Out of print, ISBN 0-8019-6454-7. I found a used copy at
On The Entrepreneur's Manual
by Richard M. White
An excellent pandect for those starting or running a business. The author has much experience and a rationale attitude. That is, he looks at real problems and offers solutions that make sense, rather describing the current management fad. The coverage is comprehensive: how to decide if your personality is suited to the company, how to make a reasonable business model, how to choose matching personalities in co-founders, a particularly good section on salespeople and closing techniques, and much more.
His list of top recommendations includes:
But most importantly, Mr. White recommends that you remain innovative and think about everything. This is a person who understands about the importance of both processes and process improvement.
- Select and test executive candidates together for team operation
- Implement effective incentive systems
- Use management-by-objectives and management-by-exceptions systems
- Make money immediately
- Develop market profiles
- Investigate and test sales networks
- Develop sales forcasting, projected financial plans, and cash flows for five years
- Aim to satisfy specific venture capital avenues
- Perform appetite-whetting techniques prior to seeking capital
- Set up, train, and motivate, and use ongoing systems to maintain, your sales network
Management by objectives (MBO) means that executives set the company's objectives in clear view of every employee, so company goals come before individual's goals. In other words, it's the vision thing.
Management by exceptions (MBE) means that one sets up standard processes to handle routine cases efficiently, with management time being spent only on exception cases. That management work is then naturally incorporated into an update of the standard processes through process improvement. MBE also includes a process for flagging important "exception" cases, such as too high a return rate or too many late shipments or too high an employee turnover.
Management by motivation (MBM) allows employees to make as much in rewards as they do in pay, but also includes many instant-by-instant intangibles like even-handed praise and constructive criticisms.
These three phrases are the organizing principle of most of his management ideas. It's interesting to see them stated thus, particularly to see use of process inverted as MBE.
Mr. White recommends that one start a company in a growth industry. That plus a good management team can immediately give a startup a 90% chance of success; the management team can correct for any other problems that occur. Without these moves the company drops to the 10% success level widely quoted in the industry.
Starting the Company
Market gap analysis is suggested as a sure-fire way to choose a company direction that makes sense. In short, one generates hundreds of product ideas by analyzing the customer's needs into a hierarchy of subpieces, then selects the best ideas that match one's goals. To me the important aspect is the philosophy that there are billions of ideas out there and your job is to pick the one that makes sense, rather than that one should take a single idea and stick with it forever, through thick and thin.
He proposes that the founders team be built through an interactive test, a 2-day off-site of all the candidates at once, which has six steps: break the ice and establish importance of decisions to be made; candidate intros; one-to-one interviews; departmental team building and testing; total team development and testing; each candidate selects bosses, peers, and subordinates. At each stage, watch to see how the different people perform, what sorts of questions they ask.
Step 4 uses departments for Marketing, Manufacturing, R&D, Administration, Finance, QA, Directors. Each must define departmental goals and objectives for the next three years, work up a milestone outline for meeting those goals, allocate departmental priorities, establish head count and expense estimates for meeting those goals, develop the image the department would like to establish in the market, company, and department's eyes. After one hour, a spokesman should present the decisions to the "company".
The main step is the fifth, in which each person works as part of his/her department to interact with the rest of the company. This lets people actually work together in a situation involving lots of interpersonal interaction. Each department must delegate responsibilities to each candidate to meet the deadline; allow two hours for the assignments and another hour to get department agreement on each. Each candidate then explains and defends his/her decisions. Step 6 is to get a sealed statement from each candidate disqualifying others, putting titles and job descriptions next to all others, including him/herself.
Mr. White also has an organized approach to evaluating candidates during an interview. This involves asking them a series of questions that are carefully designed to reveal their personality and experience. His questions are targeted at executives. For instance:
But I think the technique is appropriate for others too, the concept being to provide scenarios to see how the interviewee responds to the big picture. For instance, high-level coders could be tested for
- I am your boss. It is discovered I have an undisclosed conflict of interests which is costing us 10% more in purchases. What do you do?
- When should someone be fired?
- How do you control purchasing?
- How do we motivate and sustain key workers?
- How should QA and customer support and development fit together?
It's most important that each scenario have no single correct answer; each should be a dilemma that reveals tendencies. Incorrect thinking would be apparent as too strong a tendency or just a lack of appreciation of the problems.
- Make or buy preferences
- Ability to trust in others
- Knowledge of how to debrief a customer
- Thoughts on code quality
- Ability to handle a big project as smaller but still big abstract pieces
- Ability to come up with workarounds to get the job done rather than doing everything in the schoolbook way
- Use of reference books and other people as resources as needed.
Mr. White proposes an incentive system that seems dubious. He lays it all out with a practiced hand, but I don't see how the typical company can tie profits to milestones with any accuracy.
In his method, every milestone has a quantity of stock associated with it. Each new project gets a trust of stock to be distributed along with its milestones. The effect is that each milestone is actually worth money (well, stock anyway) for timely completion. The leader of a project gets increased payback but can lose the position and straight-line rewards by being replaced. In addition, stock is given for company-wide goals, and for individual goals. Blind performance reviews by peers also provides incentive. Use different questions each month so people have to do better oveall rather than just in certain textbook areas.
I've touched on a few items, but this compendium is not summarizable. There's no substitue for having the book itself. It's chock full of tips and advice on all aspects of running a company.
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June 26, 1996: created.
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