According to Naval, we’ve got the problem all wrong:

“There isn’t a shortage of developers and designers. There’s a surplus of founders.”

He makes a compelling argument as to the “why” :

The cost of starting a company has collapsed. It’s now just (minimal) salaries. For entrepreneurs, desks are free, hosting is free, marketing is online, and company setup is cheap.

Raising the first $25K for product development is easy – join an incubator. Raising the next $100K is easy – investors are following the incubators with automatic notes. Building a product and launching a product are easy – develop on Open Source Stacks, host on Amazon, launch on Facebook, Android or iOS, get your early traction.*

Getting real traction is hard. Raising millions of dollars is hard. Building a sustainable, long-term company is hard.

Basically, he makes the point that if you’re pre-traction, you have to expect to give up a lot more equity to grow your company than if you’ve already got traction.  In the microcosm of the overall market that I see, in professional services, you could easily argue the surplus of founders argument. If you consider all the individual contractors as “founders” that haven’t gotten traction yet.

We’ve always felt that it was important to hire people who valued being part of a team, and building something bigger than themselves.  Being part of a team enables us all to execute at a higher level for ourselves and our customers. It makes it easier to take a vacation and still sleep well at night.  It makes it easier to get health insurance.  It is a long list of benefits to being part of a firm.  Including, building value that is sustainable even after the point when you’re ready to move on to another phase in your life. For builders, this is an attractive proposition.

Eric Jackson of Forbes recently wrote the Top Ten Reasons Why Large Companies Fail to Keep Their Best Talent.

The article lays out some very good reasons why top talent gets frustrated with big companies. But the focus is still too much on secondary effects.  My thoughts on a few of the points:

#1 : Bureaucracy. “No one likes rules that make no sense. But, when top talent is complaining along these lines, it’s usually a sign that they didn’t feel as if they had a say in these rules.”  Actually, there are just too many rules.  Big companies have the resources to actually have bureaucracy that makes the lives of top talent easier, not harder.  But they don’t take advantage of that capability, because it shows up as a hard expense that can be cut.  When the economy is strong you see startups and smaller firms offering free dry cleaning or laundry service (or if not free, convenient in-office pickup).  There are free meals and caffeine at the office.  This is convenient for employees and saves them time out of their lives.  But for some reason most companies cut back both on the perks, and on the benefits of large size, as they get bigger.  Instead of requiring employees to fill out a lot of paperwork for expense reports, make it easy for them to send in their expenses and pay lower-skilled labor to process them.  Or set policies that require fewer receipts for reimbursement and thereby reduce the total bureaucracy.  Use per diems.  Have a travel group that adds value in booking and rebooking flights and hotel reservations.  Have administrative help that helps produce critical paperwork without a lot of barriers to entry and TPS forms to fill out. These are trivial examples, but wherever you can reduce the exposure your team has to bureaucracy or administrative work, the more productive and happy they’ll be.

#2 : Finding the right project.  “they usually don’t have people going around to their best and brightest asking them if they’re enjoying their current projects or if they want to work on something new…” This item in particular seems hopelessly vague.  It almost sounds like the idea is that the top talent shouldn’t have to do any of the tough, dreary projects.  Who wouldn’t want to opt out of the project that takes them to Ottawa in the winter? (No offense intended, Ottawa!)  But there’s a kernel of truth within this point:  big companies have really interesting jobs to offer high performers.  But they (typically) don’t.  Those top performers aren’t afraid to ask for a better assignment or put their name in for promotion.  But they’re told they have to wait – “we don’t promote someone twice within one year.”  Or “you can’t get a raise of more than 3% a year”.  So they realize that to move up, they have to get some experience and then move out.  Possibly getting hired back in later on.   It isn’t that no one gets these fast-track promotions and assignments at big companies, but the percentages are vanishingly small.  The top 1% not the top 10 or 20 percent.

#3 : Poor Annual Performance Reviews.  “You would be amazed at how many companies do not do a very effective job at annual performance reviews.”  Actually, no one with a job would be amazed by this.   Performance reviews are a broken process at nearly every company I’ve heard of, let alone worked at.  There are companies trying to fix that, like Rypple (now part of SalesForce), but the fix isn’t actually about annual reviews.  The fix is more feedback.  Reviews are largely a waste of time, and condescending to the employee.  The employer or manager sits in judgment and the employee is judged and much good feedback throughout the year is saved for an annual review instead of happening spontaneously.  The Annual Review becomes a marker around which unrealistic expectations get set – employees expecting golden reviews and promotions, employers disappointing them with perhaps neither.   The review process can make employers look quite petty.

So what’s the fix?  When you have negative feedback for an employee, tell them right away.  Tell them what they’re screwing up.  While they can still do something about it.  When they’re doing something great, tell them quickly, while it is fresh on your (and their) minds.  Make sure other people hear about it so that good behavior becomes infectious.  We don’t do “reviews” at BP3, but our team communicates.  They can call to talk to me anytime, and I don’t hesitate to hit them up on Instant Messenger or the phone.  We don’t do raises on an annual schedule, we just do them when we think the timing is right.  We do regular bonuses which force us to acknowledge good or bad performance monetarily, in case our words – spoken and typed – aren’t getting the message across – good and bad.

#4 : No Career Development.  Well, this is actually nearly impossible in small companies to do in a structured way. The promise a small company can hold out is that as the company grows, opportunities for employees will grow as well.  A lot of the career development is personal growth and attacking ambiguous problems (filling in the white space).  At a large company, I’d recommend managers talk to their top talent about their own aspirations for those people.  What do you want to help them achieve?  Don’t expect them to come to the table with an answer when they may not have a sense of what is possible.  But experienced executives and managers do know – and can help lay out a path or ladder that actually motivates talented people. But keep in mind, there are always some people who aren’t motivated by a ladder, or competition.  They’re good at what they do, and they know it, but they don’t care about your external validation of that performance.  These are the toughest people to keep happy on a purely professional basis.  If you have one of these high performers on your team, make friends.  Friendship and loyalty may be the only thing that keeps you two working together. And someday you may want to get a job working for them instead of the other way around!

#5 :  Shifting Whims.  “The challenge for most organizations is not setting up a strategic prioirty, like establishing an incubator, but sticking with it a year or two from now.  Top talent hates being ‘jerked around.’”  Well, this one is spot on.  What’s worse than not having a good recruiting program?  Setting one up and then stopping it 3 months in.  It takes time to recruit the right talent, develop a talent pipeline that works.  When you shut it down for more than a week or two, starting up again takes another 3 months or more for the pipeline to pan out.  You’ve lost all the momentum.  Having the rug pulled out from under something you’re excited about sucks.

#8 :  The Missing Vision Thing.  This one can be hard when you’re smaller.  It is helpful to have a humble or modest bearing in general.  Under-promise, over-deliver.  But as you grow, as things start to fall into place, you can share the vision with your early conspirators (your team!).  Eventually you step out and communicate with the world at large.  The same approach works well for team-level vision at a company.  But big companies can have bigger visions of how they’ll change the world or the landscape.  Then the real trouble coming up with something that is expansive without sounding too trite or generic (I don’t have to name names, we can all think of a few in this category).

It is just a matter of using your size to your benefit, and to the benefit of your top talent.

Really interesting progress on the state of the art for startup process.  It recently got some coverage at Austin Startup, with a great infographic included. But it has previously been discussed on Steve Blank’s blog.

The Genome Report is 68 pages of great reading.  Lots of details go into the general conclusions that you see in the info graphic.  It is included at the bottom of this post as well.  Interestingly, they go even farther than just producing a report. There’s an a survey you can fill out, the startup compass, which will help determine how your startup compares to other startups they did their research on for the Genome project.  I went partway through this survey myself, but at some point it becomes apparent that it is not really a good match for services businesses, it is really about product businesses.  And that’s fine – it is still far and away the most interesting pattern-matching tool I’ve seen for startups.

And the key finding seems to be exactly what Austin Startup focused on:

One of the big findings amongst the data was that almost 7 out of 10 companies failed due to premature scaling or inconsistency. Peeling back the data, the lessons seem really simple: don’t act like a big company.

Fascinating stuff… or scary stuff, if you’re running against the statistics they’ve collected… The statistics definitely back the idea of the lean startup.

(Side note for BPM practitioners… how can we apply this kind of data and thinking to our own BPM efforts as we grow them from projects to programs and beyond?)

Startup Genome Report 01

Fabienne: Whose motorcycle is this?
Butch: It’s a chopper, baby.
Fabienne: Whose chopper is this?
Butch: It’s Zed’s.
Fabienne: Who’s Zed?
Butch: Zed’s dead, baby. Zed’s dead.

- Pulp Fiction

There have been raft loads of articles and blogs written about “Millenials” over the last few years (not to mention Generations X and Y).  Chris Taylor has decided to take his shot, on BPM for Real-  “Does Generation Z have a ’2-second advantage’”?

What happens when a whole generation that has lived their entire lives with the ability to feed information to themselves (and at a time and format of their choosing) becomes the dominant group in the workforce?

My bias against these generational stereotypes is well recorded, but let’s review this one.  I expect predecessors to Generation X wondered what would happen when kids showed up at work who grew up their whole lives with a computer at home.  Of course, only a minority of kids at that point – but still more than in any previous generation.  Maybe it is because I was one of those lucky kids that I’m not particularly concerned about the changes this will effect on our society or workplace.

Chris Taylor explains:

I recently read The Two-Second Advantage, a Malcolm Gladwell-like book about how we learn and build mental models that predict what will happen next based on experience and data that arrives so quickly it would overwhelm–if not for our learned ability to work through it. Most of Generation Z has been living in a state of information overload longer than any human beings before them, and the result should be a capability to handle a complex world even better than we do. They should have more complete mental models for the workings of the world due to their ability to know whatever they choose, whenever they want. If you buy into the ideas of this book, they are likely developing a “two-second advantage” that should give them a leg up on the older generations.

Perhaps the new generation will be better equipped than the previous.  However, the world will change fast enough to make them feel as ill-equipped for the next transition as many of of those writing about Generation Z appear to feel now.  By objective measures, the rate of change appears to be increasing.

But the way information-technology-adept people deal with the world is not by addressing its complexity, typically.  It is by simplifying it.  Rather than having more complete models, they technologically adept will have meta-models that don’t require completeness.  We just had the Austin City Limits Music Festival here.  In the complete model world, I’d know pretty much all the acts performing, and that I was interested in, and on which of 8 stages they’re playing, and at what time.  I’d do my research before the concert and figure it all out in advance by sampling songs by various artists that are performing.

In the simplified world, as I’m walking to the concert I download an iPhone App that tells me what bands  are playing on what stages at what times.  I can quickly browse the bands and see if any of them appeal.  I can group-text my friends to find out what they’re listening to (more than one stage is active at the same time) – and that’s built in to the app if I don’t already use a group-texting application.  You can guess which of these two approaches describes my ACL Festival experience…

Think how “getting directions” has changed since GPS and maps have become so ubiquitous on cell phones.  You don’t really need directions, you just need a destination.  The only directions someone needs to give you are the little bits that never show up in a navigation system or map: “don’t turn in the first drive, use the second driveway”.

So the software and hardware is delivering the results of increasingly complex interactions with other systems.  Let’s face it, my iPhone computing directions to a destination using maps and GPS is much more complicated from a systems view, than someone scribbling directions on a piece of paper.  But the end-result to the user is actually simpler than the old way of doing things. I think that’s actually the metaphor to use going forward. The touch interfaces today give even infants a chance to interact – because the cause-and-effect is more clear.  So the interaction isn’t just the tactile (as it might be when they play with a physical keyboard), it is direct manipulation – something their brains are already wired to learn from.  The systems of the future (software and hardware) are likely to appeal more directly to the way our brains already work – and thus feel more natural to us, even as they get more complicated in principle, behind the scenes.

It isn’t really an issue of generational advantage- if you buy into Malcolm Gladwell’s thinking on practice – it takes about 10,000 hours to become an expert at something.  Any one, of any age, can become an expert if they put in that 10,000 hours of purposeful use with technology.  There’s no reason to let your kid be the only one in the house with a “2 second advantage”.  I watched my own parents leapfrog technology shifts.  They both bought iPhones before most of my friends.  They still have trouble using Microsoft Windows.  But they use their iPhones and iPad, and Kindle, just fine.  Don’t let these generational tags define you, or your views of others.  Besides, the idea of “2 seconds” being a short time is already a sort of generational bias, isn’t it?  But it does roll off the tongue better than a 2 nanosecond advantage.

Momentum for Austin startups continues – with news that Austin startup Spredfast has raised a $12Million round of funding.  Rod Favaron, our Lombardi CEO, is running the company:

The company, which launched its service last year, received the funding from InterWest Partners of Menlo Park, Calif., and Austin Ventures. It has raised a total of $16 million.

Spredfast’s software lets clients manage campaigns and conversations on social media sites, including Facebook, Twitter, LinkedIn, YouTube and blogging platforms. Rather than going to each social site, Spredfast lets users publish and monitor social activity from one central platform.

[...]

“This is a big step for us, and we’re ready for the next stage of growth,” said CEO Rod Favaron, who joined the company in February. Favaron was previously CEO of Lombardi Software Inc., which was acquired in 2010 by IBM Corp. for an undisclosed price.

It is both a vote of confidence in Spredfast, and in Austin.  In 2010 it was common to read about the dearth of funding in Austin, but almost ever since then, we’ve been seeing more news about funding in Austin than I can remember since the ’90s.

In a followup to the previous post about recruiting talent to Austin, I think news like the above fundraising does more to recruit industry veterans to Austin than the recruiting trip they recently embarked on.  The coverage on MarketWatch wasn’t flattering:

In fact, I have to report that the Austin group’s recruiting night in San Francisco was something between a bust and a learning experience for the group.

It sounds like the two main events were, basically, a tough learning experience.  But hopefully the CEOs took advantage of the trip to prearrange a bunch of meetings with likely recruits rather than just depending on the group events.  Still, the target and the optics are all wrong.  Instead of getting a story about what a great place Austin is to work, and that people are coming here to work at our high tech companies, we got an article essentially about indifference in the Bay Area and how hard it is to find talent in Austin (which isn’t quite as dire as the article makes it out).

Imagine if these same CEOs had gone on a tour of Universities in California (or other states) to recruit talent?  To put the idea out there for college students to think about Austin as a destination.  University is the right place to strike.  The experienced industry veterans don’t need to go to a job fair to find companies in Austin – they’ll leverage their connections to find a job.  Its the college kids who need some help discovering Austin and Austin companies as a place to land.

The rest of the article focuses on “solutions”… and here’s one perhaps the 30 tech CEOs could get behind – an Austin-funded scholarship at several universities – giving us some press out there on the coasts.

Update:  This article on Austin startups finding funding via Angel List is probably relevant as well.  It just speaks to how the world of fundraising is changing, and there are fewer barriers than ever for Austin entrepreneurs:

Even for Austin startups that aren’t actively raising money, AngelList is becoming a way to get on the radar of potential investors, partners and customers.

Bill Boebel, an Austin entrepreneur and angel who has invested in 15 companies, calls it the “LinkedIn for startups.”

“It’s a startup’s resume,” he said. “Just like when you’re recruiting an employee and want to learn a little more about that person, it’s a great way to find out more about a company.”

And further, Ravikant says:

“Entrepreneurs inside Silicon Valley already have access to investors here, but it can be harder for a promising startup in Austin to break in,” he said.

“We have helped Austin startups get exposure to Silicon Valley and New York investors, and we also give those investors the lay of the land in Austin.”

Has there been a better time to invest in people and talent?

There’s been a bit of a blast of news about the Austin Technology Council (ATC) taking a delegation of Austin CEOs to Silicon Valley to recruit technical talent to Austin:

“These events are about Austin making a pretty loud statement in the Bay Area,” said Julie Huls, president, Austin Technology Council.  “Texas is a New Economy State, and we have a killer combination to support it: high-paying tech jobs, fast-growing companies, a low cost of living, and a relaxed way of life.  Over 100 of our area CEOs were together in May at an ATC CEO Summit and one key call to action was to bring more tech talent to Austin.  We are proud to deliver on that idea in a couple weeks in San Francisco and Sunnyvale.”

Some of the best companies in Austin are represented in this trip – and some great CEOs for sure.  These are people that Austin has a lot to be thankful for.  I may not be sure that sending the CEOs en masse is the best way to recruit tech talent to Austin, but I certainly don’t blame Austin CEOs for recruiting in other markets.  From my time at Trilogy and Lombardi, and now BP3, I know a thing or two about recruiting talent to a firm.  I think this event in the Bay Area is more about news cycle than actual recruiting.  Hoping to plant the seeds for the future.  Clearly there is a need for more skilled people in Austin:

Austin currently has several dozen technology companies hiring 40 or more new programmers each.

Integrating new talent into Austin is clearly good for the local economy and ecosystem.  I was part of one of these waves of immigration to Austin back in the mid-90′s – and the imports are now the CEOs and hiring managers at literally dozens of local companies.  But the long term solution to this problem should be a mix of approaches – recruiting and retaining talent from universities, industry, and various locations inside and outside of Austin. Too many of the startups in Austin have stopped college recruiting and really developing their own talent – which is easy to understand when a company has a horizon to exit of less than four years. But it isn’t just college recruiting – it is also hiring people with experience who have the potential to do more – and then challenging them to do it!  Don’t just hire Ruby on Rails experts and developers – hire people that you believe can become Ruby on Rails experts.

The strategy we take at BP3 isn’t to import talent – but to hire our talent where they live – so long as they’re willing to travel to customer sites.  If they live in California, that’s where we hire them and where they base out of.  If we hire them in Minneapolis, that’s where they’re based out of.  It is actually part of our goal to have geographic diversity, and it means that we can hire people that other companies can’t touch as easily. But it has a bigger benefit for our clients-  as we add staff, we’re more likely to be able to serve our customers with local staff rather than a team that has to travel to be there in person.  High touch, high value, we like to call it.

Vivek Wadhwa’s article in the Washington Post was a brilliant assessment of the “talent shortage” in the USA – first by calling out the objectives of the President’s Council on Jobs and Competitiveness:

The council is holding a series of meetings to find ways to fix a perceived national problem: an engineering shortage. Otellini and the council claim that such a shortage seriously threatens America’s ability to create jobs, and that the U.S. risks losing its innovation edge to China and India, which are producing a million engineers per year — 12 times as many as the United States.

But next, by explaining what is wrong with this logic:

The graduation statistics most commonly touted then were: China graduates 600,000 per year, India, 350,000, and the U.S., 70,000. We found that, in 2004, when comparing apples with apples, the U.S. had graduated more engineers (roughly 140,000) than India had (roughly 120,000).

Wow.  Wadhwa’s analyis just does not agree with conventional wisdom.  Wadhwa predicts that great numbers of engineers in India and China will face unemployment or jobs in fields unrelated to engineering.  This is where he cuts to the heart of it:

Then there is the question of whether there is a shortage of engineers in the United States. Salaries are the best indicator of shortages. In most engineering professions, salaries have not increased more than inflation over the past two decades. But in some specialized fields of software engineering in Silicon Valley and in professions such as petroleum engineering, there have been huge spikes.

So, there are shortages in a few critical areas, but overall there is not a shortage of engineering talent.  Again, this matches with the data that I’ve been seeing.  It also better reflects the proliferation of engineering-derivative majors in US universities.

If I were these local Austin CEOs, however, I’d also be shopping in other parts of the country outside of Silicon Valley and Austin, and I might also focus more time on universities – graduates are more likely to relocate and take a chance on a place like Austin.  But that requires a long-term strategy toward staffing that not all companies have.

I’m hoping that companies in Austin, and in general, will start taking the time to invest more in the people they’ve got, and hiring more people with potential, rather than just looking to find someone who has done it all before.

In a recent Austin Technology Council (ATC) CEO Summit, talent shortage were a hot topic.  Which sounds crazy when the unemployment rate is north of 8% in Austin, and in Texas.  AustinStartup’s George Dearing did a good job addressing a few of the key issues.  It’s a really good read.

• 77% of respondents agree that there will be a shortage of technically skilled talent in the future.
• 71% of respondents agree that there is a shortage of technically skilled talent at the present time in Austin.
• More than half of respondents believe that talent issues have limited their organization’s productivity and efficiency.

Future Talent Shortage:  I think the overall concern for the future is valid – but overstated.  Technology and productivity advancements often have surprisingly dislocating affects on employment.  In the 1990′s, VLSI and CAD tools got to the point where 4 Electrical Engineers could do the work that had required 100 engineers just a couple years previously.  I watched my fellow class of ’94 graduates in EE go into software companies instead of working for Intel and the like – there just weren’t the number of new jobs in electrical engineering and chip design that there had been in previous years.  In Austin I’ve followed the chip business with some interest – and I would venture to say that the number of chip designers employed here probably declined into the early 2000′s… until the market changed.  Now there are a lot of different chip applications – mobile devices and analog applications have created opportunities for a lot more applications – and for more engineers.  And, with the tools at our disposal today, it may make economic sense to tweak chip designs for much smaller volumes than in 1995.

What’s my point?  Technology employment is volatile.  That results in under-representation in STEM (Science Technology Engineering Math) majors, and it results in people with little STEM education joining STEM-related fields in boom times… and it results in people with STEM backgrounds exiting these fields when the boom eventually turns to bust.

When I was entering college I heard and read the same concerns about there not being enough engineers.  Somehow we made it to 2011 anyway. All I know is, STEM majors are going to be good choices for college students for many years to come.

Shortage of Talent in Austin Right Now:  I don’t see it.  I was just talking with someone today at a local software company who commented how hard it was to find the right people in Austin.  I expressed sympathy – after all, BPM is a bit of a niche business,  so I can relate in that not everyone is an expert in BPM software.  But his complaint was that people don’t spend enough time retraining themselves to be prepared for the technology shifts – learning a new platform or language.  He has a point – if you’re in high tech and you’re not willing to invest in your own skills you’re making a mistake.  But it seemed clear his expectation was that his company shouldn’t have to make an investment in someone ramping up.

But, on the other hand.  This reminds me a bit of companies who hire interns but don’t expect to teach the intern anything.   If you’re hiring high tech workers, you have to be willing to mix it up.  Sure, hire a few people with expertise in the relevant technologies.  But don’t be afraid to hire people with varying degrees of learning curve required to be proficient in the job.  We hired an intern this summer who didn’t know how to do what we wanted him to do this summer.  And he figured it out.  And I dare say he probably has a bit more confidence that the next time someone asks him to just figure something out, he will.

Talent Issues Limiting Growth.  All I can say here is – developing talent and growing costs money.  For many years, many companies have gotten by with minimum investment in people.  I don’t mean training classes.  I mean investing in real opportunities for people to learn by doing as well as training.  And then investing enough in retaining talent so that the investment in education and self-improvement pays off.

I have to quote a telling paragraph from the original post:

Brooking’s analysis opens up several discussion points. With diversity and the educational pieces presumably in place, what then are the  obstacles to acquiring the right talent? Are companies just terrible at recruiting? Are all the good engineers are in Silicon Valley or overseas? Perhaps even more provocative, are companies really investing in people and training their employees to become more highly-skilled instead of sourcing things out to get the razor-thin margins necessary to sustain their models? Whatever the case, the NYT surfaced data from the National Employment Law Project [below] showing low-end jobs are actually the ones making a comeback, again leading me to question how aggressive some companies are really approaching the recruiting process.

Great work.  By next summer, I’ll report on some of our own talent investments at BP3.  Maybe it is just the lack of VC funding that allows us to look further out for our investments than just the next year.  We have time to invest and grow with the team we hire.

As if I needed any excuses to take coffee meetings (I don’t), Mark Suster has provided some great ammunition for those not inclined to partake:

I know I’m getting repetitive. It is with great intent. Whatever amount you’re getting out and talking with prospects, customers, employees, recruits, competitors, press, investors, potential investors … it’s never enough. [...]

For almost everybody else I work with I know that a little more dedication to coffee meetings would have a positive impact. Your biz dev discussion that goes nowhere today will plants seeds in somebody’s mind 18 months from now.

Yet most of us resist the coffee meetings seeing them as a distraction from: shipping our release, refining our business plan, working on our new website, etc. You have to do both. Wake up early. Turn coffee into late-night drinks. Never eat lunch alone.

I couldn’t agree more.  Early in my career I didn’t understand the value of eating lunch with colleagues and friends other than as entertainment.  I didn’t understand the value of meeting with people outside my firm.  But I learned. I learned that these incidental, accidental contacts can be very valuable.  So I started behaving in a way that increases the odds of these happy coincidences.  Meeting people for coffee, organizing lunch meetings, meeting with people in various cities when I travel, and making sure I meet with people outside my own business and my own industry. Also, being open to take meetings from people when I don’t see a direct relevance to my business.

On the whole, it has paid off handsomely.  At a minimum, I’ve become much better informed about Austin, about my industry, and about other people’s businesses.  At best, I’ve formed connections that will help BP3 and my own career for years to come.  I’ve certainly managed to hire some fantastic people on the basis of personal and professional connections made over coffee (and lunch).

So get out there and buy some coffee.

(disclosure: the author owns a few coffee-related stocks, and he is definitely talking up his own book! )

Great blog from Adam Deane on “the Go-Live Milestone“:

It’s an important hurdle for the vendor. It’s an important hurdle for the customer.

Attitudes change. Tensions evaporate. Management and end-users are happy. The euphoria kicks in.
Pink tinted glasses get put on again. Life is lovely

“Go Live” is probably the most interesting time in the life of a project.

The future looks bright. People start talking about replicating success, excellence centres, rolling it out to the whole organisation, to their customer’s organisations, to their customer’s customers… world domination.

But for a developer, “Go-live” is just a formal milestone in the project. You get the pat on the back from management, enjoy 5 minutes in the sunshine, and then back to the drawing board.

I think that one of the great failures of many consulting firms and IT groups is that they don’t celebrate enough at go-live.  Although, as Adam puts it, the real milestone for developers is dev-complete-  at BP3 we always reward Go-Live. Because dev-complete isn’t the finish line.  It is close, but it isn’t the finish.  And getting software to production in Fortune 500 companies is hard.  It is worthy of celebration.

Do software developers celebrate finishing a product release?

Do sales people celebrate making the sale?

You bet they do.  It is important to keep this culture of celebrating success in consulting as well.  Don’t let Go-Live just be another day on the calendar.  The team that got you there are your heroes, celebrate accordingly.

We have a process improvement case study.   Someone scheduled our all-hands meeting for BP3 in the midst of a heat wave that has set records all year long in Austin, TX.

A quick analysis was performed – corrections for the next process run were clear – schedule later in the year (October), pick a different location (Minnesota for example).  But the real question is how to fix the immediate process failure.  Sure the meeting itself was in the air conditioned confines of the fabulous Stephen F. Austin… but outside was an oven.

Not to worry.  Process improvement yielded a sure-fire way to cool down, with a low probability of failure:

Sure, not everyone jumped in the lake, but many of us embraced this process improvement with gusto, as you can see.

If the lake didn’t work, we could call in reinforcements.

I’ve said it often, but the people in your business – and on your projects – matter.  Doug Turner writes on his blog, with a slight twist to an old time-management proverb:

Well the issue of throwing more people at a solution and not getting to it any faster still exists, but now we have a new problem. Not only are we attempting to solve a problem by just throwing resources at it, we’re not even throwing the right resources at it for it to get accomplished at all. If you don’t begin with the right team, you’re not going to get the results you were hoping to get, no matter how positive your outlook, or how insistently you promised your superiors the job would get done.

My favorite passage, however:

With knowledge work especially, it’s the people and team you assemble that are going to make or break your solution. It’s not how much money can you, or can’t you, spend. It’s not how much time you do, or do not, have. It’s the people & their skillset that are going to help you to succeed. This is key to being successful.

You could just swap out “knowledge work” with BPM.  Doug’s blog ties back to a point I’ve made time and again with customers and colleagues, and on this blog:  an hour of labor is an input, not an output.  The hour of labor of the “right person” for a project is valuable and highly leveraged.  The hour of labor of the wrong person for a project is no better than no hour of labor at all.

It isn’t just an issue of trying to cram too much work into too short a time – if you have the wrong people, sometimes it just can’t get done.  And this is why it is so important for BP3 to build the best team we possibly can.

So we just completed our first company all-hands meeting.  Previously, the closest we’ve come was having our two co-founders meet for coffee on Sundays, and the near unanimous attendance we had at bpmCamp 2010 at Stanford University.  The short version of how I feel about this: why didn’t we do this sooner?!

We included all the crucial elements of a good company meeting:

1. Food.  We ate our way through some of Austin’s best restaurants.
2. Fun.  We carved out time for getting out on a boat on the lake the last afternoon.  But we also made time for checking out the local Austin bands playing on 6th street (a shout out to Empty-Handed Vagabonds and to the lead singer of Dysfunkshun Junkshun).
3. Location.  We held our meetings at the historic Stephen F Austin hotel.  The second floor balcony is a fantastic way to unwind and socialize after a day of business meetings, and the hotel itself oozes character and history. Often people ignore the setting of their meetings-  but this stuff matters!  The space you meet in affects how you think, how focused you are, how intimate the meeting feels.
4. Content. Sure, we reviewed important company metrics and business goals. But we also put a lot of content together individually to give everyone a chance to hear what  everyone else was up to.  I was really impressed with the quality of thought and content that was presented – and more impressed by the discussion that followed.  I learned a lot over the two days we met – about our team as well as about the topics they discussed.
5. Team.  Because we have a distributed organization, we have limited opportunities to gather in one place.  This is a really special team we’ve put together, and getting everyone in one place just made it more obvious how good they are.
6. Surprise.  We also had a surprise guest-appearance from Phil Gilbert, VP of BPM at IBM.  The Q&A session was memorable, as his take on the BPM space.
7. Shirts.  You’ve got to have shirts at a company meeting.  We rolled out fresh polo shirts and a surprise t-shirt addition to the lineup.

Often people will ask me why they should join up with BP3 instead of contracting – or why someone else would join up instead of contracting.  I guess if you don’t try it out, it is hard to understand the difference – but this sense of team, of building something bigger than any of us can do alone – it is very powerful.  I think everyone in attendance could feel how special this was.  You just don’t get that kind of validation and gratification as a solo artist.   You don’t get this sense of family.

So we’re building a company.  And investments like this are required to reinvest in community and team.  To say thank you.  And to give everyone a sense of the possible.  Our company meeting just made it clear to our team (and to me) why we’re special.   Thanks to everyone on the team!

I have been informed that “BP3 All Hands Meeting” as an operating name lacks a certain “flair”.  We’ll work on  branding for our event.  We might just call it “Getting the Band Back Together“.

Steve Golab of FG Squared writes in the Austin Business Journal:

I hate to break it to you. The phrase “thought leadership” has jumped the shark. A social media Web tsunami has spun out over the past decade and made it easier for everybody to claim an area of thought leadership.

Maybe thought leadership is overused. But so is “jumped the shark”.  Steve’s premise is that people who are really good at what they do spend more time doing and less time talking about what they’re doing.  He has a point:

Coming up with brilliant ideas, launching innovative products, developing great new approaches to problems is indeed thought leadership. Combining your assets together in a different way to create new value is indeed thought leadership.

Merely talking about your ideas — typically reinforced by speaking at events or getting coverage in the press — is not.

Inside your organization, communication and leadership can be done while doing – in other words, you can lead by example.  And people in your organization will be aware of it, and they’ll talk to you and understand your way of thinking.  If you’re a “thought leader” they’re going to be influenced by your thinking.

But if you want to influence people outside your organization you have to transition to writing or social media that can reach people outside your organization.  I think the point Steve is missing is that to be a “thought leader” you need to excel at both doing and communicating.  All the brilliant ideas in your head don’t lead and don’t communicate by themselves.  On the other hand, pure communication skills alone won’t cut it.  You have to be deep in your area of expertise.

Adam Deane’s blog post put me in a commenting mood, but I thought I’d share on our own blog as well.  Apologies for muddling the terms Adam used – I used “independent” to reference an individual contractor, and “pureplay BPM” to represent a vendor focused only on BPM services.  He does a great job of calling out the challenges and pros cons of different types of consultants, but I wouldn’t be me if I didn’t write an essay-length comment in response… content follows:

Interesting post. I’ve put my thoughts on this subject together previously here:
http://www.bp-3.com/blogs/2010/03/why-we-need-pure-play-bpm-consulting-firms/

The problem with one-man-band – if you find a great one, they’re a big help to a project and bring specialization to the table. But they’re not a team. They don’t have other experts with a range of skills to fall back on. When they get out in the deep end, they’re (usually) on their own. Yes there are google groups and wikis and the like – but there’s no one else in the boat with them. The problem for the consultants themselves is that they have to be working and selling at the same time. And if they sell work, but the timing doesn’t work for their current project, they have conflicts. And if they wait to sell until the previous project is finished they can end up with significant bench time. Added to that, they often get held over the barrel on rates because customers assume they can’t afford to sit out the market and wait for a better deal.

Vendor-consultancies, when done right, are a big value-add to the ecosystem. They do have an inherent conflict, in that they can’t really blame a product short-coming for their having to do extra work on a project. Often, when there is a product shortcoming, they’re asked to do work gratis to make up for it. The temptation to “camp out” is much less when the vendor is small – the vendor wants those consultants freed up to redeploy at new-sales customers. So actually the problem is the opposite- the problem is trying to retain consultants long enough on your project to make a difference.

Independent consultants- I call them pure play BPM consultancies – are actually more valuable in the implementation phase than the selection phase. Too many independents will suddenly fail to have an opinion about the “right answer” during an eval – they want to be part of the implementation regardless of what product is selected. I’ve always thought that that was a bit of a cop-out. You need to form an opinion during the eval and present your findings and opinion and why. Otherwise, what is the customer paying you for?

Also, a good pureplay consultancy will have a better balance between the twin evils of running away too soon and staying too long. Why? Because their mission in life isn’t to sell more customers, it is to sell more value. More value to one customer is easier than more value to 1000 customers. or 10. But also, they’re not likely to be big enough to back up a bus and unload 100+ consultants at your door. And because their exposure is smaller, it is easier for them to walk away and go to another customer opportunity when the time is right for the current customer – without laying off the team or having them sit on the bench for months, as might happen at a really large firm.

I don’t see the trend toward more independent consultancies however – at least, as related to credit crunch – the credit crunch simply isn’t easing for small businesses. At all. They want 3 years of history. But also, there are really good job opportunities for these folks – they can capture much of the value of being independent with much less risk. And, if they join a small consultancy (like, say, BP3), they have a chance to build something bigger than themselves – contribute to a team and a mission.

There may be a trend toward more independent consultancies, but I think the causes are independent of credit.

For what its worth, I hope my comments don’t come across as knocking vendor consultants nor independents. I’m just aware of the shortcomings (and strengths) of both situations, having done both myself  Now, as part of an “pure BPM consultancy” I feel good about the tradeoffs we’ve made and the kind of company we are. But so much of “what is right” for a consultant depends on their own individual situation – and I’ve seen dramatic exceptions to the downsides I’ve mentioned (people who get great rates, and have a “team” of supporters despite not having a literal team, etc.). I’ve also seen vendor consultants do a great job (as Chris Sanchez says – the mission is successful product launch for the customer – that’s not a bad mission! )

In fact, I think there’s a very symbiotic relationship between the three “outside” consulting groups we’ve been talking the most about- individual contractors, vendor consultants, and pureplay consultancies. individuals can augment the skills or geographic coverage of the other two organizations, and tend to be people with a lot of industry experience. Vendors are very focused on that initial successful deploy – but paired up with a pureplay consultancy that is more long-term focused, you often get a good blend, presuming their is a good working relationship.

Sanooj brings up a great point about “internal” consultants. I haven’t played that role personally, so I’m less qualified to comment. But I think it has its own challenges  I do know that when we’ve been able to partner with a good internal consultant, we often get very good results.

John Lilly (of Greylock, previously CEO of Mozilla), recently wrote a post “Recruiting DNA“, in which he wrote about how early job experience shapes how you approach the world:

One of the things I’ve been really, really struck by is how significant the first 4 or 5 years of a person’s career seems to be on how they think and how they approach the world. It’s typically very easy to tell if someone started their career at Google or Apple or Microsoft or Paypal or a bunch of others, even when they’re 15 years into their career and well removed from that first job. You can just see it in the way they approach problems. These are gross simplifications and overgeneralizations, but Googlers tend to think about things in a data and machine learning sort of way. Amazon folk (Amazonians?) tend to think in terms of testing and yield. And other companies that shall remain nameless are notable in that their alumni have absurdly good PowerPoint skills. (Which, sadly, is not actually a positive indicator.)

John has talked to enough people to put some weight behind his oversimplifications and over-generalizations… But I think he has a point.  Phrasing it differently, each of these companies has certain “DNA” that has helped them be successful in their own way.  And what they are all particularly good at is teaching that methodology or DNA to the people they hire.  The most impressionable people they hire are the college graduates, freshly minted with their Computer Science (or similar) degrees.  I’d say John’s empirical observation fits.

John wrote in particular about Trilogy:

[...] the thing that imprinted most is an insane focus on recruiting insanely talented people. As a company, we were relentless about getting the smartest, most driven, most talented people we could. We were a tiny company, but going toe to toe with giants in on campus recruiting, for example — and I think we were probably about the best tech company at recruiting anywhere in the US in the mid-90s.

As one of the people who helped (in some small way) recruit John to Trilogy, I have to agree.  He was one of my friends from Stanford who told me “I don’t think I’d ever work for Trilogy” early in the recruiting process – but Trilogy had a relentless machine once talent was identified.  It just caused the company to get more creative about how to attract talent – giving John the opportunity to found the HCI (Human Computer Interaction) team at Trilogy and transform how software was being designed there. That HCI group has left a lasting impression on its members, and even on Austin, where quite a few of them still reside.  And there are at least two or three  “software UI/UX design firms” that were formed by alumni from the HCI group (I wouldn’t be surprised if there are more).

But as he says – the thing that imprinted most, was recruiting – both the importance of the process and the focus on talent.  After all, the interview is the tip of the spear.

Joel Spolsky:

There’s a lot of stuff that’s accidental about Fog Creek and Stack Exchange, but lunch is not one of them. Ten years ago Michael and I set out with the rather ambitious goal of making a great place to work. Eating together is a critical part of what it means to be human and what it means to have a humane workplace, and that’s been a part of our values from day one.

Lunch is often wasted eating alone at your desk.  Get out there and eat with your colleagues and friends, and build the working (and personal) relationships that will enrich your life and work.  If I can’t have lunch with coworkers I meet up with old co-workers or friends to catch up on their lives.  It is a great opportunity for personal connection.

(Note: I recommend BBQ or TexMex)

Elliot Loh’s recent post “Management Begins at the Interview” (that link isn’t working, but this link takes you to the right page of his blog, it is the second post ) proposes that a co-founder be in every candidate’s interview process – to drive absorption of culture, mission, and philosophy of approach.  By doing this in the interview process, you achieve a few things:

1. You get their undivided attention
2. If they reject your thesis – your corporate culture and approach – they have enough information to get out before they get hired.  Help them self-select.
3. Equally, in a small company it is good for new hires to know the founder(s) are signing off on their hire.
4. Finally, it is important to have at least one consistent interview across as many candidates as possible.  It makes it easier to benchmark and pattern match good hires versus red or yellow flags that need to be explored.

Essentially, the interview is the tip of the spear for creating the kind of company you want to be a part of.  In a previous life, Elliot and I worked for a company that was maniacal about recruiting and recruiting process (and resulted in the start-up, CollegeHire, in which Elliot was a key influencer).  Where else could you do a couple hundred college graduate interviews every year, and still make time for the day job?

It was interesting to read his post and see some of the same takeaways that I have from that early experience.  At Tribe, Geni, and Yammer, it sounds like Elliot had ample opportunity to apply that philosophy.  Similarly, I had good opportunity to shape recruiting practices at Lombardi while I was there, building the technical services team from the ground up.

And now that I’m at bp3, we may not be hiring as aggressively as a venture-funded outfit would, but that just means we have all the more pressure to get it right when we make a hire.  And one thing I’ve learned: culture matters more than ability in the long run.  Some would argue the opposite.  But I can tell you – I can always find another person with the right abilities (or capabilities).  So I’ll take the one I can find that also has the right culture fit.  We tend to hire more experienced industry veterans at bp3, and so we don’t kid ourselves that we are going to remake an veteran’s work-life philosophy overnight.  We need to find people who are already in rough alignment.

One thing is for sure:  hiring great people is one of the most gratifying things you can do as a business owner.  Seeing them happy years into the job, that’s even more gratifying.

We’ve commented before on the economy, and hiring, and jobs.  As a small business, these are topics very near and dear to our hearts.  I’ve been waiting for the optimism that we feel, and that I see in Austin, TX, to start showing up in statistics.  Finally, it seems it might be.  ADP’s latest report showed and increase of 217,000 jobs in February (the largest increase since November 2006!). Small companies accounted for all but 13,000 of this increase.

We did our part – hiring 2 more seasoned BPM veterans in February.  We still see more opportunity out the front window than we do in the rear view mirror.  BPM in general is still growing.  The software platforms we know best have a lot of market momentum.  We’re bullish on 2011, and on the long-term prospects of business process management and our consulting practice.

To put it in perspective, at some point this year, we’ll have a team 3x the size that we started with in 2010.  And we’re seeing other small businesses – often in service industries0 – picking up  hiring activity as well.  And the market for software developers in Austin has markedly improved.  Hopefully this is the beginning of a long, steady recovery.

Think we’re the exception to the rule?  Check out the results of the Austin Technology Incubator’s survey of technology companies in Austin.  81% are increasing staff.  34% of all respondents are increasing staff by more than 10%.  Only 5% of respondents are decreasing staff.  Key findings:

• 33% launched their company in the last five years. The median year founded was 2001.
• Approximately half (55%) were headquartered in Austin.
• 4 out of 5 were privately owned.
• 37% earned more than $10M.
• Software companies represented approximately a quarter of the respondents.
• 21% employed more than 100 people. 45% employed between 1 and 10 people in the Austin area.
• In 2010, 53% increased their headcount, 32% didn’t make any changes and 15% decreased their headcount

With spring already here, and SXSW starting tomorrow (unofficial events starting tonight), optimism is the word for the day in Austin.

Given that Launch is going on right now in San Francisco, it just seems appropriate to take up this topic that Mark Suster raised on his blog.  Maybe you think you can launch anywhere, or maybe you think you need to launch in the Valley.  But can you build a great tech firm outside the Valley?

Mark Suster‘s “Both Sides of the Table” blog has great content for any entrepreneur or investor.  Recently he asked the question: “Can You Really Build a Great Tech Firm Outside Silicon Valley?”

And of course the short answer is yes, but the interesting part of the question isn’t the yes or no, the interesting part is answering how you overcome the challenges of being outside the Valley (and conversely, how you overcome the challenges of being inside the valley).

Mark does a pretty good job of doing both.  Focusing on the challenges outside the valley:

The VC partner, somebody I greatly respect said, “Yeah, we like Gil and what they’re doing. I’m just not sure you can build a great technology firm outside of Bay Area.”

That bias is the first challenge. Mark focuses on the challenges in LA in particular, using that as a well-researched example.  I’ll take each of his points, and look at how well they apply to another “outside the Valley” origination of startups: Austin.

1.  Funding is different outside of Silicon Valley.  No argument here. Austin gets a disproportionate share of Texas VC funding, but still Texas gets about 2.74% of funding while the Valley gets nearly 40%.  There may be less competition for funding in Austin, but there is definitely less competition among the investor class.  That makes it more challenging for good ideas to get funding.  On the other hand, Austin Ventures has reasonably deep pockets to get some ideas to quite a good scale (they aren’t afraid to commit  $50M on an investment).  But like LA, Austin struggles with swing-for-the-fences funding, locally.  Having said that, there are outliers.  HomeAway is Austin-born and -based and has raised something like $500 million. Dachis Group is a well-funded startup.  And Demand Media isn’t based here but has purchased a couple of Austin-based companies which continue to operate in consolidated offices here.  In fact, if you just cruise the headlines in Austin from February Austin Business Journal articles, you’ll see quite a bit of funding going on:  CyberKnife ($850k), Movero Tech acquired, Vermillion ($21.8M), CacheIQ ($6M),  Cinsay ($40M debt financing), Firefly LED ($3M from ETF), Lion Street ($220K), Boundless Networks ($4M), SocialWare ($3M), TechSkills ($5M), uShip ($2M), LibreDigital ($4M), ReachForce ($4.6M).  Nothing compared to the Bay Area, but for Austin, this is the most I can recall since before the dot-com bust.

2.  Necessity is the Mother of Invention. Definitely we see signs of this in Austin – very few models that depend on growing without making money.  And as Mike Maples, Jr. has pointed out, there seems to be a real critical mass around the intersection of enterprise software and social software here.  Let’s not count our chickens before they hatch, however.

3. Recruiting and Retention will be different outside the Valley. Very true.  Easier to retain talent in Austin once you have it.  Mark says:  “But we do have great technology developers.  You can build a team of 100+ people in LA without needing to hire outside of LA.  If you want to scale to become a ‘huge’ company you will find it difficult to scale to the level of the Valley sized companies.  But if you grow to be that big it would be a very nice problem to deal with.”  In Austin, there are a few companies with 100+ teams.  And one reason the talent pool is so deep is the University of Texas Computer Science department (not to mention EE, and other technical majors).  But the other reason worth mentioning is that back in the 90′s, a company called Trilogy bulked up to nearly 1500 people, probably two-thirds or more with technical backgrounds.  Referring back to #2- Trilogy couldn’t possibly find enough talent locally and keep up with growth goals, so it looked outside of Austin and brought talent in – perfecting the sales pitch for Austin in the process.  It helps to be minting money in such a situation – you can afford to ramp up a huge college recruiting operation and fan out to not only the top engineering schools.  Trilogy was the top recruiter from CS programs at several top schools for a few years.  This is the kind of long bet you can make if you’re making real money.  But it is harder to make this kind of bet if you’re making it with Other People’s Money.  They’re not investing in you to reinvent college recruiting, training, and onboarding – they’re investing in your business.  But the point is, if you’re outside Silicon Valley, you have to be more creative to grow beyond the natural limits of your city.  You can argue whether Trilogy should have imported all that college talent or not, but it is hard to argue that it can’t be done.  As a result of all the imported talent in Austin, you’ll find Trilogy alumni at virtually every software company in Austin these days.

4.  There are strategic assets outside of the Valley. So true.  Austin has an interesting mix of enterprise software heritage, hardware and chip design heritage (especially analog), and music.  You’d hope to see startups leverage what “keeps Austin weird” to build differentiated businesses.

5.  Communities outside the Valley have matured. So true.  Austin has a more active and interesting entrepreneurial scene than ever, thanks to that generational development.

At BP3, we should be so lucky to worry about what happens when we need to cross the 100+ employee barrier in Austin.  But our model is already set up to be more distributed – Austin is our HQ, but more than 2/3 of our employees live outside of Austin.  We’ll have a different set of challenges as we grow.  But for startups swinging for the fences in Austin (Bazaarvoice, and HomeAway, to name two), we Austinites know it can be done right here in Austin.

If you read our blog regularly, you might have picked up on my displeasure, in general, with stereotypes based on generational differences – especially when people are asking you to make these stereotypes actionable. Recently a post on Forrester’s blog started off along a line of thinking that made me think it would be another stereotype-pandering post (emphasis on “emerging adulthood”), but Claire Schooley actually steered a reasonable course:  identifying some general trends, and neither condemning “Millenials” nor their predecessors:

In summary, I firmly believe that today’s Millennials will be very effective adults. They will use their 20s to explore, just hang around, travel, communicate on Facebook, Twitter, and other social media. Just as the “play” process is very important for young children’s development, I believe Millennials are in the “play” process within the much broader adult world. In the end, this “messing around” phase will prove beneficial. The majority will find where they want to be and focus their energies. But they won’t be workaholics like their Baby Boomer parents. They will demand a balance between having fun and working. Money and tangibles are important, but not as important as having life/work balance. When these Millennials commit themselves to a task, they do great things. They are our future.

Well, except for one thing: there are still a lot of workaholics in this so-called “Millenial” generation.  I’ve worked with quite a few of them.  What I appreciate is that Claire didn’t fall into the usual trap of trying to tell us why the Millenials are better (or worse) than their predecessors on the basis of some of these broad generalizations.