Investors and investment management firms should place the same value on behaviors as they do on results. A company’s culture is its brand. As Brian Chesky, CEO of Airbnb explained, a company’s culture is the foundation for future innovation. An entrepreneur’s job is to build that foundation. Although entrepreneurs are busy applying for capital, handling rapid growth, and taking on new clients, the company’s culture may be the last thing they are thinking about. As a founder transitions from owner to leader, they should think about their company’s culture, values, and leadership strengths. They must recognize that its functional strengths are the key to building a culture that can thrive and be sustainable for the life of the business.
Emotional Intelligence is comprised of at least five elements: self-awareness, self-expression, the ability to forge relationships, the ability to make decisions, and the ability to handle stress. Empathy helps connect the team, partners, and clients. Do not ignore it. Friction between investors or management firms and business founders results from cultural misalignment, lack of strong management, lack of self-control, and lack of transition planning. Before considering partnership with any entity, investors should assess how the prospective partner will be able to engage, cultivate, and nurture his or her business. It is important for all parties entering a relationship to be authentic and improve business relationships as the funding process progresses.
What is empathy and why should investors care? Empathy is not sympathy. It involves emotional intelligence cues. It requires active listening, not waiting to speak, nor telling the person: “I told you so.” It comes authentically from the heart. It is as if one person is stepping into another person’s shoes, attempting to totally feel what they feel. Wow!
It is the ability to articulate one’s understanding of another person’s perspective and to act in a way that shows respect for another’s feelings. This is a challenging skill to remember and use. During the evaluation phase of a prospective partnering entity, be mindful of their emotional intelligence strengths.
Investors evaluating the CEOs and their teams should not only review their functional strengths, but also their ability to partner, transition from owner to leader, and ability build trust, influence, and lead the company. How does the current company relate to their customers? Do they have the presence to lead, influence, and create company culture? At the same time, as the business entity, obtaining funding is important and evaluating the funding team is even more critical. Here are three ways to measure the emotional intelligence of a team:
Strategic Planning & Self Control:
Growth must be conscious. It requires discipline, consistency, and purposeful thinking behind every action. A sound strategy executed well can yield high return on investment (ROI). Of course, during this process, stress levels can rise and the ability for self-control will become essential. As an investor, your time, energy, and other resources can become a burden, especially when the prospective partnering entity does not act with a purpose, does not establish clear objectives, nor understand true weaknesses. Stress management is key. Leading and driving a business is stressful. Stress tolerance affects the ability to be flexible and maintain self-control. When a person lacks self-control, his or her judgement and decision-making, under stress, can collapse. A person who acts erratically under duress may not be an ideal partner.
Trust, connection, and collaboration are basic leadership skills. These skills help set the stage for the culture of a company that is innovative and strong. Secondly, leaders must be able to express themselves so that it motivates, inspires, and mobilizes the company to move forward. As an investor, building relationships through trust is an essential foundation for partnership. Being transparent, sharing information, and including others in the decision-making process, all create trust in a business relationship. However, an evolving cultural strategy should go hand in hand with the growth strategy. This ensures that teams understand what they are doing and the rationale for doing it. They will feel vested in the outcome and contribute to best practices to move the organization along. When business leaders empower a team, it is a signal to the team that they are valued and trusted. A CEO who lacks this ability to lead creates a company culture that is nebulous and static.
Customer Experience & Social Responsibility:
Think about customers and pipeline. The engagement strategy is a critical component to filling a funnel. From attraction, consideration, decision, and off-boarding, businesses are constantly trying to find ways to engage and keep clients. However, failure to understand their needs, listen to their pain points, and live up to the promised standards, can leave a lackluster feel about a business and brand. They, too, will lose respect for the business and look to other companies which will better cater to their needs, pains, and desires. As the customers’ tastes and preferences change, a leader must be able to assess the trends and create a customer experience that is true to its culture.
Social responsibility shows concern for the greater community without the expectation of something in return. Be a team player, serve, and act responsibly in all facets of life and business. How does a CEO and their team lead in this area of social responsibility? Is he or she giving back to help other people, his or her employees, and the community? In today’s environment, people are watching, and it matters.
Wise investors and investment management firms are sure to consider the right mix of skill, hard work, and resources of a prospective partner. It is common sense for them to also consider placing the same emphasis on valued behaviors than they do on performance.