School of Physical Sciences ©PGH Moving into Business 2011; Leadership and teams: finance Peter Hiscocks March 2011

School of Physical Sciences

©PGH

Moving into Business 2011;Leadership and teams: finance

Peter Hiscocks

March 2011


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Contents

• You and your team• Organisational structure• Skills and competencies• Building the right values and culture• In-source vs out-source• Teams for projects

Groupwork:• Planning for your business


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Your Business:

Your Team


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Your business team

• You need people to make your business work• You need to make sure that you have the right people for

your business

• You need: – the right structure– skills – recruitment – development processes

• Your team is the vehicle for the growth of your business: you must manage it effectively


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Organisational structure

• Organisational structure will define the way your business works

• If you have no structure, you business will work like that

• People need to know who their line manager is

• People work better in a defined structure (mostly)

• Grading will affect promotion and remuneration

• No structure can mean people feel they have nowhere to go in the business


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Organisational Structures

• A range of alternatives– Need to change as you grow

Amorphous Hierarchical Matrix


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Amorphous structure

Amorphous:• People start to feel lost• Difficult to build skills and competencies• Line management and career progression is

difficult

• Works OK for the first year• Freewheeling approach suits new starts


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Hierarchical structure

• Old fashioned ‘command and control’ approach• Results in isolated departments and ‘silos’• Can contribute to organisational bickering and

competition

• Everyone knows who their boss is• Clear career paths• Good for building skills• Direct lines of responsibility


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Matrix organisation

• Can lead to confusion over responsibilities• More complex to manage; easier to ‘go wrong’• People can be unclear of their seniority and role

• Provides better management for project based organisations

• Can integrate skills management, line management and project management


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Organisational Structure vs. Time

NumberOf

People

Time

6-10

25 - 40

100 +


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Skills and competencies

• You need have the right skills in your business to succeed:– Range of skills– Depth of skill– Adequate resources in appropriate skills

• You need to manage this – it won’t happen by accident• Ensure the people you recruit have the skills they say

they have:– Check resumes/CV’s– Check references– Test at interview


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Competencies

• To succeed your business needs to be ‘really good’ at something

• Make sure you understand:– what this is– who are the people in your team that make this thing

happen

• Plan how to strengthen your competencies• Make sure you don’t re-structure pr loose people

in a way that will weaken them


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Values

• You and your employees should have a shared set of values that define how your business operates

• The Business Values should represent a set of guidelines and rules for all employees to follow

• It is recommended that all employees know what these are and why they are important to the business

• Examples:– Integrity– Customer service– High quality – Employee career development


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Culture

• Building the right culture in the business is your job– Work/output focused consultancies, city law firms– Ordered and controlled manufacturing/production– Caring hospitals, nurseries– Relaxed local authorities– Creative media companies

• Make sure you have the right culture for your type of business

• In all cases your business should be customer focused and supportive to your employees


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Culture of the organisation

Goalorientation

high

high

low

low Teamorientation

FragmentedEg University

Mercenary

Eg investment bank; P&G; etc

Networked

Eg BP; Unilever

Communal

Eg community trust


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Building the right culture

• Selecting the right culture for an organisation is not a black and white issue

• It will depend significantly on the desire of the founders and leaders (not always the same!!)

• It will also depend to an extent on the industry sector in which you operate

• And it will also be affected by the people you employ• Important issues:

– Make sure you have thought through the culture you want– Make sure this is interpreted consistently through the

organisation– Make sure all your people know and understand this


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In-source vs outsource

• Your own employees (should) give better loyalty, know the job better, be lower cost, enable growth

• However, you have to recruit the right people, pay them all year round and comply with employment regulations

• Out-source resources are more flexible and can be hired and fired at will (almost)

• Reduced compliance requirements for out-sourced resources

• Costs may be higher for each unit of employment


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Teams

• Building your employees into a team is important: you will get much better value

• A team has to have a defined and clear objective or goal• The team members should all believe in this goal and

their role in achieving it • Your job as leader is to make sure that they understand:

– the goals– how you are going to get there– the role you want them to take in getting there

• Your job as leader is to help them fulfil their role


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Team roles

• In a team different people will be expected to carry out different tasks

• Some people are better at some tasks than others

• Understanding what tasks people are good at in teams will help you design teams that are much better

• M Belbin has designed a team role designation


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Team roles - characteristics

• What are the typical phrases and comments used by different team role characters?

• What do you think are your top Team Roles?

• Who did you recognise and why?

• Think of a real team you have worked with and discuss team roles


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Plant

Contribution:• Creative; imaginative; unorthodox• Solves difficult problems

Allowable weaknesses:• Ignores incidentals• Too preoccupied to communicate effectively


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Resource Investigator

Contribution:• Extrovert; enthusiastic; communicative• Explores opportunities; develops contacts

Allowable weaknesses:• Over optimistic• Loses interest once initial enthusiasm has

passed


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Co-ordinator

Contribution:• Mature; confident; a good chairperson• Clarifies goals and promotes decision making• Delegates well

Allowable weaknesses• Can be seen as manipulative• Offloads personal work


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Shaper

Contribution:• Challenging; dynamic; thrives on pressure• The drive and courage to overcome obstacles

Allowable weaknesses• Prone to provocation• Offends people’s feelings


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Monitor evaluator

Contribution:• Sober, strategic and discerning• Sees all options• Judges accurately

Allowable weaknesses• Lacks drive and ability to inspire others


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Teamworker

Contribution:• Co-operative; mild; perceptive and diplomatic• Listens, builds and averts friction

Allowable weaknesses• Indecisive in crunch situations


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Implementer

Contribution:• Disciplined, reliable, conservative and efficient• Turns ideas into practical actions

Allowable weaknesses• Somewhat inflexible• Slow to respond to new possibilities


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Completer finisher

Contribution• Painstaking, conscientious, anxious• Searches out errors and omissions• Polishes and perfects

Allowable weaknesses• Inclined to worry unduly• Reluctant to delegate


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Specialist

Contribution:• Single minded, self starting, dedicated• Provides knowledge and skills in rare supply

Allowable weaknesses• Contributes on only a narrow front• Dwells on technicalities


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Developing your team

• In addition to designing your team you need to:– Recruit appropriate people– Structure your remuneration scheme appropriately– Develop their skills– Provide career development– Appraisals and performance reviews

• Your employees are a critical resource for the growth of your business – make sure you are making the most of them

• Invest a little – get a lot back


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High performing teams

• Teams are not always happy places• Team effectiveness is affected considerably by the

attitudes and work practices of team members• Sometimes team members do not perform well;

sometimes their approach to team work is negative• This performance needs to be confronted or the team

will not achieve its goals• This is a tough but very effective approach to making

your teams work a lot better


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Project teams

• We often set up projects • You need to structure the project team carefully

– Clarity of objective and resources to get there– Team size– Members & skills– Sponsor and reporting linkages

• Understand and review team ‘human dynamics’


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What is your experience of teamwork?

• Do you ever work in teams in your University work?

• What have you found that works well• What have you found that causes real problems• Work with your neighbour to discuss and

develop ideas


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What Is A Team?

TEAMS


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What Is A Team?

“A team is a small number of people with complementary skills who are committed to a common purpose, performance goals,

and approach for which they hold themselves mutually accountable”

- The Wisdom of Teams: Creating the high-performance organisation; Jon R Katzenback and Douglas K Smith, McGraw Hill


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Multi-functional Team Structure

Source: Christopher Meyer, Fast Cycle Time

Executive Sponsor

Who are they?

What do they do?

Senior member of organization

who champions project throughout the organization for the team

Act as mentors; provide visibility to the project

throughout the company

Core Team

Team

Sponsor

Support

Steering Committee

Project Manager

Core Team Members

Project Manager

Who are they?

What do they do?

Can be from any function. Typically appointed by the

Sponsor

Primarily responsible for the day-to-day

management of project

Core Team Members

Who are they?

What do they do?

Representatives of functions that are integral to the project’s success.

The functions represented will differ from project to

project.

Responsible for resolution of their

functions’ issues with the project and gaining

functional approval as necessary

Support

Who are they?

What do they do?

Functions that are affected and need to

provide input, but are not integral to project.

Support project teams with expert advice or additional resources.


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Types Of Teams And When To Use Them

Heavyweight Team

Lightweight TeamFunctional Organisation

Function Manager

Line Function

Function Member

Project Member

Project Manager


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An introduction to finance


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You need to understand finance

• Businesses go bust because they run out of money

• Poor financial management is a major reason for this

• Funding for your business is controlled by finance people

• You won’t get their money if they think you wont look after it


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What is Financial Management?

• All businesses use resources and assets to achieve their purposes• Your job is to manage these resources and assets • Money is an effective measure of resources and outputs• Financial Management provides the set of tools and techniques that enable the business to control and manage money

Why is it important• money is a good measure for managing a business• regulatory and govt. requirement• prevent you going broke• enables you to justify investments


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So…What’s the Problem?

Financial Management seems so complex; why are there problems?

• myth• language• structures, processes and systems• details and care


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Financial Language

Easy: Difficult:

• cash-flow - net present value• sales - internal rate of return• balance sheet - depreciation• costs - arbitrage• profits - accruals• shares - escrow


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Financial Tools and Techniques

Financial Management is important in an organisation for a range of purposes.

Some of these are controlled by legal requirements; others can be determined by management to suit the organisation’s needs

• financial accounting

• management accounting


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Accounting systems

Shoe box accounting is bad

Tesco shopping bag is worse

You need a computer basedaccounting package


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So…What’s the Problem?

Financial Management seems so complex; why are there problems?

• myth• language• structures, processes and systems• details and care


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Financial Language

Easy: Difficult:• cash-flow - net present value• sales - internal rate of return• balance sheet - depreciation• costs - arbitrage• profits - accruals• shares - escrow


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Financial Principles

There are certain Guiding Principles that are critical for all financial management tools and processes

1. Legal and ethical

2. Relevant to the organisation

3. Manageable and relatively simple

4. Use right measures for the right purpose

5. Transparent (in most cases)


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What is the Profit and Loss Account

What does it show?


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Profit and Loss Account

What is itThe Profit and Loss Account shows;

– income and expenditure over a particular period– the amount of residue (profit) at different levels

Why is it importantThe Profit and Loss Account provides information on what has been happening to the organisation during the past time period – revenues; costs and profits• it shows the financial ‘health’ of the organisation• gives management important operational information on which it can act to manage and control the business


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Structure of the Profit and Loss Account The main elements of the Profit and Loss Account; Revenues• sales• grants, donations, covenants, etc

Costs• costs of sale• operational costs• overhead costs, etc

Profits• gross profits• Net profits before tax (and interest)• Net profits after everything


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Example of a Profit and Loss Account• Newco – year ending Dec 31st 2006

Revenue £,000

software sales 65

grants 35

consulting 82

Total Revenue 182

Costs

salaries 109

rent/rates/services 14

marketing 20

travel 16

comms/telephone 8

IT services 18

legal 6

Total costs 191

Profit before Interest (9)

interest 6

Profit before tax (3)


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What is the Balance Sheet?

What does it show?


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Balance Sheet

What is itThe Balance sheet shows;

– what assets an organisation is using (at a particular time)– and where it got the money to finance those assets

Why is it importantThe Balance Sheet gives information on the financial status of a business – what it owns and what it owes• it is very important in valuing an organisation• how it changes over time gives information on the health of an organisation


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Structure of the Balance Sheet

The main elements of the Balance Sheet;

Net Assets Employed• fixed assets• working capital• investments

Financed by• owners capital• profits• loans (debentures; mortgages; hire-purchase agreements; etc)


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Example of a Balance Sheet

• Newco: Balance Sheet on 1st Jan 2007ASSETSFixed Assets

computer equipment 1,500office furniture 1,000Total Fixed Assets 2,500

Current Assetsaccounts receivable 15,000cash in bank 10.000Total Current Assets 25,000

LIABILITIESaccounts payable 5,000deferred salaries 45,000others 2,500Total Current Liabilities 52,500

Total Assets less Current Liabilities (25,000)

EQUITYshare sales 50,000

Reservesretained earnings (78,000)net income (2006) (3,000)

Total Equity (25,000)


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What is the Cash Flow Statement?

What does it show?


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Cash Flow Statement

What is itThe Cash Flow Statement shows;

– how much cash we have in the bank– what are the future cash flow projections

Why is it importantThe Cash Flow Statement provides information on how much money (cash) the organisation has to pay for operational and business matters• no cash means you are ‘bankrupt’• you can run out of cash even if you are a profitable business


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Structure of the Cash Flow Statement The main elements are similar to the Profit and Loss Account; • revenues• costs• profitsIn addition, these are shown on a month by month basis into the future• the balance of cash brought forward is calculated for each month• total cash increasing is good• total cash declining needs to remedial action • total cash negative is a disaster


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Financials for your business plan

• Use an Excel spreadsheet• Select how many years you need to show• Estimate your revenues by period• Estimate your costs by period• Calculate our different levels of profit


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Financials

• You will need:– Profit and loss account– Balance sheet– Cash-flow forecast– Identification of ‘Key business drivers’

• You should prepare:– Expected case– Best case– Worst case


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Bottom lines

• There is no perfect template that will make your financials look wonderful

• YOU need to understand the basics of finance• You need to think about what the investors are

concerned with• You need to show them a good deal


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Sources of Finance

….getting the money you need to get started


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Different types of finance

• Grants

• Loans

• Investments finance

• Revenues from sales

• Steal it


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Grants

• Sources of grants:– DBIS

– NESTA

– Carbon Trust

• Pro’s and con’s of grants

• Information sources

• Getting advice on grants

• Writing and preparing a grant application – how to

ensure success


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Loans

• Sources of loans:– Local authority schemes

– RELF

– Banks

• Pro’s and con’s of loans

• Where to get advice and information on loans

• What the bank (etc) wants in return

• When does a loan make sense?


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Investment finance

• Sources of investment finance:– Venture capital

– Seedfunds

– Business angels

• Pro’s and con’s of investment finance

• Sources of information on investment finance

• Where should I use ‘investment finance’?

• How do I meet investors?

• What do they want to know?


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What investors want

1. Their money back

2. A lot more money in addition

3. A clear understanding of WHEN they will get their money back

4. An understanding of the risks involved

5. An understanding that YOU know what the risks are and have

plans to reduce the risks

6. An understanding that you know how to get your product to the

market


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What investors want (2)

7. Clarity on how much money you want

8. Clarity on what you are going to use the money for

9. Comfort that you have enough money

10. Mechanisms to report on progress

11. Mechanisms to intervene (if things go horribly wrong)


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There are different types of money

you

3 F’s/grants angels series A

VC

series BVC

seedfundsseries C VC/private equity

£

10 k

50 mio

10 mio

1 mio

500 k

100 k


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Different types of money have different characteristics

• Your money is quite precious

• 3F money is often very expensive

• Angel money brings angels – can be +

• Seed-funds are hard to find these days – unless you

are based in the North East!!

• VC money = rocket fuel


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Moving into Business 2011Group Work

Building Your Own

Business:

Developing your Team


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Prepare for your business

• Outline organisational structure• Skill requirements and competencies• Management style, processes and growth plan• Culture and values for the business and how

you will achieve these

Documents

School of Physical Sciences ©PGH Moving into Business 2011; Leadership and teams: finance Peter Hiscocks March 2011