EU Salvation=Germany, which=disaster?

Forget the headlines you'll inevitably see over the next few weeks, months or even years.  "EU pledges solidarity.  So and so is open to Eurobonds.  So and so has just bailed out Spanish banks.  Greek leaders promise to...whatever..."  Anything you hear and see out of the press is just a band aid masking the real problem, which is today invisible to most observers of this long-simmering crisis.  Where the EU is hemmorraghing is inside itself.  It comes down to culture and history whether this region will survive long term.  The prognosis doesn't look good.

There is only one solution to the EU's problems--to create a super state with a common financial framework, including a one-size fits all fiscal policy, thereby lowering the cost of debt and bringing financial order back to the region. Without this, more bailouts may be possible for awhile longer, but they won't actually fix anything.  The systemic problems of high unemployment which accompany necessary but pain-inflicting austerity in a downward economic death spiral will persist as no one will lend to a country not committed to austerity.  Then you have cultural blowback, as we've seen in France, where socialism is firmly back in power, imperiling France's ability to attract foreign capital and bring balance back to its state-run economy.  People don't like pain.  They avoid it and seek pleasure.  This is humanity 101.  Get over it.  So ultimately, this merry go round of awarding bailouts for austerity which leads to blowback and political upheaval will end poorly, in chaos.  The solution?  A central bank with teeth, and a central governing structure with fangs--led by Germany.

But don't hold your breath, because the architect of this superstate would of course have to be its strongest member--Germany.  And this is the same country that sought world domination less than 100 years ago--twice! Germany, ironically enough, is treading lightly here, clearly hoping that the PIIGS will proactively pursue this superstate, not wanting to suggest this idea too strongly given its checkered past.  Problem here?  The other states are led by clueless politicians who are more interested in re-election for their own basic survival, than the harsh financial realities they're facing.

So make no mistake, Germany's terrible past will come up again, overtly or tacitly as the rest of Europe grapples with this simple reality: consolidate around German leadership or dissolve the EU and wither for a generation while emerging markets and the US gap you by a mile, relegating you to second world status.  Because that's where the weaker EU member states are headed in a hurry.  No natural resources, an uncompetitive work force and most damning, a lost generation of unemployed young workers reliant on the state for basic survival.  Which will take another generation to unfold.  Game will be long over by then.

Good luck to all!

Quick update on what we're seeing

So everyone now has:

1. A BYOD or security angle. Or some hook into any of the top 3 priorities of I/T customers in pull market conditions.

2. A mobile strategy (or you're a dinosaur, or just don't like customers or cash flow)

3. A need for more people than candidates to fill various roles (if you're smart enough to be taking advantage of a pull market in technology)

Let's look ahead. I think:

1. Facebook will do well, but level off around $150B in market value until someone democratizes your Facebook data. Then what do they do? They can buy their way into phase two. How many user abuses will be inflicted before this company "grows up" and how will it grapple with privacy rights vs their commercial interests on an ongoing basis? To me this is Facebook's fundamental dilemma.

2. Google's just not getting it. They don't get consumers at all. But Android will consolidate, 2-3 handset makers will dial it in, fragmentation woes will settle down and it'll make a run at iOS. But droid will not ever dominate tablets. MS will make a nice push here.

3. I/T (despite "overclouding", a word I made up recently), is where the real money will be in the next 5 years.

4. Cali will do ok and stabilize for the next year or two but the technology space's success is masking a very deep and insidious longer term threat to the state's well-being, which is a tax-the-rich, tax and spend political culture. Lookout Cali, in about 2014/2015 when this really inflicts pain and once again, Jerry Brown will have made a bunch of stupid mistakes like he did in the 70s, and leave someone else holding the bag. He should be ashamed of himself for caving into the CFT last month on the tax strategy for November, which will narrow the tax base even more, when Cali needs to widen it considerably, leaning too hard on the top 1%, which are mobile and which will eventually say "enough's enough." Letting public service unions dictate tax policy is a recipe for disaster as it's the fox guarding the henhouse effect and they already have way too much clout in this space. Cali's achilles heal are public service unions. Anyone with a pulse MUST see this and fight it. They're the ultimate anti-capitalist, pro-big gov't, etc.

5. 90% of solar startups will be gone by this time next year.

6. 90% of US battery startups will be gone by this time next year. Same with biofuels/biochem. Any capital intensive greentech company running short on technology/cost excellence, commodity shock proof (show me one?!) and needing capital should just be shut down now but people are too embarrassed to admit they blew it in this space and their denial of this harsh reality will cost their investors dearly. Time to cut and run from capital intensive green tech. It's so obvious it's sickening.

7. Digital is leveling off. Companies are starting to flatten out, management teams are flaky, you're seeing high turnover in startups and the bigger companies like Groupon continue to show why inexperienced management teams in hypergrowth public co's are a recipe for mediocrity if not outright failure. No one seems interested in mature leadership teams and this will be the undoing of many digital media related companies, unfortunately.

9. The next 5 IPO's in technology, Facebook excluded, possibly Twitter excluded, that are positive events for investors a year later, are likely going to be I/T related vs digital.

10. Ecommerce will go from $1trillion to many trillions over the next 5 years, at the expense of a lot of retail jobs in Europe and here. Will actually help Asia from a job creation point of view. I just don't know how strip malls survive this next era where you're buying shaving gear on the web.

11. Apple is truly unstoppable. Until MS, with tremendous irony, becomes the "underdog story." And makes a dent in tablets and mobility. Watch for them here. But with such a bumbling idiot in Steve Ballmer as CEO, they could blow this. And Windows 8 reviews suggest promise, but some real cluelessness on the PC level. If they nail tablet and handset, they're good. If they don't, Apple is a thousand dollar stock in two years and a trillion in market value, potentially acquiring Microsoft? Stranger things have happened.

Hope you enjoyed the stream of consciousness. We'll see what happens, of course.

Andy

Competition for People-tips you might not have thought of

I'm looking pretty hard at two finalists for a cloud CEO search. In both cases, the finalists have been CEOs before, and made money for investors. Both are highly sought after. Here's a few tips for how to keep killer people in the running until you close one:

1. Keep quiet about your candidates. Don't forward your search status reports to anyone. If you want data from, say, a partner in your venture or PE firm, just call and ask about what they know. Even partners can make a mistake, forward a note with a bunch of resumes and biographies, and then the data goes viral. That's just bad hygiene, possibly illegal and risky. Big search firms tend to brag to the press about who they're talking to, which is spectacularly stupid on a number of levels, most of which are abundantly obvious. Clueless, big company Boards take that press, eat it up and say, naively: "look at who those guys get to talk to!" Meanwhile, the "candidates", most of whom never even returned a call from the Korn Ferry partner in question (an example), are thinking "who the hell's using my name in vain?" Too many examples to count, point is, keep quiet! Recruiting is about discretion and not chest beating.

2. Do very quiet early referencing on key people, contextually of course, and don't let people run off half cocked checking around because they've got nothing better to do, running their mouths off about who they're talking to. Word travels FAST. And people will wake up to who's around, who's open to things, etc. It is a call to action when, say, a PE or VC partner calls another one for a reference on a successful CEO they might have backed. You're inviting competition to act more quickly. Big mistake. Save it until the last minute, but know that you don't have any likely land mines before that stage, so you don't have to blow up the project and start over. Re-capping: don't wake people up to your candidates until you absolutely have to, in referencing or bravado.

3. Don't talk to the press. Enough said.

4. Stay in close contact with your candidates every week--at least the top 3. Spend the time to really understand how they're thinking about the opportunity you're discussing with them. Does it really fit their life plan? Are there motivations coming from a healthy place? Listen, don't just sell. You can close more people by listening than by selling.

5. When you have a "live one," be agile. Above and beyond all other things, don't let a high overhead process (too many people interviewing candidates, for example) bog you down and lose people. Get to a yes/no within 2-4 weeks. Healthy for all.

Good luck!

Interesting CEO profiles: Myths vs Realities

Everyone's frothy right now, like a bunch of rabid dogs chasing a bone truck. There's money to be made, gold to be mined, in technology right now. It's a risk-on environment for sure. But classic mistakes are being made in hiring, or at least contemplated, daily.

My advice for CEO recruiting? Don't fixate on "big personality/big resume" CEOs thinking they'll make the difference for you. Focus on what your candidates say they'll do for your company as they get close to it, and that will drive your decision process. Don't get hung up on style or even resume. The best CEOs, in my view, behave like level 5 leaders, are calm and measured, mature, and seldom come into the success stories armed with a big resume and gaudy track record. They come in with a plan or at least an approach that makes sense. Ready to listen, to understand the work, develop relationships with Founders, management and Board. The ones to watch out for are the heroic, "get out of my way and let me at this thing" types, the ready-fire-aim strategy. And if anyone asks "what about Steve Jobs," please stop reading this, refer back to history, and many of the points here will be made for you...

Examples of solid CEOs who were not "big personality/big resume" profiles before their last success (this list is a mixture of current CEOs and a couple of big notables from history):

1. Fusion IO ($2B market cap, 2011 IPO); My firm ran a CEO search there and talked to a bunch of veteran CEOs with big resumes, ultimately recommending that the Board stick with Dave Flynn. He had a great plan and management was behind him. We're glad the Board made the right call. Because sometimes, the right call is a non-call!

2. 3Par ($2B acquisition after IPO); Dave Scott is a solid engineering type guy, not a lot of hype. They plugged away and outlasted competitors stuck to their knitting and never took their eye off the product vision. Solid execution drove value here, even though they burned too much VC money en route.

3. Data Domain (2B acquisition after IPO); Frank Slootman is a competitor. He’s very polished but hard nosed, serious minded and holds peoples’ feet to the fire. Working for him is a labor of love. And I consider Frank a good personal friend, so I say all of this with great respect. He is NO hype, NO handwaving. Hired young, unproven people with just OK track records and made them work like animals, focused them, didn’t let anyone BS him, ever, especially not sales people. Slootman would say “execution, not sales nor even strategy, drove us. The strategy became apparent as we executed.” Frank had a so-so resume before DDUP.

4. NetApp (huge hit, still public, industry leader); Dan Warmenhoven: engaged the Founders successfully, has the scratchy voice of a smoker, has a sort of nervous energy to him, was fired in his previous role but was a steady, no-nonsense hand on the wheel. He was anything but the glamorous hire when Lee Schweichler found him for NTAP...

5. Cisco; John Morgridge. He was frugal, and humble. He had a great eye for talent. He’d been fired from his previous company and was pretty measured stylistically, though driven (people see "measured" and think "low energy." Huge mistake far too often). He hired John Chambers. Another great Lee Schweichler discovery (both Morgridge and Chambers).

6. Microsoft; Bill Gates. Geek. Founder/CEO...Maybe Andreesen Horowitz is onto something here? People should think twice before taking out the Founding CEO in some cases.

7. Mark Zuckerberg. Geek. Founder/CEO...hates being on stage. Didn't even HAVE a resume coming into FB...

Let me illustrate an example of where big personality/big resume loses. A few years ago, I hired a CEO who’s a huge personality, very compelling, extremely articulate. Big, gaudy jobs in a globally recognized company mixed with a couple of interesting startups. He took a 20 person company worth almost nothing to an IPO worth a billion. But it hit the wall and is now worth a fraction of that because this person is a victim of his own success as a salesman and didn’t line up execution with hype. The company will be acquisition bait, ultimately, and declared a success. But it could have gone a lot farther had he dialed back the hype and focused more on quiet, focused execution--managing investor expectations and outperforming them, vs going for huge valuations which wouldn't ultimately hold up. To be sure, this guy has done more with the company than anyone could have dreamed, but it could have done a lot more. Ironically, he'll probably be a much better CEO the next time around!

So in my opinion, the difference between flash in the pan startups and those who really make it big is about walking softly and carrying a big stick. Staying quiet until you are ready to knock someone out and punch big companies in the mouth with a brass knuckles equivalent product and business plan. It isn’t about the resume, nor is it about the big personality of the CEO…And history will easily show this when/if people get around to doing their homework to reach the same conclusion...

Enjoy!

Reference your references

References are the single most critical component to any executive search and need to be conducted thoughtfully, but for reasons far beyond the obvious. This is true of any hire, from Board members to CEOs to VPs on down. Take the time to get the complete picture on an interesting candidate. B candidates? Don't bother to reference them--you shouldn't even be talking to them in the first place. But when you think you have an "A" candidate, make sure you don't overlook them due to quick, out of context "referencing" done by people who aren't equipped to "reference the references."

We see great people overlooked because the untrained eye (sometimes our clients, or someone involved in a hiring process) will "do a reference" on a candidate, which is nothing more than a passing conversation during which an offhand comment is made. The "reference" can be highly suspect for a bunch of reasons. Among them:

1. Competition for talent. If you wave someone off a great candidate, you have a better chance of grabbing the person yourself. If you're a PE or VC firm, chances are, one of your partners is looking for a CEO and because there's a huge imbalance between the supply of great CEOs and the demand for them, this is a critical competitive edge that any firm would want to gain.

2. Almost never are these references done contextually. We never hear people actually walking the reference through the specific situation at hand, and having a thorough, balanced conversation to really flesh out someone's qualifications for a given situation.

3. Everyone's controversial. The more senior, the more visible, the more controversial. Steve Jobs. Enough said....

4. Personal vendettas are everywhere, and no one goes through a serious career without making a few enemies. Those people talk more loudly than one's supporters, typically, because people love to complain, especially in this day and age.

I could go on and on, but here's a real-time example of where a "back channel" (generally thought to be the best kind of reference and worth 10 listed references) almost cost me a world class CEO candidate.

• I'm running a high profile CEO search. My target is a CEO whose company was acquired, returning about 100% to investors over 4 years. A spectacular performance.
• I called the former COO, whom I know very well, and consider a good professional friend.
• My source had been part of the former regime, which was replaced by my target.
• Reference was highly negative. My source gave me anecdotes of what other team members complained about.
• I almost eliminated the target from consideration. But I stepped back and asked "how objective was my source?" This guy was passed over by the Board for the CEO role, and the "old guard" was clearly unhappy about it. So it was impossible to get a balanced read on the target from this particular source. His "followers" would naturally complain about the new regime and leadership in general.
• So I and my client ran about half a dozen other informal references, and then looked more analytically at how the company performed under my target's management. It was stellar. References were stellar. But they're binary: old guard unhappy, new guard ecstatic.

So this is a simple example of why, if you're going to run references on someone, take the time to do it right, really think about it, and give any candidate adequate consideration before moving on them, or moving on.