Management Team and Company Structure Chapter Eight Management Team and Company Structure Management Team and Company Structure By Bruce R. Barringer, PhD Department of Management University of Central Florida Orlando, FL 32816 Email: Bruce.Barringer@bus.ucf.edu Dr. Bruce Barringer University of Central Florida 8-1

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Introduction Management team Board of directors Board of advisors Other professionals Company structure This part of the business plan is divided into five sections: Management Team, Board of Directors, Board of Advisors, Other Professionals, and Company Structure Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Management Team Founder and key management personnel The management team of a new firm typically consists of the founder or founders and a handful of key management personnel. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Management Team Management team personnel Management team ownership and compensation Common mistakes to avoid The Management team consists of management team personnel, management team ownership and compensation and some common mistakes to avoid. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Management Team Personnel Brief profile of each member of the management team Title Duties and responsibilities Previous industry and related experience Previous successes Education background A brief profile of each member of the management team should be provided, starting with the founder or founders of the firm. Each profile should include the following information: Title of the position. Duties and responsibility of the position. This item should explain specifically what the individual will do and how the individual’s work will contribute to the development of the firm. Previous industry and related experience. This item should explain who the individual has worked for, and how the individual’s past experiences relate to the new firm. Previous successes. This item should highlight the individual’s past successes and accomplishments, particularly as they relate to the challenges of helping launch a new firm. For example, has the individual been involved in previous startups, launched divisions within larger firms, spearheaded successful teams and projects, and so forth. Education background. Michael J. Fister President and Chief Executive Officer Mike Fister is President and Chief Executive Officer. Prior to joining, he spent 17 years at Intel Corporation, where he was most recently Senior Vice President and General Manager of the company’s Enterprise Platforms Group. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Management Team Ownership and Compensation Ownership structure Compensation Options Pool—An inventory of company stock which is set aside for future employees It is also necessary to fully disclose the ownership structure of the new venture and the compensation of the members of the management team. An options pool is an inventory of company stock, usually in the neighborhood of 15% to 20% of the total stock, which is set aside for future employees. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Common Mistakes Placing unqualified friends in key management positions Assuming that previous success in other industries translates to one’s own industry Presenting a one-man team philosophy Hiring top managers without sharing ownership in the firm Not disclosing management team skill or competency gaps Vague or unclear plans for filling the skill or competency gaps There are a common set of mistakes to avoid when putting together your initial management team and writing this section of the business plan. These mistakes raise red flags and undermine the credibility of your plan. The most common mistakes are as follows: Placing unqualified friends or family members in key management positions. Assuming that previous success in other industries automatically translates to your industry. Presenting a “one man team” philosophy—meaning that one person or a small group of people is wearing all hats with no plans to bolster the team. Hiring top managers without sharing ownership in the firm. Not disclosing management team skill or competency gaps. Vague or unclear plans for filling the skill or competency gaps that are disclosed or clearly exist. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Board of Directors A Board of Directors is a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm A board of directors is a panel of individuals who are elected by a corporation’s shareholders to oversee the management of the firm. Technically, a board of directors has three responsibilities: (1) appoint the firm’s officers, (2) declare dividends, and (3) oversee the affairs of the corporation. The optimal size of a board of directors for a startup is three to five people. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Board of Advisors and Other Professionals Panel of experts who are asked by a firm’s managers to provide counsel and advice on an ongoing basis Other professionals Attorneys and accountants A board of advisors is a panel of experts who are asked by a firm’s managers to provide counsel and advice on an ongoing basis. Unlike a board of directors, a board of advisors possesses no legal responsibility for the firm and gives nonbinding advice. As a result, many people are more willing to serve on a company’s board of advisors than on its board of directors because it requires less time and there is no legal liability involved. A board of advisors can be established for general purposes or can be set up to address a specific issue or need. Other professionals: Briefly identify the professionals, including attorneys and accountants, that apply in your case and provide a short bio if appropriate. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Company Structure Organizational chart Graphic representation of how authority and responsibility are distributed within a company The most effective way to illustrate how a company will be structured and the lines of authority and accountability that will be in place is to include an organizational chart in the plan. An organizational chart is a graphic representation of how authority and responsibility are distributed within a company. The organizational chart should be presented in a graphical format. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2009 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright ©2009 Pearson Education, Inc.  publishing as Prentice Hall