Saturday, October 20, 2007

Criteria for Growth and Investment

The number of women-owned businesses are increasing at a faster rate than the increase among male-owned firms and among equally-owned (male and female) firms. This trend creates investment opportunities for small business lenders, such as the SBA. The Los Angeles area SBA office, the largest in the country, has experienced an 85% increase in loans to women-owned businesses over the past year.

The trend also creates investment opportunities for private equity firms – especially those that are also women-owned or those with women are in top management or decision-making positions in the firms.

Yet the challenge is more than women helping women to succeed. The true challenge is in creating, fostering and building viable women-owned businesses out of the hordes of those coming into the marketplace. Just as not all homes are prime market material and not all buyers are prime quality prospective homeowners, so too not all women-owned businesses are worthy investments.

What does make a woman-owned business a viable equity investment opportunity? How do we differentiate the top value potentials from the many wannabes? Here are some guidelines.

The business is in an industry sector that has a high probability of growth and value. A nail salon or day care facility simply is not worth tossing money at – unless and until someone could come up with a viable franchisable business model and/or some pricing model that would pay growth-oriented wages. Let’s face facts here – women search for the Filene’s Basement Deal for their day care centers just as they do for their lingerie. As long as women are only willing to pay bargain rates for their most precious commodities, no pricing scheme is going to be substantial enough to be passed through to the business components. With the cheap customer pricing reality, what is the likelihood of being able to charge a reasonable day care fee and to pay workers a reasonable day care wage?

Most of the businesses entered by women persist in being “of the heart” more than “of the head.” On those occasions where investments were made in healthcare services, such as labor importation of nurses, the business model envisioned serving a highly technical staff shortage where premium prices could recover investments required in the selection, training and certification of nurses. It was not a model based on Mother Teresa serving Skid Row Clinics.

High growth and value sectors today include biosciences, energy-related fields, transportation, finance, construction and technology of all forms and shapes. Not home-services, personal services, clothing, food or any of the myriad “helping professions.”

A second qualification for equity investment in the ability to keep competitors at bay until the business reaches critical thresholds. Proof of concept or proof of market require time and patience, but even more important is the ability to test prices, respond to customers, and fine tune the product without being attacked by competitors. DNA and RNA purification is an example of intellectual insight that could be protected from copying while the business matured its customer base.

By contrast, most women-owned businesses, from scrapbook design to retail or consumer product development, face scavengers immediately upon going into business. Customers copy creative ideas without compensation. Competitors are well-entrenched all over the world.

Protecting the key components of a business idea, through trademarks, patents or exclusive relationships with partners who are willing to refine the product through collaborative efforts – all this provides potential investors with certainty that their dollars won’t be sucked away prematurely.

A third priority is the ability to build a team of supporting and supervising excellence. Successful growth-oriented businesses have begun to build a sales force, a marketing team, and management expertise as the foundation on which the entire company can grow. It is not necessary to complete the entire enterprise, but an organization does demonstrate that the business-woman in charge clearly knows she cannot do this job alone, that she knows how to identify competent support talent, that she can teach them to work together effectively, and that she can lead them from her role as a guide – not Mommy. In short, she needs to demonstrate an understanding and appreciation of the mature organization that she is creating.

When forming a new business, private equity investors say they expect there will be at least 3 crucial people holding the following 5 critical jobs:

o Finance/money
o Marketing
o Operations/technology
o People
o Strategy/leadership

Potential investors will expect to bring more talent to the table. The woman entrepreneur needs to know what complementary skills are required and how they fit into the bigger future.

Finally, before the woman-owned business is entitled to use the financial resources of investors, she must demonstrate a willingness to put her own financial skin in the game. Most businesses need to show that the leadership knows how to leverage her own money before others will trust her to do likewise with theirs. She must fund the start-up initially. She must demonstrate a willingness to face the risks and manage them. If she is not willing to put her money forward, to show proof of concept, it is unlikely that anyone else would be willing to play Prince Charming to her idea of herself. It’s a lot like showing the world that you at least know how to help this baby learn to walk on its own. If you won’t or cannot take it that far, then others are not likely to be will to take over.

When forming a new business, private equity investors say there are four areas of risk to be addressed: product, market, team and financial.

Potential investors are willing to take on those risks right after the woman business-owner has shown that she understands what those risks are and is prepared to deal with them, too.

Monday, October 15, 2007

It's All In Your Perspective

Samuel Clemens (Mark Twain) reportedly said that when he was a teenager, he thought his father was the stupidest man on earth. “When I turned 22, I was astounded at how much the man had learned in just 8 years.”

We see the same maturing perspective when we look at women in leadership. It’s not that they have become wiser. It is we, finally, who are growing up and realizing how smart women really are -- and have been all along. Our perspective has been narrowed by our lack of exposure to the real experiences and life stories of women who hold top positions of responsibility in today’s economy. We don’t know who these women are, what they have experienced, or how they arrived at their current positions.

Too often we simply judge women in leadership by our own shallow horizons. Or worse, we let journalists or “nonprofit research organizations specializing in advocating on behalf of women” tell us how to think, tell us what to believe, and pack our public media with the same limited or biased research findings year after year.

We can view women in leadership -– women on top corporate boards of directors -– through a more focused lens, taking into consideration their entire journey to their current positions of responsibility.

It is no mean feat to be a director on a top Fortune 1000 corporate board today. Yet, we know so very little about the women who accomplished that goal. We know them more as “only the few” or “just a handful” or “barely.”

What is interesting is that they all started as little girls in a family somewhere, chose an education or had it selected for them. Then they did something unique. What was it? It was not one uniform thing for all women. It was a collection of decisions, choices, footsteps one in front of the other, down a path that led to that impressive result: a corporate board seat.

But their lives are much richer than merely that current snapshot in time. They followed one path or maybe more. They progressed and they backtracked. They sidestepped and turned in another direction or leaped over an impeding hurdle. Certainly many other women stopped or left the course – so what made these women persist? What persuaded them to endure?

When you meet these women, they do not look down on you from some high, airy pedestal. They greet you graciously, are genuinely interested in your work and are enthusiastic to tell the challenges they faced and the opportunities they encountered. They are optimists, positive and appreciative of the good people and good fortune that serendipity sent their way. There were no guarantees then, nor any perfectly balanced or chartered course. The mentors they met were tough task masters who expected much of them, first, to test whether they were up to the challenge. The women were worthy, first, and the opportunities followed, in that order.

In the few years since we started to look at women in leadership in the American business marketplace (it’s been just a little over one decade), clearly the women themselves kept learning and growing. Now it is our turn to learn from them … from the outstanding women who serve on top corporate boards of directors in the 21st century.

There is a lot of contemporary history packed in and among the life stories of these women. All we really have to do is be ready to be astounded by how much they have experienced in their brief time upon this stage.

Wednesday, October 10, 2007

No Excuse for Bad Research

What profit a man that he would inherit the world yet lose his soul?

What good does it do women to gain equality of opportunity only by the ruse of bad research? I’m an advocate of women in leadership as much as anyone. I want more champion women on champion boards. But, I don’t want women to advance if the price of that progress is paid in the currency of poor quality economic research.

Elsewhere, we have discussed the “economic miracle” that if companies would simply add a female to their boardroom genetic mix, that somehow they could expect returns on equity, on invested capital or on sales would soar at statistically insignificant rates. Unless, of course, other factors alter the economic brew. Or, unless we have it backwards: that women accept board roles only after their due diligence finds the firm has already increased returns. Or, maybe it’s just a crap shoot, and these things are so blurred that we can’t see the effect for the fuzzy causes.

But, why should we care about serious economic analysis when we’re talking about Women on Boards?? When we debate economic research about women in leadership, the goal is not merely to conclude that “The Results are CLEAR!” or the “Action is REQUIRED!” The purpose of intelligent debate about research on women in the economy is exactly the same as for men: to understand why and how these things occur, to be able to forecast what can be expected in the future.

Co-relation is not causation. Statistics can be significant or not. If the data and the analysis do not support The Case for Women On Boards, then women researchers have to be willing to swallow that whole, go back to the laboratory and figure out what the data does reveal and what the analysis means to a rational male or female person. If the cake don’t bake, then we don’t eat.

Anything short of good economic analysis would constitute reverse gender profiling. That’s as unacceptable as any other profiling or cherry-picking only the data or the people with whom we prefer to associate. We need to know what was the cause, what was the effect and what is the true nature of the interaction? We need to be able to repeat these research findings in the other halls and gatherings in order to ensure credibility for quality economic analysis of women in the business marketplace.

Friday, October 5, 2007

Clearing the Hurdles

Clearing the Hurdles: Women Building High-Growth Businesses (Financial Times, Pearson Education Inc.: 2004) by Candida Brush (Boston University), Nancy M. Carter (U. of St. Thomas), Elizabeth Gatewood (Indiana University), Patricia G. Greene (Babson College) and Myra M Hart (Harvard Business School).

One of the best parts of this book is its willingness to ask the tough questions. For too long, we have heard only the myths and negative stereotypes held out as gospel truth -- it has been discouraging to study women in leadership. The other impressive part of the book is its positive tone: anything is possible as demonstrated by real women in the real world running real businesses very very successfully.

One example of the tough questions is “Are women-owned businesses really smaller on average?” The book, a product of The Diana Project, a multi-year and multi-university study of female business owners and business growth activities, goes beyond the obvious and asks more questions: Why might that have been the case in the past? What does the data tell us? What were contributing factors or motivators?

The five highly-regarded research academicians examine causes in context and in time. Some factors or motivators that might have been valid years ago may no longer be true. And others can be influenced or changed by conscious choices or actions on the part of aspiring female entrepreneurs.

The authors do not simply accept ancient myths as gospel truth for today’s more highly educated, experienced and informed business world. Things change. Women can change things. Women can leap over the hurdles or go around them (whatever is appropriate) rather than just stand there and stare, frozen in time and space. More data provides more perspective on old problems. Sometimes, it is simply a case of presenting the same data in a new or more appropriate framework. The writers are not looking for easy answers: they keep going and probing: “What other explanations might be suggested?”

The second valuable aspect is their citation of real world, real person examples of successful women entrepreneurs. It doesn’t matter that many are not yet Fortune 500-scale public companies. What does matter is that they are approaching the top of the revenue pyramid and that their learning experiences are highly relevant. The women entrepreneurs are willing to be quote for attribution: “This is what I confronted and this is what I did to overcome the challenges I encountered.”

Finally, this is a book for all entrepreneurs – for men and women, minorities and majorities – because when you want to build a business and be among the top 5% in the economic marketplace, at that point the rules, the opportunities, the methods and choices are indifferent as to your color, origins, gender or faith.

Books written by men for the past 555 years have been read by women. The pathway to success is not the monopoly of either gender – in fact, the best business teams tap the best expertise (male and female). Competence is not chromosome-specific.

“Like their male counterparts, women entrepreneurs cannot be lumped into single categories.” [p 164]

It’s such a pleasure to read a book that defines “networking” as something other than bake-sales or silent auctions. Real networking “is the management of all the activities associated with developing and maintaining ongoing relationships [including] repeated interactions and mutual exchange of valuable information and resources. [p. 171]

This book will be among my top recommended suggestions for anyone interested in growing their business to the very top.

Monday, October 1, 2007

Learning From Leaders

From a study of the women who made it to the corporate board room by way of the academic path, very few women made it by staying put. Most had to take leaps of faith to leadership opportunities at other colleges or universities were they were “unknown” and had to prove themselves, on the merits. They “shaped” their risks and their adventures shaped them.

The women did not suddenly appear among the knives, swords, or sabers doing battle in the marketplace. Their lives and experiences honed their talents like a great mallet pounding steel into shape over an open forge.

From the perspective of those who came to a director role by way of a political or government path, the women developed a skill that was valuable to some entity that was struggling with a related issue. Or the entity needed her unique insight and perspective on a problem.

The women didn’t get elected in many cases. They were named to head up commissions, agencies and departments because those organizations were the center of the firestorm of the subject that was their specialty.

In interviews, one male board member said that bringing a woman on their corporate board “lowered the testosterone levels during their deliberations. The other directors became civil”

Another male director described a board that had women directors who then retired. Afterwards, he said, the board was not as effective in the opinions of all the remaining male directors. They were not as focused on business as they had been when there were women on the board.

Another woman was the 1st female on a major bank board. She was asked to chair the board. At her 1st meeting, she realized they were in chaos: all of the directors wanted some say in every single issue under consideration. The woman initiated a committee structure and named a chair for each committee, selecting the most qualified member to head each area of concern. She mandated that the decisions and recommendations had to be made at the committee level before the whole board would review and vote. Committees owned the responsibility of framing the debate and the issues to be considered by the board at large. Only assigned committee members could vote on issues at the committee level.

Every director still attended every committee meeting as before, but the work of the whole organization was raised to a higher level of deliberation and discourse once the accountabilities and processes were put into place.

There's a lot to be learned by talking with the women (and men) on corporate boards that actually have women directors on board.

Memo To Business Editors

Memo to: Editors, Business Newspapers and Journals
In re: How to Write About Women in Leadership

Gentlemen:

We know most of you know these “rules” by heart, but for those new guys who aren’t quite sure about how to approach press releases from distinguished academics doing research about women advancing to executive positions at major corporations, here is an update to A Crib Sheet: How to Write About Women in Business Leadership.

1. Find a female reporter. Only women will write with the appropriate passion required of this subject.

2. Begin with a lead paragraph that contains one or more (preferably all) of the following “key phrases:” glass ceiling, concrete ceiling, jade ceiling or variations on that theme.

3. Ensure that two-thirds of the article contains the following terms spattered throughout: despite, only, difficult, couldn’t, wouldn’t, breaking in or male-dominated. Emphasize past struggles, especially as a little girl; focus on failures and missed opportunities; look for desperate women strategies.

4. Cite academic research (preferably that which has not experienced any peer review) that “discovers” of “finds” the startling news supporting items 2 and 3 above.

5. Blame the companies for the small pool of available female candidates who might have the education, training or experience required for leadership. Especially chide corporate executive leaders or boards of directors.

6. Interview “experts” from a female advocacy group with the following credentials:

a. Non-profit organization (an absolute “must”)
b. Launched recently
c. “Help” women

7. Leap to another corporate example where family-friendly hiring policies are being implemented. This will help that company recruit women into their low income, low level trainee positions -– the most likely candidate for newspaper advertisement.

8. Close with a quantum leap conclusion: company-provided day-care is a predictor of better-than-peer corporate revenues or share prices.

9. And, most important of all, remember to never, ever, EVER actually describe the education, the hard work, the accomplishment or the achievement of the woman in leadership whose picture you must display prominently atop this article.

Together, we can be sure the mainstream business media continues its decades of socializing women to pursue the lowest expectations careers and avoid the nasty stigma of competitive success.

That’s a wrap! Get me Copy!