Startup: An Insider's Guide to Launching and Running a Business (17 page)

Does this sound important yet? It should.

So, how do you build a robust and healthy psychological contract with your team? You have heard this since you were a kid: follow the Golden Rule. Treat your employees as you would like to be treated if you were in their shoes. Respect, honesty, and appreciation for effort will get you started.

The subject of the psychological contract in itself could fill up a very long book. Short of making a book out of it, I have compiled it into a list, or more specifically a kind of informal contract. This contract is something that each of my employees gets a copy of when we do performance reviews. This agreement sets a contrast to the usual tone of a review, which is, “What have you done?” and “What will you do for the company?” This is all about how the manager works to fulfill the needs of the employee, which is the cornerstone of any manager relationship in my opinion. This is particularly applicable to knowledge workers and creative workers. In the form presented here, it is less applicable to hourly workers who do things such as man a cash register or work in a call center. This contract is custom-tailored to knowledge workers in many of its details, as most of the people who work for me are engineers or creative professionals.

A Contract for Your Team Members

So much of the discussion between employees and employers is about what the employee needs to do for the company. This is a necessary and valuable topic, but I have found it useful to turn the discussion around by giving the people that work for me a commitment on how I will help
them
to be successful. Here is the contract I offer team members:

My Commitment

1. To provide you with clear instructions and clearly define what is expected of you.
   
2. To make sure you have the resources you need to be successful.
   

   This includes
   

   • Time
     
   • Information
     
   • Equipment
     
   • Budget
     
   • Cooperation from other team members
     
3. To protect your interests.
   

   This means
   

   • To always try to protect your time. I don’t want you to spin your wheels on projects that won’t make a difference to you and to the company.
     
   • To always try to protect your career. While this does not mean that things will always work out, if I am part of the conversation, you are being watched after to the best of my power and ability.
     
4. To help you to grow and reach your goals.
   

   This means:
   

   • To strive to get you the training you need to enhance your skill set.
     
   • To give you the opportunity to make mistakes and to learn by doing.
     
   • To actively seek to help you grow your responsibility to include new areas as your knowledge and skill improves.
     
   • To give you advice and encouragement designed to nudge you toward your best potential, even if that means you eventually grow beyond the company.
     
5. To make sure your contribution is visible to others.
   

   This means
   

   • Employees should get credit for everything they do. As your manager, I will make sure this happens. I know that nothing demotivates quite so powerfully as a manager smiling his way through the process of taking credit for what his subordinates created.
     
6. To not micromanage. You own what you do.
   

   This means
   

   • I recognize that the best employees
     own
     what they do. Their work should be an expression of themselves. If a manager gives too much direction or restriction, then it strips employees of the opportunity to express themselves and invest the full power of their creative energies.
     

A fellow entrepreneur recently shared a story about Sam Walton from early in his career. He was a founding member of the Procter & Gamble/Wal-Mart customer team in northwest Arkansas. This assignment gave him the opportunity to observe Sam Walton in person. He was deeply impressed with how Sam would start his meetings by asking what his senior managers had done for the employees in the last week. He would say that if they were not making support of employees “job number-one,” then they could go work somewhere else. I think I would have liked Sam.

_________________

Manage Different People In Different Ways

Of all the employees I have had the opportunity to work with, every single one of them was a unique expression of personality, talents, weaknesses, needs, attitude, and enthusiasm. In other words, we are all human beings. Big news, right? Ask yourself if you take this into account when you manage your employees. If indeed every employee is unique, then the way that you deal with each employee should ideally be unique as well (I am contemplating the relationship between you and the employees that report directly to you). A one-size-fits-all mentality fails to capture the nuance needed for a real and dynamic team. Some people need more instruction, some less. Some prefer written communication, some verbal. Some people are visual and benefit from working on a whiteboard, some not. If you treat all employees the same, then I would suggest to you that you are missing something.

Learn how the individuals on your team think and how they prefer to work. (Note that this doesn’t mean that company policies apply differently to different individuals.) For instance, on my team now there are employees that need top-level objectives only, and know so much about our business that they can be left to fill in the blanks on the details. There are some employees that need close management of details. And some employees have less experience and need a mentoring role to support them.

Accommodate them with a management style that fits them and they will perform significantly better. I have found that this accommodation on the behalf of the manager can mean the difference between disgruntled and unmotivated employees on one hand, and motivated, engaged, and productive employees on the other.

Employees are the backbone of your business, and believe it or not, less squeezing and more helping from management will increase performance.

_________________

Friends as Employees

At age 23, I started my first company. As any business owner does, I always needed reliable people to help me on projects. I did not yet have a deep network of business relationships and subcontracting companies, so I would do what seemed natural—I would recruit people that I knew. In one memorable case, I hired a high-school friend to work for me. I remember that he was really excited about it. The problem was that he would show up at the job site when he wanted to—he was treating our
work
relationship as a
friend
relationship. Fact is, he impacted my schedule and cost me money because he was unreliable. On finishing our first job together he remarked to me, “That was fun. We gonna do it again?” I replied honestly, immediately, and directly: “You were consistently late and didn’t even show up on the second day of the project because you were hung over. What was all that about?”

Sadly, that was the last time he and I ever spoke. Really, I should not have hired this friend to work in a professional capacity with me. Looking back, his personality was not well suited to it.

Other personal relationships have yielded similar problems, all stemming from this point: when friendship—which means that people have equal status with
one another—blurs into a boss/employee relationship (where what you say is what they have to do), it can cause conflict. In almost all cases, the interpersonal boss/employee position of “my way or the highway” and the buddy position of “we are friends of equal status” have great difficulty reconciling with one another. If an employee makes a mistake, you have to point it out. If they perform poorly or have a bad attitude, you have to hold them accountable. With friends, these situations are problematic and often lead to an end or permanent change (for the worse) in the relationship.

I think I should share something with you. This next story should likely remain buried, but this is nothing if not an archaeological expedition. Way back, I offered to make a teacher of mine an employee/partner in my Horizon Services business. That is, I would treat him as a revenue partner but he would just help on executing jobs and would play no part in all of the background effort of running the company. It was a very generous offer on my part, if I do say so myself. It quickly became a completely regrettable situation. As it was, he was a good friend of mine who needed some money. I looked up to him, so I thought it would be a great benefit to have his drive and intelligence helping me out. It wasn’t. It was awful. He would not want to work on certain days. He would expect half the money cleared from each job, even though I had a lot of expenses I had to cover that he would never see, such as equipment payments and advertising. He actually made more money than I did! What would really make me annoyed was when I would drop by his place to pick him up at an appointed time, and he was not ready to go. He would invariably be casually eating cereal in his kitchen, not even dressed yet. Every time I think about this situation, even years later, my blood pressure starts to go up.

Now you are no doubt thinking, “
Fire
him already!” and you are right. The problem was that I had an important relationship with him outside of work, which I would damage or throw away if I were to lay it on the line and tell him to get stuffed. I was sorely tempted on several occasions to do just that.

It came to that anyway, and for good reason. But for the few months that I tried desperately to make both the work reality and the personal reality play nicely with each other, it was pure hell. What a mistake!

For the sake of completeness, I have to throw this in. On the start day of what was the biggest contract I had ever landed, he arbitrarily decided, as the not-on-the-hook-for-anything partner, that he was not going to work. To this day, I don’t know what he was thinking, but he refused to get moving and insisted that I do the same. Like an idiot (remember, I was very young), I caved in and we delayed start on the project.

The customer fired us (well, me, actually) and demanded that his huge deposit be returned immediately. That was such a painful lesson. Looking back on it I am ashamed, embarrassed, and regretful. I don’t have many such memories, but this one was an unmitigated disaster. Everything about sharing my prosperity with this (once) respected friend was a complete and utter failure. I am feeling sick as I write this. I fired him as a partner, and soon thereafter as a teacher and friend. The upside of all this is that I learned the following lesson that I can share with you.

Takeaways
: Keep your personal and business relationships separate unless you can follow these guidelines:

• Lay all expectations out beforehand: start time, finish time, the responsibilities, who makes decisions, and who is paying for what. Discuss everything in a frank and direct way. Don’t pull punches—
  say
  what you need to say before you get started. For example:
  
  • I need you here at 8:00 a.m. sharp every day.
    
  • If you’re working with me, I will treat you like any other employee—and you will treat me as a boss. I’m serious about this, and if that makes you uncomfortable, this arrangement won’t work, and the job offer is off the table.
    
• Hold them accountable.
  

_________________

Friends as Partners

As you know, it is very common for friends to come together as partners to do business. This is especially good when you are starting from scratch and everybody contributes in defined ways to build something together. Some of the most productive work relationships I have had are of this type. It has always been so much more powerful to move from friendship to partners building together than from friendship to employee.

The advantages of friends as partners are

• They know you.
  
• You know them.
  
• You have a framework of trust. This framework exists between the two of you, but also extends to your shared network of friends and family. This web of relationships adds substantial strength to a business partnership that supports you and provides arbiters and perspective-givers when the going gets tough.
  

The disadvantages are

• Network diversity can be impacted. When I partnered with Sterling to found Meridian Internet Services, we were a great fit. One thing we recognized at the time, however, was that we both knew the same group of people. We found that since our networks overlapped so much, we did not have the benefit of networking that would have come from relationships with diverse and separate groups of friends.
  
• Friends tend to be similar to one another. The dynamism that can come from having a business partner that has a different background, a different temperament, and a different attitude from you is often lost in friend-based partnerships.
  
• Legal formalism is reduced. You may feel comfortable doing things without contracts—since you are friends. This can come back to bite you. It has worked out OK for me, but it would have been preferable to have known exactly where my partnership stood with regard to a number of issues over the years. The informal status was easy, but uncomfortably ambiguous much of the time.
  

On balance, having friends as partners is a desirable situation. The basis for my personal evaluation of what would make a good business is anchored in the question, “Who around me can share my enthusiasm in such a way that they can contribute instead of just being along for the ride?” If the answer is there in the form of someone you already know and respect, then run with it.

If you are forming a partnership, sign a contract up front. I know that this can seem overdone and formal for friends or family, but it is for the best. The contract lays it all out there. If you don’t have a lawyer, as a last resort, you can find a boilerplate contract document online and modify it to fit your needs. Be forewarned that this kind of contract can be very difficult to get right, but the
benefits for having the understanding down on paper cannot be underestimated.