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.

About the author: Marty Shindler is the CEO of iShindler, a husband and wife advisory team with credentials that includes a Big 4 (Coopers of PriceWaterhouseCoopers), top 5 business school (Sloan at MIT) and hands on experience at 20th Century Fox, MGM, Lucasfilm’s Industrial Light & Magic, Kodak’s Cinesite and Bank of America. Mr. Shindler may be reached at Marty@iShindler.com.  Follow him @MartyShindler

© 2018 The Shindler Perspective, Inc.