majority of that time I was fully focused on the development and growth of the company and firmly committed to remaining the CEO until I felt we'd achieved our vision. But after a very desirable acquirer backed out, my investors grew restless and pushed for a succession plan. Two months later, I was informed by the board that the succession plan had been accelerated and that our president would now be the CEO.
This sort of scenario happens far more often than either entrepreneurs or investors like to admit. Here's how, when the time comes, you can be prepared:
Write your succession plan.
Whether your company is public or private, make sure you have a succession plan and that your interests are protected. Assume that your separation agreement will have a noncompete clause, and make sure you understand the terms of it. The noncompete should relate to your company's business specifically, and should not prohibit you from other types of ventures. Even if you live in California, where most noncompetes are unenforceable, you don't want to be heading to court just as you're being ousted.
My noncompete restricted me from engaging in ventures in financial information, which was entirely reasonable. I had stock ownership in my company and it was in my best interest for the company to continue to thrive. Also, in reality, broad or overly general noncompetes rarely hold up in court, so it is in both parties' interests to be clear and fair.
Keep a stiff upper lip.
When the rug gets pulled out from under you, you have to somehow keep it together. You have to immediately come to terms with the decision and behave with extreme dignity that befits the legacy you plan to leave. Above all, as unpleasant as it can be, you need to understand that you anticipated this and participated in the succession process.
When it happened to me, I called a trusted advisor for input and sympathy. His first question was, "Did you cry?" I said, "No," and he congratulated me, saying that is the thing people fear most about women CEOs. (Great.) His next question was, "Are you going to stay on the board?" That's an important question, because as long as you remain on the board, you are subject to regulations concerning purchases or sales of stock in the company. You're also setting yourself up for some pretty uncomfortable meetings. I remained on the board until it became absolutely clear that my input would either be ignored or worse.
Get out of Dodge-at least mentally.
You need to get a new perspective immediately. A fresh start will give you a sense of relief, which you will certainly need. I started a new venture, and we decided that New York was not the right place to do that. The conditions of my noncompete, plus my pride in EDGAR Online, made it impossible to engage my original founding team. We moved to Austin, Texas, where we felt the environment would be more supportive.
Yes, you could do it better. Forget it.
Don't stress over the problems of your former company. Maybe the stock is tanking and the new management is clearly clueless. You can't do anything about it. Think about it this way: You want to concentrate on the new company, in which there are a myriad of things you actually can control.
Ask yourself this: Are you as passionate about your next innovation as you were about the previous one(s)? Are you driven to look forward, not back? Can you apply everything you learned at that earlier company to make your next one even more successful? The opportunity to feel the rush of a start-up is not limited to your first company. It's the gift that keeps on giving.
KAY'S TAKEAWAYS:
Once investors are involved, the board's plan for growth of your company may include removing you as CEO. Be prepared to execute your succession plan with grace and understand the terms of your separation and noncompete agreements.
Understand that it will be a difficult time, but that you knew this might happen. Move on and through it as quickly as possible.
Move on! And do something that drives you forward so you won't be looking back.
Seven Predictions for the Future of Work
Dana Ardi
Everything you thought you knew about the workplace is already outdated.
Gone are the days when decisions were made from the top down and when all anyone was expected to do was simply "their job." As a corporate anthropologist, I study the cultures of organizations-how they evolve and intersect with what's happening right now, and how the people in them influence and shape their communities. Here are a few changes you should be preparing yourself and your business for.
The talent pool will grow.
As the use of robotics and automation technology increase, humans will no longer be asked to perform rote tasks. That means the nature of jobs will change. Greater connectivity means we will have greater access to talent literally all over the planet.
A new form of labor pool and market where individuals, project teams, or even entrepreneurial companies (that are really just teams of teams) from all over the world will bid on high-value tasks and opportunities. This new dynamic will not only increase the efficiency of organizations, it will also change the notion of what "managing" means. It will also create competitive pressures for organizations to embrace global languages and cultural awareness as a way to appeal to the most talented workers.
Collaboration will be the norm.
The type of company-and people-that will thrive in this new environment will embrace collaboration and teamwork. I call them the Betas. The old-fashioned Alpha way of doing business-top-down, command-and-control-will no longer be viable.
As Alpha methods die out, employers will be looking for innovators, technologists and big thinkers. Data managers will remain in high demand as will people with the skills to manage a diverse workforce.
"Limited contracts" will rise.
As we move into a craftsman and service economy, people will work for organizations for two to four years with incentives built in to compensate them for the level of impact they bring to the organization.
Specialization will be even more essential.
The flatter and more networked the workplace becomes, the more essential it will be for people to continually build their skill set and maintain a level of specialization that enables them to stand out in a crowd of talent.
Social networks will become a way to partner.
Workers at all levels will need to market themselves through their social networks, forming partnerships and gaining influence by striking deals based on their deep skill specializations.
Everyone will become an entrepreneur.
People will work for and with many clients and partners simultaneously. At the same time, individuals will have greater control over the kind of work they tackle and how they are compensated.
Individual contribution, not pay grade, will be rewarded.
With a more peer-to-peer network in place, individuals stand to reap greater rewards than in the more inefficient hierarchical systems of the past where those at the top of the pyramid paid themselves first. Rewards will be tied to the value of an individual's contribution and not to any artificial title.
I write about the rise of this new kind of organization and workforce in my book, The Fall of the Alphas. The future of work will be different than it is today and, as the old adage says, fortune favors the prepared.
KAY'S TAKEAWAYS:
The talent pool will grow with teams of people inside and outside corporations.
Everyone will become an entrepreneur, selling skills.
Social networks will become the connectors of work engagement.
The ability to continually market yourself will determine success.
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