ExpertCEO

Help! Expert CEOs and VCs listening-in:

I think we need to resolve our plan this weekend to call a meeting with the VCs next week.

Things have gone downhill fast with the VC-inserted CEO. He continues to damage team rapport, is behaving badly, and is hiring a new person secretly, (when this person was interviewed by the entire mgt team, he got a unanimous thumbs down). The sales person is being hired to "stack" the team with yes-men. This new guys is honestly, not qualified.

CEO has pulled the CTO out of day-to-day partner, client and prospect communications even though the CTO is the only qualified person to make a nascent channel relationship work (and having an inexperienced and not qualified mid level engineer do the work, which will fail).

Finally, the CEO is circumventing the agreed-upon communications channel between partner (global reseller), end client and our company.

This is upsetting both other parties and is threatening to disrupt the hard work we've all done for 6 months nurturing the relationship... and did I say that this company is a possible acquirer, and that the VCs basically told us to sell the company by end of year?

If we screw up this implementation, we screw up the possibility of an acquisition by this company, and there are precious few others as well suited to acquire us.

Did I also say that the CEO is acting like a child and swinging his "authority" around because he was embarrassed by the CTO when he (the CEO) jumped into a partner call and disrupted the call, and upset the partner team.... And did I also mention that the CTO is a founder... (I am not the CTO).

We are now spending as much time worrying about who will be replaced by his yes-men and how to keep the key reseller partner on board and happy (in spite of ongoing interference and chaos) than we are spending on doing good business.

So we need to go to the board and specifically to the VCs. The VCs are a well-known tier-1 firm. Their main partner in charge of our company is a good guy, but we don't know what his reaction will be. The "other" GP in the VC firm is being brought into our company's meetings (by the CEO because, in part, this GP was the one related to the CEO's last company, for which he "made" the VCs a small amount of money --$30-$50 Mil). We all think this was not because the CEO was god's gift, but rather due to timing. Nonetheless we think he has the VCs hypnotized. We need to wake the VCs up.

To their credit, the VCs have stuck by the company, and should want to have a well-run organization or at least one that won't be shedding the experience and expertise that is needed to get this partner deal done, and set up the company for the acquisition.

What do we need to "document" to go the meeting?
Do we need to have a signed document from the greater management team describing the chaos and damage this CEO is creating?

Do we simply need a bullet-point listing of the damage and the planned disruptions this CEO is enacting based on his lack of understanding of our business and based on his ego being damaged?

This guys is not only *not* a leader, but he is actively damaging both the team rapport and ability to execute, but he is damaging the best shot we have at an exit for the VCs, and a soft landing for us.

He either has ADD and forgets detail and our agreed-upon approach and communications w/partners, or he simply is disrespecting them. We are not sure. Either way it's not working.

To gut the company and put his "guys" in place will result in

a) failure of the partnership with the global reseller and

b) failure of an acquisition potential with that company and

c) a bad reputation for our company, as we will have botched an implementation and will have made the end customer mad and the execs who recommended us embarrassed.

What would you suggest for the meeting? We only have one shot at this. When the CEO gets wind of the meeting, it will be binary: it's either the founding team and the exec team, or the CEO.

Please advise what you, think the ideal "presentation" of the situation would be in a conference room environment.

Thx

And yes, my resume is going out to friends and headhunters. As I suspect are all of the employees'

Ouch ...

This sounds like a very emotially charged situation. Here, in my humble opinion, is the way to approach this situation.

First, given all that you've said, it's seems virtually certain that the VC / Board Member of your Tier-1 VC is at least somewhat aware of these issues. You're call for a meeting won't come as a complete surprise.

I would recommend first putting together a rational and unemotional memo that outlines the problems you've described in your post. Try to do it in a way that deals with the issues and possible solutions rather than just negative items about the CEO. Organizing your thoughts in writing in this fashion will enable you to think through the issues and then communicate them to the VC clearly and concisely no-matter how emotional the meeting is. It doesn't need to be "signed" by anyone.

Second, I would recommend that you contact him and ask for a meeting to include him plus you plus the other members of the executive team (who are with you on this issue). You should specifically exclude the CEO. I think it's fine if VC #1 wants to include VC #2. I would just ignore that issue. Believe me, the fact that you plus 3 or 4 of your peers want to have an "urgent and confidential" meeting with him will get his attention.

At the meeting, all you need to do is to give him a copy of the memo (hard copy), and just go over the points you've made. You'll then know which way the wind blows.

I suspect you'll be able to have the meeting without them informing the CEO, but eventually, he'll find out. And you're right - it'll be your team or the CEO. If the company has value, then the VC will have some pretty tough choices, assuming your team includes most if not all of the key executives.

Having been on the VC side for 5 years or so, this is the type of situation that gives them nightmares.

Good luck, and keep us posted on what happens.

I have read Ken's advise and endorse it. I want to add a few caveats to consider. In the original posting, it is hard to know who the concerned group is. It would help to have some more visibility regarding who is dissatisfied (and the level of responsibility of the author,) as it may help in giving advise on how to proceed. I lament that this is getting to a "major meeting" stage before someone in this group -- probably the author -- has had a chance to understand the whole picture. So, if still possible , I recommend that one person make direct contact with the best person on the Board one-on-one and allow for an informal dialogue before proceeding to the major confrontation. The points that Ken makes apply to this as well. It will also help to preface any discussion with a level of concerned-humility: the recognition that the dissatisfied group may not know the entire situation. They certainly have the best interest in mind: the well being of the company. But they are operating from only a partial picture; their concern is based on what they see. There may be more that they are not privy to and may explain some or all of what they are so frustrated with. Give the CEO the benefit of the doubt (hard as that may be) and allow yourself to be pleasantly surprised with other facts. If there are none, you are no worse off. If there are, you may benefit everyone. Also, keep in mind the burden the Board has. Changing CEOs is one of the most difficult tasks a Board can ever encounter. So approach the issue with empathy for the burden of the person you are talking to, and maybe even be prepared to offer some solutions rather than just a listing of problems.

Good luck!

Ricardo

Thanks Ken and Ricardo! Great suggestions, which we took to heart.

At this point, our founding team may be out of work. But at least we tried. We may be forced to grade this "top tier" VC a d-minus in this case however.

We had the private 1:1 meeting with the VC. Great suggestion. We were assured that it would be confidential.

Subsequently we had a summit meeting (Founders and CEO and VC) and a lot was put on the table. We were rushed though the meeting and the definitive "memo" was not presented, though it was sent to the VC afterwards.

At the summit meeting the founding team was partially heard, but it was evident from the crude pre-meeting jockying and attempts at alliance-building of the CEO, that he (the CEO) knew what we were coming to the VC to talk about (i.e. the VC contacted the CEO and said "this is what your guys are saying... they seem upset with you...what's up? Can you/we fix this?")

Though this could be expected, we were *very* surprised that the CEO had the bad form and audacity to pout and act "betrayed" (and express his sense of betrayal) to the exec who had the 1:1 with the VC. Unbelievable.

This is just so much more evidence that the CEO continues to be
a) Intolerant of anyone who differs with him,
b) Unable to imagine his actions could be criticized or imperfect, and
c) Fabulously unaware of how much of a narcissist he is, thinking that the exec /founding team owes him privilege when he has not earned it, and in fact has squandered any right to it, from his actions.

To say he is a management bully would be too simplistic and easy. He really does not "see" anyone else, and thus does not "see" anyone else's position or agenda.

And we are left with the heartbreaking conclusion that the VC is either hypnotized or just checked-out. It appears that further meetings took place between CEO and VC, and that nothing substantive has been announced to the exec team about any changes or even about any steps to "improve" communications or process.

So the VC, in good management form, basically sent the team back to work it out. But the CEO had no intention of doing so and apparently has "spun" the VC into making the "me or them" decision. Because... of course... the CEO has nothing to improve or fix. Its "everyone else."

We had figured this was a risk. We just did not think the VC would allow the CEO to skip the entire process of "working it out" and move right to the "me or them" choice.

What is even more mystifying is that without the founding team there is no core engineering and client relationship DNA or ability to do the important integrations and implementations that should lead the company to be positioned for a successful partnership and a runway for an acquisition. What's the CEO going to do? Post for a new engineering team? Ask the "fired" founders to consult to a new team?

It would have made more sense to fire the CEO and several of his do-nothing, unqualified "buddies" on the team, and scale down to a few people to do the implementations with the key partner, manage the account relationships, and have one of the founders (technical) sit in the CEO seat, and have the VC and some others help with the sale talks. Or bring in an experienced CEO type who could basically COO the ship and keep out of the way--except insofar as help sell the company (we have several in mind who have done this).

Ok, So this sounds charged full of emotion, but really it is just a bit of a let down since we did have pretty high expectations of the VC.

The lesson learned here is threefold:
1) The reason it is important to "Pick" your VC carefully is that she/he may "insert" a CEO that is bad for the company, unqualified in the business segment, unresponsive and unaccountable to common sense.
2) Be sensitive to when/if the VC "checks-out" and what that can mean in terms of their actions (common sense and robust help, or just life-support and nominal attendance)
3) Don't miss your darned milestones, because bad things happen (like a VC-inserted CEO)...

Is this our fault? Well we know that none of this could possibly be the CEO's fault. In his world "nothing" is his fault. Is it the VC's fault? Seems he "checked-out" long ago, and is just muddling along, inserting his trusted buddy to get this to a break-even acquisition and minimize his time and hassle. To hell with the founders or optimizing an acquisition likelihood if it means spending more time and heartache.

Seriously, Eventually everything comes down to founders and leaders accepting accountability. Leaders don't shrink from being accountable. So we started this company, and thus made our bed with the choices we made all along the way (including investors). Well then, yes it is our "fault."

What will we do differently next time? Probably round out our board and investors with a wider group (to dilute influence), pick investors who are more known for their coaching, mentoring and great leadership qualities, and of course, we won't dare miss any business milestones (easier said).

More as it develops, but it looks like we may need to get our Resumes out there today.

Wow. There is a lot here. I want to respond with more comments, but I need some time to digest this.

Fred Wilson of Union Square Ventures pointed to a great blog post from Ben Horowitz on this that seems appropriate given it was about CEO Coaching...
bit.ly/dkG7yy
Ben's original post: bit.ly/dB9rOs "How to Minimize Politics in your company"

Here's an example of Ben's advice on what to do when one exec comes to you complaining about the performance of another exec:

If they are telling you something that you already know, then the big news is that you have let the situation go too far. Whatever your reasons for attempting to rehabilitate the wayward executive, you have taken too long and now your organization has turned on the executive in question. You must resolve the situation quickly. Almost always, this means firing the executive. While I’ve seen executives improve their performance and skill sets, I’ve never seen one lose the support of the organization then regain it.

On the other hand, if the complaint is new news, then you must immediately stop the conversation and make clear to the complaining executive that you in no way agree with their assessment. You do not want to cripple the other executive before you re-evaluate their performance. You do not want the complaint to become a self-fulfilling prophecy. Once you’ve shut down the conversation, you must quickly re-assess the employee in question. If you find that they are doing an excellent job, then you must figure out the complaining executive’s motivations and resolve them. Do not let an accusation of this magnitude fester. If you find that the employee is doing a poor job, there will be time to go back and get the complaining employee’s input, but you should be on a track to remove the poor performer at that point.

I wonder what Fred and Ben would have done in this situation.
The organization has clearly "turned" on the CEO in question, and his behavior is without question out-of-bounds, and disruptive. I can't believe that this is "news" to the VC. But then again, I am too close to the situation to be the judge of that.

Is it the role of the VC the to play boss, and fire the wayward exec, or is it his role to appease the CEO and deal with the fallout? I suppose either way there's fallout. As Ken said, this is a VC's nightmare.

But one way keeps the greater team together, the other way sends a bad signal to those who are left at the company "no matter what, don't cross the CEO, and even if he is doing something ridiculous or bad, you have no voice... take it or get out..."

And Ben is right, nobody likes politics, and those of us who are hard at work building businesses resent the time we have had to spend cleaning up after this boorish CEO and his moods, self-righteousness and apparent lack of respect for basic business process and manners in this industry and marketplace.

Ok enough said. Just thought I'd share these blog posts from Ben and Fred.