The new e-business start-ups could do with some sound HR guidance to counteract all the reckless PR hype
The downfall of boo.com has become a case study in flawed management. The entrepreneurs who founded one of Europe’s best-funded e-commerce start-ups admit that its collapse was due to an approach not supported by sound business skills.
But their example is not an isolated case. Recent research from the Economist Intelligence Unit and IBM showed that more than half its 350 executive respondents singled out internal shortcomings – either a lack of e-business skills or managerial understanding – as the biggest barrier to e-business success.
For boo.com, capricious management proved fatal. The brainchild of three young, glamorous entrepreneurs, it characterised the hedonistic money-go-round that has been spawned by the new economy. Lavish launch parties, £30m marketing costs and unwarranted spending sprees all took their toll – but early warning signals were apparent from the outset.
It took the company half-a-year to secure a chief financial officer, Dean Hawkins, who had helped propel Adidas business performance, only for him to resign two months later. Co-founder Ernst Malmsten, formerly a poetry critic, concluded, “My mistake has been not to have a counterpart who is a strong financial controller.”
Today’s e-commerce leader is required to be an alchemist, yet there has to be an equal financial and commercial counterbalance – a disciplined alter ego to structure the business.
Renaissance men and women with both general management skills and entrepreneurial pyrotechnics are rare. Instead, a combination of compatible personalities can make a formula for sound management.
Maturity, assertiveness and experience are needed to handle the painful side of start-ups such as finance, administration and, of equal importance, its people management issues.
Human resource specialists should not be the silent partners in a growing business. We all abide by the maxim that HR has to serve the business agenda, but have we ever suspected that this is only a part of its role?
In fact, personnel should not just respond to management dictates, it should be piloting its own agenda. Management often neglects the long-term view that personnel can provide, proving itself to be an important strategic ally.
In the wake of boo.com, a closer link between HR and venture capitalists would be in the best interests of prospective backers. Boo.com spent more than £l00m of investors’ money.
With hindsight, the caveat is that anyone investing in a dotcom start-up should examine the personalities behind the venture and make it a condition of investment that there is balanced management at the top. During the period when a start-up is being proven or disproven, the stabilising minder role could be filled by an experienced interim manager.
External guidance can prevent ailing management performance. Most ascendant entrepreneurs are too busy riding the e-rollercoaster to take time out to reflect on their own progress and shortcomings.
Many dotcom entrepreneurs are first-timers with functional expertise but very little real management experience. An external mentor can establish a sense of balance and teach the necessary skills for juggling hard-headed management and creativity in the business world.
Unless the balance between commercial sense and visionary charisma in management is in place, a venture will not make it off the ground and there will be more unhappy endings.
• Terry Bates is managing director of GHN, the Penna Group company that provides one-to-one executive coaching for FTSE-250 companies