Management and Ownership: Facebook Faces its Entrepreneur Quandry

In the 20+ years we have been providing advisory services to companies at all points on the entertainment and technology value chains, we have observed many common challenges that affect growing entrepreneurial organizations in the hyper competitive world of production, distribution and exhibition of movie and TV content.

Starting a new business or maintaining one, for that matter, can be risky.  If it was easy, everyone would do it and they would all be successful.  If only that was the case.

While each engagement in which we are involved is unique in many ways, there are certainly some similarities.  Many of these were identified in Ten Steps to a More Profitable Company and The Seven Steps Beyond, both published over two decades ago.  Even though there have been many changes in technology since then, these articles have stood the test of time as the fundamentals remain the same.

Another challenge that we have encountered numerous times is the concept of management and ownership.  This issue was in the forefront recently in the discussions and news reports surrounding Facebook and Mark Zuckerberg and what his advisors may be suggesting to him.

In many start-ups and small to medium sized organizations, management is so intent on the product that the infrastructure and important administrative policies and procedures are relegated to a secondary role, if they are addressed at all.  This inhibits growth.

At a certain point in time, growth begins to plateau, if not decline.

When this occurs, companies frequently have trouble getting to the “next” level because they lack the strong foundation for continued growth.

This is often evident when there is one entrepreneur/founder.  When there are multiple founders, issues amongst them arise compounding the problem.  Common issues are:

• One or more members of the founding team wears multiple hats, so to speak, with responsibilities such as marketing, sales, HR, finance and other important functions.
• One or more of the founders works harder or not as hard as the others, but they receive the same compensation and frequently have the same equity percentage as established at the outset;
• Lack of agreement on how to differentiate responsibilities in order to make the company more productive and responsive to the needs of its customers;
• In organizations with younger teams, personal matters such as dating and family often enter the picture. The whole team is likely not on the same personal track.  What was cool for a group of twentysomethings may not be as cool for those in their mid – late thirties; and,
• Other issues that arise where there is not a pre-defined method of dealing with such matters.

These issues manifest themselves in a variety of ways that are often not positive.

Often it is an indication that outside, professional management is required.

This is frequently difficult for founders to embrace.  But the risk of failure is very real if these issues are not addressed.

Sometimes it takes an independent and knowledgeable observer to assess the situation and to facilitate a discussion amongst the parties.

As a part of that assessment, we typically provide guidance such that the parties understand the following:

• Ownership roles connote a fiduciary responsibility to the Company;
• Management of an organization takes its authority from the owners of that organization and is charged with executing the Company plan;
• Founders need to transition between their various roles, recognizing when to wear their owners’ hat and when to wear their worker hat; and,
• Phasing in outside professional management talent throughout the organization can prove to be very successful if handled correctly and founders understand their “new” roles which might mean reporting to a non-owner senior manager.

So, how does this tie in to Facebook?

Mr. Zuckerberg has created an exceptional company that has been significantly impactful on the global culture, all started from his Harvard dorm room.

As a part of the IPO, he retained absolute voting control (ownership) over how the Company operates and there are likely few in the organization that will say no to him.

The current storm brewing around the company necessitates a change of one sort or another, and hopefully before it is too late.  Will he cede management control?

As with so many companies, it may be time to bring in different management to guide the Company into the future and to shake up the status quo.  Facebook is certainly not the first company to face a management challenge nor will it be the last.

 

As for The Shindler Perspective

NAB – The National Association of Broadcasters Conference is next week.

Broadcasting has changed dramatically through the years and seemingly at an accelerated pace of late.  Among the reasons for this are the decline in traditional linear TV and the increase in cord cutting amidst the emergence of the multitude of streaming services in the marketplace, many of whom have done award winning work.

We’ll be there to watch and to listen as to the changes that the many companies in the industry envision for the future.

Digital Hollywood – Next month is Digital Hollywood Spring.

The Future of Film continues to be a hot topic for lots of reasons, not the least of which is the aforementioned presence of the major streamers.

We’ll be discussing this and related subjects with the panel on May 23, 2018 at 2:30 PM at The Skirball Center in Los Angeles.  The exceptional panel of industry execs at present includes:

• Matthew Bakal, co-founder + Chairman, Atom Tickets
• Craig Dehmel, EVP, Head of Global Distribution, IMAX
• Paul Dergarabedian, Senior Media Analyst, comScore
• Gene Munster, Managing Partner, Loup Ventures, previously managing director and senior research analyst, Piper Jaffray
• John Rubey, CEO Rubey Entertainment LLC.
• Ted Schilowitz, Futurist, Paramount Pictures
• Marty Shindler, CEO, The Shindler Perspective, Inc., Moderator

On the topic of Future of Film, incentives have played a key role in recent years.  ICYMI, here is our take on Incentivized Growth, a blog we published at year end.

Other events – In the coming months, the future thinking events, Display Week and CineGear, both of which are relevant to our work and to our clients’, are on the agenda.

Trends and stats – As April 2018 begins, it signals the beginning of earnings season as companies report the statistics that form the basis for many trends in the marketplace, many of which directly and often indirectly impact the companies with which we work and the readers of this newsletter.

Follow me on Twitter, Facebook, LinkedIN and Google + where I regularly post the stats and comment on the trends inherent in them.

Comics reflect reality – While not generally recommended, sometimes when the boss makes a request, and time does not permit completing it, the “to do” goes away as in this recent Dilbert comic.

Comics reflect reality – One does not need to be an attorney to read an agreement.  Understand Before You Sign has long been a discussion point with our clients.  If La Cucaracha had read his contract, he might have saved himself a headache.

 

Feedback and comments on this newsletter, prior newsletters, our posts, etc. is always welcome.

Roberta Shindler and I look forward to an opportunity to discuss with you how we can contribute to your success.

For The Shindler Perspective, Inc.

Sincerely,

Marty Shindler

Chief Executive Officer

© 2018 The Shindler Perspective, Inc.