StartupGarden: January 2004 Archives

Who Really Matters--great new book

In the currency of business books, new ideas are rare. There are so many experts touting innovation and radical business models that most good ideas are quickly packaged and marketed and essentially commoditized in the marketplace. One of the few folks speaking with an original and intelligent voice is Art Kleiner (who keeps a lively webpage.) I’ve often cited his The Age of Heretics: Heros, Outlaws, and the Forerunnersof Corporate Change as one of my favorite business books. Now he has a new work, Who Really Matters: The Core Group Theory of Power, Privilege, and Success, which is another standout.

I reviewed his book in this past Sunday’s Boston Globe. Here is a slightly expanded version of that review:

In his new, important book, business thinker Art Kleiner gets to the heart of what makes organizations tick with one simple question: who is in?

Such a query—and its accompanying query of ‘who is out?’—identifies one of the most powerful yet rarely addressed dynamics of corporate life. According to Kleiner, "in every company, agency, institution, and enterprise, there is some Core Group of key people—the ‘people who really matter.’ Every organization is continually acting to fulfill the perceived needs and priorities of its Core Group."

Set aside the nobility of mission statements and momentum of big hairy audacious goals. Companies exist to serve the financial and psychological needs of the chosen few. Kleiner argues that power resides not in the formal structures and flow charts of an organization but in this rarely identified Core Group. These members receive lavish salaries, comfortable perks and recognition, and a security from such complications as having to book travel arrangements or deal with personal details.

All other organization men and women are what Kleiner calls "employees of mutual consent"—people who act on the perceived needs of the Core Group, whether they do so directly or down the chain of command. While these individuals can achieve financial security and even personal fulfillment, they never enjoy the perks and privileges of the insiders. Kleiner shows how organizations move and act based on the collective decisions of its members, and demonstrates how the Core Group needs, both real and perceived, cascade through the organization as a series of decisions.

Core Groups are neither inherently good nor bad, Kleiner argues; they simple are. Their members shape the values and direction of the company, and their needs direct the company. "The Core Group is like the Sun King—wherever it puts its attention, things shine," he writes. The shape and structure of Core Groups differs from organization to organization. At some companies the Core Groups are not necessarily the highest paid; at other organizations they are not necessarily those people with the highest formal positions of power. Most universities, for instance, are dominated by tenured faculty as opposed to individual deans. Some companies have Expanded-Core-Groups, in which "it is easy for everyone, from the CEO on down, to take the needs and priorities of everyone into account when they make a decision."

Above all, Kleiner argues, Core Group dynamics must be reckoned with in order to point powerful companies toward nobler behavior and to prevent abuses of power. He recommends several mechanisms for guiding the Core Group to benefit the maximum number of the people in the organization. One such practice is that individuals learn to conduct better conversations as a way of identifying Core Group members and opening up their actions to the company as a whole.

As a means of shaping the impact of the Core Group, Kleiner suggests that non-members tap their collective equity (which goes beyond financial equity to include reputation and relationships and capabilities) to form a Shadow Core Group. This alternative to the ruling party serves to raise organizational consciousness, to "build a new awareness of the purpose and potential of the organization among Core Group members, decision-makers throughout the organization, and (most important of all) yourselves."

Kleiner acts more like a corporate anthropologist than a consultant, taking a deeper look at the dynamics of organizational behavior, questioning a few basic assumptions about how corporations actually behave. He refuses to capitulate to business book template 101 by creating a simple recipe for success leveraging the power of the Core Group. This integrity leaves some questions unanswered. He isn’t completely clear on how one becomes a member of the Core Group, for example, and there are numerous places where more specific examples would help. He also allows certain looseness to the argument in places, discussing certain topics as Core Group issues without making the connection completely clear.

But overall, this book provides an important new theory about how organizations really work. Clear, provocative, and useful at a deeper level than any handbook on the fad du jour, Who Really Matters challenges all readers to take a fresh look at how their company truly operates. Kleiner’s call to action deserves a wide audience.

Posted by tom at 11:05 PM

Entrepreneurship in the First Person

A spate of excellent first-person books on starting a business prompts a question: is entrepreneurial education a commodity? Can the basic guts of launching a successful business be distilled into something so basic as investing’s golden rule of "buy low, sell high?" Tolstoy tells us that all happy families are alike, while miserable ones aren’t; but I’ve never found just one template for the successful startup.

Successful guides to startups must gracefully straddle the tangled terrain between personal and professional, logistical and emotional, inspirational and perspirational. In a startup these realms are so often blurred, and individuals need to separate out where possible. Launching a company is often an intensely personal experience with huge logistical demands, punctuated by a series of daunting and blurry decisions that only present themselves over time, as you make other choices. Entrepreneurial learning is essentially a heuristic process, by which I mean to say that you learn how to play the game only once you are playing it. And so any cookbook offering sure-fire recipes for success will inevitably fail you.

Okay, this is a bit of a long-winded windup to some recommendations of excellent recent entrepreneurial titles. These four books share one common thread, which is that they are written in the first person. For, as Barry Moltz says in You Need to Be a Little Crazy: The Truth About Starting a Business, "Regardless of what popular books say, there is no single way to achieve the personal success that you seek."

Here are few reasons why I enjoyed and highly recommend this book. First off, Moltz sheds numerous insights into entrepreneurship as a personal journey rather than a formulaic and predictable process. He shows how everything you bring to the table gets thrown into the mix of whether your venture makes it or not. And he forces you to keep the big picture in mind—the fact that you always need to establish more important goals than mere financial ones. "If you want to financially keep up with your friends, make lots of money, or accumulate wealth, get a job," he says.

Throughout the book he makes excellent and actionable links between personal assets (such as the strength of your networks) and business potential. And in My Truth About Getting Started and Running a Business, which I consider the best chapter in the book, Moltz reveals the source of his authority by sharing how he learned the business essentials about startups. To read more, by the way, visit his website.

Another great quality to this book: Moltz delights in sharing the real pain and danger of launching a business. If you get nothing else from this book, one of the key takeaways is a sharp and at the same time engaging focus on just how many things can and often do go wrong with startups. "It’s not a question of whether you will fail as an entrepreneur, it is simply a question of when and how," Moltz writes. "One key to being a happily successful entrepreneur is the way you handle failure. An entrepreneur is defined by how well he or she handles failure, not by how he handles success."

Tout number two: Barnett C. Helzberg’s What I Learned Before I Sold to Warren Buffet: An Entrepreneur’s Guide to Developing A Highly Successful Company also shares a wealth of solid lessons from experience. This enjoyable book serves as a powerful reminder that the most important asset for any business is good old common sense. Nothing creates wealth and value for any company better than good ideas, hard work, and patient execution. Helzberg earned his podium by building the family business of Helzberg Diamonds into a string of 143 stores in twenty-three states, creating a business so appealing that Warren Buffet’s Berkshire Hathaway bought it in 1995.

He’s a man who clearly derives satisfaction in making the last detail of a well-run business work, and his book focuses on simple yet critical topics. Such as: learning to focus your energy on the right things, developing the discipline to jettison activities that don’t make the right money, hiring the right people, and cultivating the wisdom necessary to manage the balance between leading others and freeing them up to their potential. "Focus is your lever to success. As the leader you need to be sure you and your team are doing the right things, and as managers they need to be doing thing right," he writes.

Mind Your Own Business: A Maverick’s Guide to Business, Leadership, and Life by Sidney Harman is another excellent read from an opinionated and successful entrepreneur (as if they’re ever not opinionated). Like Helzberg, Harmon enjoyed tremendous success (his company is the world’s leader in making high-end audio equipment) and he seems bursting with ideas and opinions to share. Thankfully they’re sensible and intriguing. As someone who served as U.S. Deputy Secretary of Commerce and taught at Harvard, Harman deals with both day-to-day business topics and broader subjects including policy and the nature of the Internet Economy. Throughout this sharp book he animates his lessons with terrific and sensible stories of an accomplished life.

Finally, I’ll not only mention but recommend a book I was prepared to dislike. Doing Business by the Good Book: Fifty-two Lessons on Success Straight from the Bible, by successful black entrepreneur David Steward, uses stories and passages from scripture as a way of sharing truths about business and life. And yet unlike other books that have attempted similar goals (primarily the unseemly Jesus, CEO) and failed by bending over backwards to mine trivial or platitudinous truths, this book is grounded. Because Steward has a story to tell and real examples to supply, he pulls of the difficult task of sharing wisdom without sounding preachy.

Post script: for those of you seeking slightly more impersonal guides that focus on essential operational issues for startups, I’ll just mention several classics. Small Time Operator by Bernard Kamoroff shares just about every detail you need to know about the details of starting and running a small business, with a clear strength in bookkeeping and taxes. William Stolze’s Start Up: An Entrepreneur’s Guide to Launching and Managing a New Business delivers solid grounding in the theory and practice of the early days. And Wilbur Yegge’s Self-Defense Finance for Small Businesses takes you through the nuts and bolts of this critical discipline authoritatively—to which I’d add Jill Fraser’s The Business Owner’s Guide to Finance: When Your Business is Your Paycheck. (Earlier I posted a long piece with my top 25 titles.)

Posted by tom at 10:50 PM