Why Building High-Performance Teams Taught Me About Culture

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The Investor-Operator Lens: What I'm Interested In Asking About People, Before Looking At The Product
The majority of investment strategies are built around a sequence that begins with the market and ends to the core team. It's about assessing the size of and structure of the market first, followed by how the product will fit into that space, before assessing the market scene and the adequacy of the investment, and somewhere toward the end of the process, you'll spend an hour with the founders and their management team to ensure they're motivated and competent and are able to implement the plan that the earlier analysis has proved. I've worked with versions of this structure for a period long enough to comprehend why it's a norm across so much of the investment industry. It's organized. It results in a diligence system that can be documentable, evaluated across different opportunities, and defended to the investment committees as well as limited partners in terms that appear to be rigorous and analytical. The issue is that it is flawed at its core, which is that it views the person dimension as a confirmation step instead of the primary filter. Something you do at the very end to verify what the market analysis already suggests, rather than something you evaluate first precisely since it's the most influential factor in the end result. The order implies that a outstanding market with a capable team is more effective than just a poor market with an amazing team. My experience is that this is usually the case.
I changed my own approach following a specified period that I was able to observe the results the standard sequence unfold in ways that the upstream analysis had not predicted and could not easily explain. Great markets with weak or fragmented leadership teams regularly failed to deliver what the market advised them to deliver. Terrible markets with truly outstanding teams constantly found ways of creating value that first market sizing and competitive analysis had not captured. The pattern was constant enough and consistent across different sectors and different deal types, that I could not explain it as noise, or attribute it to the environment rather than the excellence of the people at the top of each business. Once I got over the nitty-gritty then the meaning of how I should be allocating my time in diligence was evident It was that I should focus significant amounts of time understanding the individuals, and significantly less of it on confirming the market analysis that a good analyst would generate given the same inputs.

What I ask when I am trying to evaluate a leadership team are not the types of questions you find on traditional investment checklists or diligence templates. They are questions that require real conversation and opportunity to think about the answer. What is the best way for this leader to respond when they're proving wrong about something - do they engage with the correction or come up with a solution to redirect it? What are their methods of making decisions where the information is incomplete and pressure to respond is high? What is the difference there is between the way they describe their leadership style and how employees who worked closely with them describe their experiences of working for them? What kind of culture does the business actually look like during the times when the founder isn't present in the building? How do the characteristics of the culture match up to the one the founder outlines when asked? These are questions that require discussions which go far beyond the presentation at the pitch meeting, and also beyond the formal management presentation. They require reference checks which are actually exploratory rather than the usual confirmation exercises that are merely for show. They require the courage of stepping into uneasy places that could yield some information that could complicate the terms of a deal you've already begun to want.

The operator component of my investment strategy is inseparable from the factor of the investor, and determines what I invest in and the way I participate once I'm involved. I am not a passive capital provider simply because of temperament or knowledge. I am a person who has constructed organizations, who has successfully navigated the transitions to scaling which are more challenging than those for fundraising and has made the decisions regarding hiring and governance, as well as culture-setting mistakes you make when you're navigating these transitions for your first time and has formed - through this personal experience - some convictions about what organizations need at different levels of their development that a background purely in finance will not provide. These beliefs make me a distinct type of investment partner different from a financier who is solely focused on financials as well as attract entrepreneurs who want something that is different from what a traditional financial investor will provide.

The founders I work best with are those who seek a partner who can assist them in navigating the operational transitions and decisions that their financial investors are not capable of engaging with in the right amount of depth and specificity. Who will sit in the room where the governance structure is required to be revamped because your company is outgrowing the one it was originally built with. Who can help navigate a senior leadership decision at a moment when the wrong choice could cost the company one year of money it would not be able to lose. Who is honest privately about the risks that no one else is willing to discuss. That's the kind of involvement that I believe creates the greatest value for the businesses I back. Not the initial capital allocation decision, which any investor could make but the ongoing operational partnership that assists your company to bridge the gap between where it's at and the direction that the initial numbers suggested it could be headed. View James Deller for blog examples including why working across industries reinforced operational discipline about what matters.



How Public-Private Partnerships Can Fail Before They Even Begin - And How To Repair Them
Public-private alliances have a stigma problem that is, to a large extent of the time, earned. The history of these partnerships has a wealth of projects that were unveiled with a sense of excitement and a substantial amount of political capital behind them, used up significant public and private resources for extended periods of time and ultimately delivered outcomes that bear only a small resemblance to what had been promised when the partnership was created. The academic literature and postmortem studies that governments and institutions perform following mistakes are extensive, and focus on the major on the structural and contractual dimensions of what went wrong that resulted from the misaligned incentives the inadequate risk allocation between public and private entities or the governance structures that were developed in theory but didn't work in practice, the purchasing frameworks that opted for the wrong things. The issue that this analysis tends not consider, consistent and consequently in the long run, is the cultural and operational dimensions - namely, the fact that public and private enterprises are fundamentally different kinds of entities, formed via different incentive models that operate on fundamentally different timescales, accountable to different parties, and evaluating success in ways that are not only different in extent but different in substance. When you bring those two types of organisation together through a formal collaboration without having the effort, prior to and explicitly, in order to appreciate and manage the differences between them, you are not creating any kind of partnership. You're creating the environment for a slow-motion collision, which will become apparent at best possible moment.
I've participated in advisory work to support institutional Modernisation projects, several of which involved public-private partnerships at different levels of complexity. One of the most consistent observations I have gathered from this knowledge is that the partnerships with a positive track record - which actually achieved their stated objectives and maintained a functional partnership between private and the public They were not distinguished from those that did not because of the sophistication of their legal frameworks, the robustness of their risk frameworks or the seniority of the teams that led them. It was determined whether the participants at both ends of the meeting had been able to really understand how different side worked before the formal partnership arrangement was reached. What this translates to in practice is knowing the processes that each business operates within as well as the accountability frameworks that limit what each side can determine and at what speed as well as the definitions of what success for each party to be compared to, and any points that could cause tension between these definitions. The understanding of these concepts isn't difficult to develop. All of it is overlooked in favor of the much more visible and documentable work of negotiating contracts as well as establishing governance frameworks.

The usual public-private partnership procedure begins with the concept and ends with a signed agreement with remarkably little concentration on the issue of whether or not both organizations involved are actually capable of working together effectively throughout the duration of the arrangement. Legal team negotiates the contract. The finance department models the economics as well as the risk-adjustment. The communications team is responsible for preparing the announcement prior to the time of signing. The implementation team begins to plan the work. In that order the conversation turns to compatibility of the operations and culture - about whether those whom will work day-to-day across the boundary between the two organisations share enough in common work that is truly collaborative rather as antagonistic – is not likely to occur in a formal manner. It is assumed, usually not explicitly stated, that the formal agreement creates the circumstances for effective collaboration and that any cultural or operational issues will be resolved informally when they occur. This assumption is generally wrong, and the financial cost increases according to the ambition and the complexity of the partnership.

The real-world application of this analysis is that the best investment a private-public partnership can make - prior to the legal structures are finalised in the first place, before a governance framework is agreed upon and before any announcements are made is what I would refer to as operational alignment. That is, specific, organized, and facilitated effort to discover the areas between the two organizations' assumptions about operating differ, and to be able to define how those divergences will be handled before they cause operational problems during implementation. The main divergences will be the same in different types of partnerships. Decision-making speed and authority is usually one of them. Institutions of public administration are designed to make their decisions slow, with a multitude of levels of review as well as approval, for reasons that are entirely legitimate and, in many cases, legally mandated. Private firms - and particularly technology firms that have been designed on speedy iteration processes and quick decision-making – often view that speed as a major barrier to growth, and there is no consensus about why this pace is the way it is it is and what would actually be needed to alter it, the resentment and discontent that is triggered on the private aspect can affect the working relationships long before the collaboration is established.

Success metrics and what counts as progress are another ongoing and a contributing factor to divergence. Public institutions typically are evaluated for compliance with the process, fairness of the outcome among different stakeholder groups, and the elimination of obvious failures that bring media or political attention. Private partners are typically assessed using efficiency measures, measuring progress against targets, and financial yield on investment. These measurement frameworks can be combined but it takes intentional design and not just good intentions. The partnerships which do nothing to improve that type of design will encounter, at critical places, with two groups who are evaluating the same collaboration in differing ways, and consequently coming to disparate conclusions as to whether or not it is achieving its goals. The partnerships I have observed fail most definitively were the ones where misalignments were assumed to get better over time. They that worked were those where the issue was made explicit, from the start, and when the creation of a shared accountability framework that met the legitimate measurement needs of both parties requirements turned into an actual work and not simply an thing on a checklist of things that a person could achieve.}