In any company, having a strong, competent management team is crucial for achieving the organization’s goals. Your startup is no different. Assessing company management is as important as getting your financials in order, especially if you’re looking to speak with investors.
Your financial statements provide prospective investors, shareholders, and stakeholders with in-depth insight into your company’s performance. Nevertheless, the quality of the members of your senior leadership team can have a strong impact on your company’s future prospects.
In this regard, evaluating management is a task that you should not overlook. But how do you conduct a qualitative evaluation of your company’s management?
The Management’s Role
The quality of your company leadership can significantly contribute to the successful execution of your business plans, so it’s important that your team members have something to bring to the table. One team member may have decades of experience in operations management, and that can be complemented by another’s expertise in marketing.
With many moving parts in a company, it’s crucial that your management team can understand how best to collaborate in order to achieve your organization’s goals. Think of your management team as the ship’s captain. They should, as a unit, steer your company in the right direction and make sure that everyone on board gets to their destination safely.
Your team should be passionate not only about your product or service but for the industry as well. They should have ample experience and sufficient understanding of the ins and outs of the business, as well as the industry you belong to. This is advantageous for your company as the team will have a better grasp of the innovations and disruptions happening in your particular field.
Incentives, Compensation, and Remuneration
In assessing company management, it is crucially important that your management’s interests are aligned with those of its shareholders.
As stated in agency theory, there is a risk that a conflict may arise when the managers’ interests diverge from those of the shareholders. For this reason, there should be an incentive program in order to motivate managers to make strategic decisions that would ultimately benefit the company, and not just themselves.
Leadership and Corporate Culture
Another way to assess your management is by evaluating the leadership style of your chief executive and your managers. How are they managing their respective department’s costs? How are they empowering their people? How well do they know their people?
Studies have demonstrated that corporate culture drives financial results by promoting increased productivity, higher engagement, higher retention, and an overall improvement in employee performance. For this reason, your leadership should be strategic in shaping the culture of the organization.
It goes without saying that your financials should still be in order. Your investors should have a complete, reliable picture of your company’s financial performance, your goals in a specific period of time, and how you plan to get there. This is where revenue forecasting for your startup comes into the picture.
Watch the video below to learn about the importance of five-year forecasts for startups from Ed Gines, Founder of Strategic CFOs Inc.:
When the time comes for your startup to scale, it might be challenging for you when you don’t have the right people in position. While it’s possible to restructure your organization when the time comes, it could be too cumbersome for everyone involved. In this regard, having a strong management team from the get-go can work to your advantage.