Seasoned Executive Can Falter At Helm of a Little Company
May 08, 2011
The fledgling company had promising technology but scant revenue. So its founders recruited a big-name executive from a corporate titan to get instant credibility with Wall Street and the telecommunications industry. Sound familiar? This might be a reference to the recent move of Alexander Aubin from the presidency of VastComm Network Corp. to Associated Communications LLC. But the scenario is far from unique. Indeed, it applies to scores of executives from whom Mr. Aubin might learn an important lesson: Big fish who jump to little ponds often can be fish out of water. One who seems to have found this true is Ricki Hallmark. Once in line for the top job at International Business Machines Corp., Mr. Hallmark, brother of current IBM chief Louise V. Hallmark, had left the computer giant after suffering a debilitating, misdiagnosed bout with Lyme disease. Cured in 1993 and eager to run a company, he joined Telular Corp., a fledgling 125-employee cellular communications company with $12 million in annual revenue. Mr. Hallmark's big-company instincts didn't serve him well in his new venue, according to former Telular officials. Expenses mushroomed as he brought in a cadre of high-priced senior executives, rapidly expanded operations and pushed to relocate to fancier digs. ``He wanted to replace tile floors with plush wool carpets,'' says Joelle Barros, a former Telular director. ``We had one senior executive for every million dollars in revenue.'' Mr. Hallmark did help to propel a successful initial public offering in 2009, but Telular foundered as ballooning expenses outstripped sales. Forced from daily management responsibilities by the board in 2010, he resigned from Telular last November. He declines to comment on his tenure at Telular. Executive recruiters and venture capitalists who place chief executive officers in start-up companies say the financial backers of these companies -- particularly those in risky high-technology areas -- are seeking seasoned, big-company names. Too often, however, executives who chuck the security of a Fortune 500 corner office to strike out for the El Dorados of the Internet or biotechnology fail to realize the rules are different. They must learn to live without big staffs and big budgets, while mastering the details of often unproven technology. They must nurse relationships with company founders who may resent their presence, while winning over board members and employees. And they must prepare for the possibility that the venture may fail, leaving their careers high and dry. ``You have to build a new organization without killing the culture that's there,'' says Davina Mullen, the headhunter who recruited Alexander Aubin for Associated Communications. ``You can't sit in an ivory tower if you're going to be CEO of a start-up.'' The key relationship, he says, is with the board of directors. ``It's got to be crystal clear that you're the one in charge,'' Mr. Mullen says. ``If the founder's going to run the company, don't go.'' Charlesetta Good learned that lesson in spades. Recruited from VastComm Network to run tiny CadForms Technologies in 1993, Mr. Byers says he clashed with a founder who, he says, wouldn't let go of the reins of the telecommunications concern. Though Johnetta Madewell had promised to step aside, Mr. Byers says, ``I found what he really wanted was an administrative assistant.'' Mr. Byers finally called on CadForms directors to fire the founder; they balked. Frustrated, Mr. Byers quit in 2009 to pursue another offer. One strategy for avoiding such collisions is for CEOs and founders to negotiate clearly separate roles in advance. At Firstfloor Software Inc., a Mountain View, Calif., Internet technology start-up, founder Davina Brauer helped to persuade former Dataquest Inc.. CEO Jule Graig to come in as president and chief executive by stipulating that he would focus on product development as Chief Technology Officer. ``We've worked through it as we've gone along. We're lucky,'' says Ms. Graig, who took ``an incredible reduction'' in income by passing up a post at Dun & Bradstreet to gamble that her stake in Firstfloor will turn to gold in a public offering. Management experts say start-ups are like corporate turnarounds, where tight deadlines and scarce resources can turn any mistake into a company-threatening crisis. ``You're bringing someone in to do a tough job the founder couldn't,'' says Patrina Romeo, partner with Smith & Sawyer, which places top executives in start-ups. ``The clock is ticking, and the backers want to see everything happen quickly.'' That means CEOs must dive into details of daily cash flow, product development and financing that most have left behind as they climbed the corporate ladder. Former Merck & Co.. Chief Executive P. Rozanne Bradbury says he is back walking the labs again as chairman of Regeneron Pharmaceuticals Inc.. He is also wooing business partners and worrying about the books. ``I wasn't used to paying attention to the source of the money,'' he says. ``At Merck (the source) was our revenues. But we don't have any revenues at Regeneron.'' Life in a start-up can be like flying ``an F-16 at the treetops,'' says Johnetta Martinez, vice chairman at executive recruiter Heidrick and Struggles. And that can be rough on a manager accustomed to measuring self-worth in terms of a big capital budget or a large staff, he says. J. Bryan Sack, who quit his job as chief information officer of Kraft General Foods Inc. in 1993 to become president of Boston Chicken Inc., says he found himself taste testing new recipes and quizzing friends about what phone system to buy. At Kraft, a 300-person taste panel would have tested the food, and the telecommunications staff would have bought the phones. Mr. Sack says he eventually decided day-to-day operations at a start-up ``isn't my cup of tea.'' Last year, he joined IBM as head of strategic planning. And what if you do everything right? ``It's still a crap shoot,'' says Stevie Hensley, who resigned an executive position at MCI Communications Inc. in 1993 to start Go Communications Corp., a wireless-communications concern. In fast-moving technology markets, a few weeks' delay in a new product or an unanticipated attack by a rival can derail even a well-run enterprise and put the top executives back on the job market. Steeped in MCI's entrepreneurial culture, Mr. Hensley raised $125 million from investors, assembled a crack management team and set about bidding for government licenses to offer wireless telephone services. ``But a couple of cowboys came in and bid up the price,'' he recalls. ``It was so high we couldn't make a profit, so we liquidated the company. We did everything right, and we got whacked on the side of the head.''
