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Mark Sanders |
Two
months ago, I attended a great event organized by the VC
Task Force on the topic of “The Evolving Role of the CEO and
the CFO." This is where I met Mark Sanders, who spoke so
eloquently about his experience and evolving role as a
former CEO of Pinnacle Systems, which he grew from a 21
person restart to a public company with sales of $350M and
nearly 1000 employees.
I am delighted that Mark, who is now pursuing other
interests, has accepted to share in this interview how he
successfully reshaped his role of CEO through various growth
stages.
Anthony: Do companies have
definable levels of maturation? And if so, what is the
impact on the role of the CEO?
Mark: Organizations (like all
organisms) have definable stages of development—from
conception to early childhood (no income, supported and
nurtured by investors) to first product (learning to walk
and talk) to rapid growth, early maturity, and old age—all
the various levels of maturation. These stages can be quite
painful (remember adolescence?) and to transition smoothly,
one must give up old methods that worked well in the past
and embrace new ones.
Successful companies continue to reinvent themselves, or
fade away, and the critical ingredient is often the personal
leadership of the CEO. It’s sometimes the case that when a
company reaches a point where it must transition, the CEO
can’t make the shift, and the board is compelled to make a
change.
Anthony: In your opinion,
what are the main focus areas during the startup phase?
Mark: First, of course, is
development of a viable business plan and assembling the
startup team. Next is raising capital and initiating
strategic alliances with strategic customers and industry
partners.
By far the most important element is the team. Diverse
skills, exceptional talent, superior intellect, and a
proactive disposition are vital. And don’t forget the
extended team which includes a great board of directors,
legal, audit and banking partners. Get the best; investors
bet on the team far more than the idea.
Anthony: What is the role of
the startup CEO?
Mark: Building a team of “top
ten percent talent,” as noted above, is a primary chore of
the CEO. He drives the company vision and implements
strategies that must be clear and simple and become part of
the fabric of the company.
Personal leadership is vital at this early stage, which
means taking care of investors, employees, and shaping the
organization. A dedicated and rapidly moving team is a
powerful force.
Anthony: How can the CEO
leverage the extended team?
Mark: Probably most important
and least appreciated by startups is the Board of Directors.
At its best, a board contributes rare skills that the
company couldn’t afford to buy, along with the wisdom and
counsel that only comes from experience. No CEO lives long
enough to make all the mistakes himself, so he may as well
learn from others! Key elements for success are
compatibility amongst directors, a diversity of talents
(financial, marketing, et cetera), and recognition that
investors have different objectives that will change over
time.
Regarding banking, audit and legal: get the best and make
them part of the team. It’s more important to get good
talent from a small company than it is to get lesser talent
from a big name firm. The smart CEO builds relationships
that will endure through the inevitable trials of a growing
company.
Anthony: Is there such a
thing as a “Company Culture” in the early stages?
Mark: All companies have a
culture, and the variations are amazingly broad. This
culture can be a powerful and positive force, or a severe
detriment. Culture evolves from the top, and the CEO must be
very conscious of how his behavior affects it. Employees
don’t pay much attention to what you say—they watch what you
do. If trust and frugality are to be important in your
company, be completely honest and open, and demonstrate your
frugality at every opportunity. When the inevitable crunch
comes, it’s too late to install a cost-conscious culture.
Leading by example is still a golden rule. It means
establishing the principles the company lives by. And the
CEO is the guardian of these principles.
Don’t make the mistake of thinking that loyalty and hard
work are bought with compensation—pay is way down on the
list of what’s important in motivating people.
Anthony: Did your military
experience, as a former US Naval Officer, help shape your
leadership style and drive your success as a corporate
executive?
Mark: An MBA was very valuable
for developing management skills. But in terms of value
leadership training in the military is at the top of my
list.
The rise of business as organizational phenomena mostly
occurred in the last century, but military science has been
evolving for thousands of years. Small wonder that two of
the best business books ever written are The Prince
by Machiavelli and The Art of War by Sun Zi. The
Prince was written 500 years ago and The Art of War,
over 2,500 years old, is still considered the Bible of
military science today, and widely read for enterprise
management.
Markets are territories, products are weapons. We have
allies and enemies (competitors and partners). Employees are
soldiers. We use tactics and strategies, gathering
intelligence. The parallels are endless and apt.
So if I have made that point, consider this: The military
pays poorly, the conditions are awful, you get paid the same
even if you’re ineffective, you’re separated from your
family for long periods, and it's dangerous work. Yet
military leadership techniques are so effective that
soldiers and sailors willingly risk their lives to be a part
of it.
I have found that the same techniques work in business:
strong feelings of loyalty to the company, a sense of
camaraderie and mission, the belief that what one does is
really important, and personal recognition…all the same
drivers in war and business.
Anthony: Can you give us
practical examples of how you motivated your employees?
Mark: Although the term
“Machiavellian” can imply trickery, it in fact represents
tried and true methods for motivating and directing people,
so read The Prince! Effective leaders constantly look
for opportunities to demonstrate and reinforce behavior that
they wish to instill in an organization, and which
ultimately become part of its culture.
For example, in Silicon Valley many creative employees
(particularly engineers) tend toward odd hours, often
arriving considerably later than others. This demonstrates a
flexible environment, but reduced overlap with other team
members hurts efficiency and promotes an elitist view of
such individuals (and people who arrive late often leave
early). Rather than legislate, as CEO I would arrive a
little before 8:00am and try to visit every department
before 8:30am, randomly chatting with those who are already
working. I also call in to remote facilities. I am able to
set an example, and more importantly, employees who are
there are seen by me and feel good about it. (In fact,
people who would never visit my office but want to say
something arrive a little early and wait for me to drop by.
I learn a lot that way).
Sometimes I'll ask for someone who isn’t there…and later
that day they invariably track me down to see what I wanted
and make an excuse for not being there. Staff meetings are
at 8:15am, so senior management quickly gets on board, and
soon enough normal starting time becomes normal again. And I
do the same thing in the evening.
So be visible to demonstrate what’s important, and look
for opportunities to reinforce the kinds of behaviors you
want. If you see something done really well, or someone
making an extra effort, go out of your way to recognize them
in front of their peers. It will pay off manifold, and
people quickly understand what is valued.
At Pinnacle I established what was called the “Night on
the Town” award. Any time someone did something above and
beyond the call of duty, another employee could nominate him
or her for the NOTT (Night on the Town) award. During our
monthly company meetings, I called each nominee up and
recognized them for what they did. It was always a surprise,
and the award was a dinner for two at a fancy restaurant,
all expenses included; a plaque for display; and a camera to
take dinner pictures which were posted in the cafeteria.
The benefit went far beyond the individual. The whole
company witnessed these events and looked for opportunities
to nominate, which is as much fun as the award itself.
Quickly, going the extra mile became part of the culture,
and we would have a half-dozen rewards every month. (It
reminds me of battle ribbons, used for eons by the military
for recognition. The idea that people would risk their lives
for a piece of cloth is crazy, yet it’s a high honor. And
soldiers and sailors worldwide measure each other by such
decorations. It’s a funny human behavior, but it really
works).
As a CEO I never traveled business or first class, when
the rule is that employees fly coach and seek the lowest
fare. Everybody knows how the CEO travels and should not
resent the fact that they must travel coach. Fly with your
subordinates and that will get around too—in a positive way.
Your ability to lead is directly proportional to the respect
you earn from your subordinates, and they’ll admire you and
feel better about the company if you are “in the same boat”
with them. Build an egalitarian environment.
If people feel ownership in the company, they are
protective of its assets and personalize its successes and
failures. When they see something not working or someone
slacking off, they realize that it’s hurting the company and
will actually say or do something to help. So there is high
value in putting equity in the hands of every employee to
help build a sense of ownership.
There are many other examples of how to build goal
congruence with the organization and its members. Most
involve recognition and appreciation for doing the right
thing, and doing the thing right. Remember that excellence
exists at every level, from warehousing to engineering to
senior management, and the smart CEO reinforces it at all
levels. You can’t actually motivate people directly, but you
can create an environment in which they highly motivate
themselves.
I constantly sensed the mood of the company and how
efficiently it was operating (if the parking lot is still
full at 7:00 pm on a Friday night with people coming in on
Saturday or Sunday, you have a happy team)!
Finally, it’s an odd fact of life that people will rise
to expectations. Don’t expect much from people and they
won’t disappoint you. But expect more than you really ought
to and they will rise to that challenge, and actually
outperform for you. Amazingly, one inspired person can
accomplish what ten can not. Such inspiration is not only
incredibly valuable, it’s viral and will spread to others.
Anthony: How does the role
of the CEO evolve through various growth stages?
Mark: At first, of course, a
startup CEO is a benevolent dictator. There is no time for
discussion and consensus—speed is too important. For this to
work, the CEO must command the loyalty and respect of the
team. And they must believe in his vision for the company.
As the company grows, subordinates become managers or are
replaced by those who can manage. Second and third
organizational levels develop, and the CEO no longer makes
all the key decisions and transitions into being a mentor to
his staff. His leadership skills and the corporate culture
he has developed must guide subordinates to do the right
thing. Leadership by example becomes even more important:
honor excellence, maintain an intolerance of mediocrity, and
pay attention to all your stakeholders (customers, employees
and investors must be kept happy at the same time).
As the organization continues to grow, new structures
must evolve. Management information systems become critical
to continued success. Through this period the CEO must be
persuasive in retaining top talent, and ruthless in purging
out poor performance, lest the average IQ drops to 100.
Anthony: What are Force
Multipliers?
Mark: If all other things are
equal, the larger, stronger company always wins. So as a
small company, you must upset the balance. And force
multipliers are schemes to make your company the strongest
player in the competitive field you are attacking.
It may be as simple as defining the market narrowly
enough so you have overwhelming superiority concentrated on
a narrow front. Or it may be a dramatically better product
(weapons superiority, to use the military analogy again),
superior training of your employees, powerful allies, or
captive customers. The point is, you must find competitive
advantages that make you the most powerful player in the
market you define. And it must be a sustainable advantage or
larger competitors will spend you to death.
Anthony: Can you talk about
the project(s) you are currently working on?
Mark: I remain active in
technology and am a director for several public companies.
However, in the last two years I have been living a
long-time dream to build a destination marina and boatyard
in the South San Francisco Bay. As a Director for the Marine
Science Institute in the late 1980’s, I became aware of the
fact that recreational boating is dying in the South Bay.
This is in part due to the difficulty of maintenance
dredging in this shallow bay, and in part because of the
extremely high value of waterfront land in the middle of
Silicon Valley—so valuable that it’s practical to buy
marinas and fill them in to build offices and condos. Today
there are no boatyards at all in the South Bay.
In 1993 I was able to sign a purchase contract with
Cargill (Leslie) Salt to buy a bittern pond on what is the
last viable spot for a marina in the South Bay. It took
twelve more years to get all the required permits, which
occurred last year. (Waterfront development in San Francisco
Bay is second in difficulty only to the nuclear power
industry!)
We have been in construction for two years and I hope to
open by year’s end, and realize that dream after 15 years.
There is more information available at
http://www.westpointmarina.com.
Anthony: What advice would
you give today’s entrepreneur?
Mark: Apply the principles of
business and war:
Objectives must be measurable and achievable.
Be offensive. Defense never won a war.
Mass. Concentrate your efforts for a high probability
of success.
Economy of force. Don’t waste time on secondary
battles. If you can’t invest enough to win, abort.
Maneuver. Control the marketing battleground and
force the competition to waste time and resources.
Surprise. Change the rules. Be proactive.
Simplicity. Be clear and concise. If you can’t
explain it in an elevator, it probably won’t work.
Speed. A good plan violently executed is far better
than a great plan a week later.
Unity of command. Your subordinates must have
authority, responsibility, and be held accountable. Without
all three they will fail.
The CEO’s job is simple, if you do just three things:
- Have a clear strategy that every employee
understands (it’s better to be inefficient doing the
right thing than efficiently doing the wrong thing).
- Hire the top ten percent in terms of intellect.
- Create a nurturing environment that no one wants to
leave.
Bio
Mark Sanders was President and Chief Executive Officer of
Pinnacle Systems from 1990 to 2002, and Chairman from 2002
to 2004 of this Mountain View, California Company. Under
Sanders’ leadership, Pinnacle Systems became a major
provider of digital video technology from broadcast to
consumer, and is today the largest supplier of video content
creation tools in the industry, and the sixth largest
broadcast supplier in the world.
During Sanders’ tenure, Pinnacle Systems was recognized
as the fastest growing company in the video industry. Three
times it was named in the Silicon Valley “Fast 50”
and “Fast 500” lists of fastest growing companies in
North America. For thirteen years Sanders guided the company
from a 21-person startup to a multi-national organization
with nearly one thousand employees, 10 development sites,
and 9 EMMY awards for technical achievement. Sanders led a
successful IPO in 1994, followed by two equally successful
secondary offerings. At his retirement sales exceeded a
third of a billion dollars per year. Sanders acquired and
integrated 21 other companies into Pinnacle Systems,
accounting for half of the company’s growth, averaging 50%
per year.
From 1970 to 1988, Sanders held increasingly responsible
positions at Ampex Corporation, including Vice President and
General Manager of the Audio-Video Systems Division in 1983.
He was subsequently named VP/GM of the Data Systems
Division. Later the divisions were combined into the
Recording Systems Division under Sanders, who was
responsible for more than 4000 employees.
Sanders holds a Bachelor of Science degree in electrical
engineering from California Polytechnic State University and
an MBA from Golden Gate University. He served as a US Naval
Officer, receiving the Navy Achievement Medal and
Presidential Unit Citation while on active duty in Southeast
Asia. He is a standing member of the National Academy of
Arts and Sciences (EMMY) committee as well as a Society of
Motion Picture and Television Engineers (SMPTE) Fellow, and
a recipient of the prestigious Technology Leadership Award
as a digital television pioneer. He was named Alumnus of the
Year by GGU in 2002. Sanders is a director for Bell
Microproducts and LookSmart Inc.
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