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Documenting Partner or Member Dissociations

Business counselors are frequently asked to get involved in documenting the dissociation of a partner or member from a partnership or an LLC.  Dissociation is the formal legalistic term for a parting of the ways among the ownership group of a partnership or LLC and includes both voluntary and involuntary terminations of the interest of the dissociated partner or member.  Business counselors must carefully advise the parties about the various structures that can be used to complete the dissociation and since termination of the relationship raises thorny issues regarding valuation and post-termination activities it is recommended that everyone involved be given an opportunity to seek their own independent counsel before actually signing the documentation relating to the termination.   To learn more about being an effective counselor at a difficult time, see my recent post on documenting partner or member dissociations at the Legal Solutions Blog.





Base Pay, Job Security & Sustainable Engagement Key for Swiss Workers

According to the results of a survey of Swiss workers conducted by Towers Watson in 2012 as part of its Global Workforce Study 2012 the two most important criteria for them when selecting a prospective employer were a high level of employee autonomy and good job security.  Other important factors included challenging work, base pay/salary and convenience of the work location; however, anxiety about job security clearly remained important among the Swiss even as the country one recovering fairly well from the financial crises of the prior years.  When the focus of the questions turned to identifying the “top drivers of retention”, the Swiss were most concerned about base pay levels and the transparency and fairness of the pay system.  While bonuses and long-term incentives were also of interest to Swiss workers, they were less important than the fundamental issue of base pay/salary.  Other factors that were particularly influential to Swiss employees with respect to remaining with their employer included opportunities for career advancement, trust and confidence in senior leadership, the employee’s relationship with his or her supervisor/manager and job security.  The percentage of Swiss workers who were “sustainably engaged” was higher than the European average, yet still significantly lower than the global averages found among Towers Watson surveys and the Towers Watson report admonished Swiss employers to proactively address frustrations among their workers about lack of the right resources and necessary support.  When polled about the top drivers of sustainable engagement, the Swiss workers identified leadership; supervision; stress, balance and workload and communication as being most important. 


Business Opportunity Disclosure Statements

As you and your clients watch television or browse online they are constantly bombarded with enthusiastic exultations to get involved with startlingly successful new business ventures.  In fact, your clients may even have their own ideas about setting up a new business and recruiting others to join them along the path to riches and financial independence!  If they do you’ll need to counsel them about compliance with federal and state laws pertaining to the offer, sale and documentation of “business opportunities”.  For a preview of what you'll need to know, see my recent post on the Legal Solutions Blog.






Best Product Development Processes in Silicon Valley

Google has received a good deal of attention for its pro-active encourage of new product ideas from employees through its “70/20/10” rule, which Thompson described as the expectation of top management that employees would “devote 70 percent of every work day to whichever projects are assigned by management, 20 percent of each day to new projects or ideas related to their core projects, and 10 percent to any new ideas they want to pursue regardless of what they might be”.  Obviously such a system became unwieldy as the company’s growth exploded and additional steps needed to be taken to manage the flow of potential innovation including initiating the practice of having employees meet on a regular basis with the founders and other top executives of the company to pitch their new ideas and projects.

A fascinating window into the product development and management process at Google during the early 2000s comes from notes taken by Rodriguez on a presentation given in 2003 by Google product manager Marissa Mayer, who was later to become CEO of Silicon Valley icon Yahoo.  In her presentation Mayer noted that product development at Google was rigorously tied to the company overall mission of organizing the world information to make it universally accessible and useful and that “accessibility” and “utility” were thus key goals in each product development initiative.  In fact, Mayer stressed several times that “user-centered design” was extremely important in the product development at Google and that this meant building products that people really wanted based on identifying and understanding user needs and desires.  According to the notes prepared by Rodriguez the Google product development process began by accepting ideas from everywhere (i.e., employees and customers)—Google expended a lot of effort to encourage new ideas including sponsoring various forms and mediums for idea-collection and participation—and then prioritizing those ideas on a “Top 100” list based on several factors including utility to users, the likelihood that it would assist user retention, chances for success, the contribution it might make to diversifying revenue stream and, finally, the level of effort required relative to impact.

When a new product idea was selected for further development it was assigned to one of many small, agile engineering teams that were allowed a great deal of autonomy with respect to their internal organization.  Google did not have a formal product development department and instead viewed each team, which typically had three engineers, as the relevant business unit for each project.  Members of the team were co-located and worked exclusively on the project for three or four months before moving on to a new project.  One of the engineers was designated as the “technical lead” for the team and had responsibility for the technical excellence of the project.  At this early stage product documentation was very sparse and the team prepared only what was necessary to create a product requirements document that would be analyzed at the end of the initial development process.  A Google product manager was continuously involved in the work of each team and product managers generally worked with nine or ten engineers across several teams at the same time.  Larger projects were explored using the same methods applied to smaller projects by breaking the tasks into logical modules that could each be addressed by small teams (e.g., a large project might have four units of three people, a total of twelve people, each working on a discrete piece at the same time).

Rodriguez recorded several other interesting characteristics of the Google product development process.  First, once the company was satisfied that a new product or service was likely to be seen as useful by users teams were created to create and execute an explicit “monetization” strategy for the product or service.  Second, Google created organizational tools to ensure that the plans for launching each new product, including calendars and current status reports, were readily visible throughout the company.  Third, as mentioned above, the focus on user-centered design was continuously reinforced and the product development path included weekly user studies, emphasis on quality and understanding what users really care about, experimentation and iteration.  Finally, Google had a bias toward “expedient solutions” and getting new products and services out into the market quickly even if the company knew that further work would be needed to improve performance and the quality of the solution offered to users.

Rush et al. conducted ongoing research to identify best practices of highly successful new product development teams operating among Silicon Valley technology companies.  They were particularly interested in exploring the methods used by these companies to get new products to market quickly and efficiently while ensuring that customer requirements are satisfied.  Among other things they found that the most successful companies were those that recognized that customer requirements were likely to change continuously during the development process and that it was a mistake to freeze the product specifications early in the process and not engage in regular contract with customers to gather feedback.  In fact, the researchers found that the most successful product development teams proactively sought out product requirements from the most suitable and dominant customers in the market segment that the companies had chosen for the new product.

Jaruzelski and Le Merle argued that Silicon Valley companies were more successful at innovation than their counterparts in other parts of the world because Silicon Valley companies did a much better job of creating and maintaining strong alignment between their innovation and business strategies and emphasized that the most successful Silicon Valley companies anticipated customer needs, had their top technical executives report directly to the CEO, ensured that innovation strategies were developed and communication from the top throughout the company, and constantly refreshed their product development staffs.


Incorporation Questionnaire for New Corporation

When a client comes to you for advice regarding the formation and organization of a new corporation it is important to gather and analyze as much information as possible.  While interviews are useful and provide a good way to get to know the client better and learn more about the client’s overall vision for the business you should also have a basic questionnaire that you can easily and quickly pass to the client that provides a clear platform for gather the information that will be needed to complete the formation and organization documents.  To learn more, see my recent post on this subject on the Legal Solutions Blog.


Silicon Valley Secret: Innovative Organizational Structures

Much has been written about the distinguishing characteristics of the organizational structures deployed in Silicon Valley.  In some cases, the formal boundaries of the organizational chart have not been very different than those used for decades by companies outside of the Valley.  For example, Thompson reported that Google’s corporate structure was relatively traditional, apart from a few unique top-level positions such as Chief Culture Officer and Chief Internet Evangelist, and featured an executive management group at the top of the organizational chart that oversaw the usual functional-based departments such as engineering, products, legal, finance and sales.  The functional-based departments each had their own smaller, more specialized, units and the internationalization of sales activities was based on geographically organized branches focusing on the Americas, Asia Pacific, and Europe, the Middle East and Africa.  In general, however, scholars and managers have been fascinated by several distinguishing characteristics of Silicon Valley organizational culture including flatter hierarchies, greater decentralization and autonomy, flexibility and adaptability, and tight and intentional linkages between organizational structure and culture.

In the 1990s, Teece described a “high flex ‘Silicon Valley-type firm” as a company that would have shallow hierarchies, significant local autonomy and a resistance to hierarchical accouterments of seniority and rank and functional specialization.  According to Teece, decision making processes in these companies were usually simple and informal, with key decisions typically being made by the founders during the early stages of development, and an effort was made to ensure that communication and coordination among functional-based groups was relatively quick and open.  Teece noted that while these companies were likely to be highly innovative they often labored under severe resource constraints, particularly with respect to availability of capital, and the most successful companies were those able to strategically overcome those constraints through effective use of outsourcing and alliances.  A preference for flatter structures within organizations that thrive and survive on innovation is understandable given that hierarchies typically create bottlenecks that can slow the pace of progress and persons that have reached a comfortable position on one of the higher floors of a tall organizational structure may be reluctant to permit and promote initiatives that might make the existing way of doing things, including current products and services, obsolete.

Commentators have also noted the strong link between organizational structure and culture among Silicon Valley companies.  Apple, for example, has been held up for the way that it accentuated the importance it placed on being product- and engineering-driven by moving its design group out of the lower levels of the organizational hierarchy where it is often placed and positioning it near the top with a direct reporting line to the CEO.  In the same vein, Meyer explained in the late 1990s that “[i]n contrast to traditional firms where organizational structure defines the framework within which work occurs, Valley firms use the work to define organization's structure" and then went on to note that organizational structures in Silicon Valley could best be described as flat, flexible, permeable, and fluid.

Kashen argued that while technology and product innovation have certainly been important and impressive outputs from Silicon Valley, firms in that region have also been innovators in identifying and implementing new ways for groups of people to organize themselves and work together.  For example, he described one company that had abandoned the traditional functional-based organizational structure in favor of autonomous “pods” with at least one representative from each discipline that worked on its own scope of product and set and followed its own set of metrics and goals.  Leadership within each pod rotated based on the stage of product development so no one person had a management title.  Another alternative described by Kashen was referred to as “Holacracy” and relied not on top-down authority but on a “set of explicit processes and structures designed to achieve the company’s purpose”.  Kashen explained: “In a Holacracy, every role in the organization has an explicit, documented purpose and set of accountabilities, and roles exist separately from the individuals who happen to be filling them at the time. The core operating processes include two distinct meetings that occur on a regular (typically weekly) basis: Tactical (actions) and Governance (structure), each with a clear set of procedures. The Governance meeting is what most distinguishes Holacracy: it allows for explicitly changing the organizational structure on a weekly basis!  If a project or set of tasks is proposed that does not clearly fit into the explicit accountabilities of any current role in the organization, then the Governance meeting will resolve the ambiguity by assigning it to a particular role. This leads to much more clarity throughout the organization around who owns what, and who makes which decisions.”  Kashen also mentioned that some companies have apparently done away with formal management and hierarchy completely and allow leadership of projects to be determined organically based on whoever steps up.  In this type of environment there are no titles, reviews or promotions and raises and bonuses are determined through peer reviews. 


What Makes a Silicon Valley Leader?

Academics exploring leadership of emerging companies in the US have suggested a variety of frameworks for classifying and explaining “leadership styles”.  Inc. focused on four strategies—directive, participative, laissez-faire and adaptive—and suggested that the dynamic environment in which emerging companies operated required that leaders be able to apply each of the styles at the appropriate moment.  A PsychTests study of more than 7,000 top-performing leaders, including leaders of firms other than emerging companies, confirmed the advice from Inc. by finding that the most effective leadership style in terms of firm performance could best be described as “eclectic” and incorporated elements of four other distinct leadership styles identified in that same study:  the “sports coach”, the driver-director, the mentor, and the “country clubber”.  An article in Fast Company described the menu of leadership styles developed by Goleman in his 2000 study of mid-level managers: pacesetting, authoritative, affiliative, coaching, coercive, and democratic.  Obviously the apparent ability to identify and describe a particular leadership style does not mean that it is effective or used as often as it should be. For example, Goleman found that his pacesetting and coercive styles typically produced a negative impact on leadership effectiveness and that his coaching style, which he argued could be quite effective, was often kept on the shelf by leaders who feared it would take too long to apply.  Complicating the area even further is that argument of researchers such as Kets de Vries that companies can no longer look to a single omnipresent ruler but must instead recognize that success is tied to creating and maintain a team of self-aware executives that learn how to work together to apply "distributive, collective, and complementary leadership."  Kets de Vries suggested that the “leadership team” have the capability to carry out eight different archetypical roles including strategist, change-catalyst, transactor, building, innovator, processor, coach, and communicator.

The extraordinary financial and inventive success of Apple, and the death of its iconic leader Steve Jobs, has served as a platform for a robust debate about whether or not Jobs should be lauded for his leadership practices and style.  Williams, writing for Psychology Today, noted that many management consultants, academics and business leaders had applauded Job for his work as a “leader” and pointed to research conducted among the heads of Silicon Valley companies that showed meaningful support for Jobs’ often abusive behavior as necessary for building a financially successful company (i.e., the “ends justifies the means”).  Williams, who described Jobs’ leadership style as autocratic, egotistical and lacking in transparency and generally based on an old-style “carrot and stick” approach, suggested that “claiming Steve Jobs was a great leader smacks more of hero worship than an objective view of what a great organizational leader should be and do” and warned that “extolling his virtues to a new generation of up-and-coming leaders would be a serious mistake”.  He also pointed to research that, Apple notwithstanding, an abusive leadership style is not the road to optimal bottom line performance.

Other well-known Silicon Valley-based companies have also generated commentary regarding the leadership styles that have been used to build their organizations.  Thompson has written that Google has attempted to avoid excessive oversight of employees and provide them with substantial leeway, and resources, to develop new ideas that they might think of on their own.  Critics have scoffed at the efficacy of this approach from a financial perspective, arguing that most of the new products that have been developed have not been successful; however, it appears that the system has produced important intangible benefits in the form of a workforce that feels “personally invested in the company's sense of mission and future success”.  According to Manimala and Wasdani the five key precepts of the leadership practices of Eric Schmidt, Google’s Chief Executive Officer, were “get to know your employees, create new ways to reward and promote your high-performing employees, let your employees own the problems you want them to solve, allow employees to function outside the company hierarchy, and have your employees’ performance reviewed by someone they respect for their objectivity and impartiality”.  Manimala and Wasdani  also reported that an internal Google research team headed by the Laszlo Bock, Google’s senior executive for human resources, had identified the follow eight qualities among the best and most-effective leader-managers within the company: “be a good coach, empower your team and don’t micromanage, express interest in your team members’ success and well-being, be productive and results-oriented, be a good communicator and listen to your team, help your employees with career development, have a clear vision and strategy for the team . . . [and] . . . have technical skills so you can advise the team”.