Giving Entrepreneurs the EDG

Business
Basics for
Engineers
by
Mike Volker

Giving Entrepreneurs the "EDG"

By: Mike Volker, Tel:(604)644-1926, Fax:(604)925-5006

As presented at:
CANADIAN CONFERENCE ON ENTREPRENEURIAL STUDIES
Queen's University, Nov 6-7, 1987
Session D: NETWORKING AND EXECUTIVE DEVELOPMENT GROUPS

Summary

A formal means of networking, herein referred to as the Executive Development Group (EDG), can be established as an on-going resource for the entrepreneur. This resource is valuable to the entrepreneur as an educational tool, a board of advisors, a moral support system, and as a lead-in to many external avenues of support. In order for maximum benefit to be realized, a definite commitment and a certain degree of procedural formality is required. It will not be successful if approached on a casual basis. Networking is an in-topic among entrepreneurs, but few entrepreneurs have been able to take networking any further than casual acquaintance-making. The author of this paper has been involved with an EDG for over 10 years and has enjoyed many benefits therefrom. There exists a need for entrepreneurs and an opportunity for educators to form new EDGs. The experience and observations detailed herein lead to some specific recommendations which should be helpful in any such undertaking.

Networking or Socializing?

One often hears of various networking attempts. Kiwanis and Lions Clubs are good examples of networking. In addition to providing community service, members of these clubs clearly benefit from meeting others within their community and being able to approach them more readily as a result of sharing in a common interest. A businessman may find investors who are willing to support him. Import/export clubs, chambers of commerce, professional associations, and various business associations are all ways for entrepreneurs to expand their contact lists and meet people. One of the prime objectives of, for example, the Hong Kong-Canada Business Association is to meet other people over a breakfast networking session. These are certainly good ways for entrepreneurs to circulate among others and socialize. Is it possible to extend the basic idea of networking into something far more tangible? The answer is "yes".

The Need

In working with entrepreneurs and business people, this writer has observed that, especially at the outset of their business venture, they thirst for knowledge in practical business matters. Sure - they can check the yellow pages in their phone book and call a tax specialist - but wouldn't it be much better if they were referred by a colleague, someone with a similar problem? Or, maybe they just need to know what business accounting software other are using? What about export permits? Employee policies? Profit-sharing? Telephone systems? Family matters relating to the company? Buy/sell agreements? etc?. In each case, one can hire an "expert". But maybe it's better to first exchange opinions with one's peers who find themselves in similar circumstances.

In the early 1970's when the author was busy building his computer terminal company, he joined CATA (Canadian Advanced Technology Association) and as a director of that association, enjoyed many opportunities to "compare notes" with other entrepreneurs in start-up situations. Although professional services cannot be completely replaced by networking such as this, it assists one in finding the appropriate outside expertise. Most importantly, it allows one to be better prepared by having the benefit of others' experience.

Entrepreneurs also need on-going executive development. For example, they require specific courses or programs which help them mange more effectively. Courses on time management, effective supervision, finance for the non-financial executive, negotiating skills, and motivating employees are just a few examples of more in-depth learning requirements. Certainly, it would be difficult to obtain a working knowledge of negotiating principles over a cup of coffee with someone at a trade show!

Executive Development

In the early 1970's, Dennis Eaton, who was then with the University of Waterloo's Center for Continuing Education and Management, developed the concept of the Executive Development Group (EDG). Together with Larry Agranove from Wilfrid Laurier University, they decided to pull together approximately 10 owner/managers and encourage them to meet regularly both to exchange information and to further educate themselves by inviting resource people as speakers. In 1973 they formed a group in Toronto and the following year they formed one in Waterloo.

In recognizing the need for management education among business people, Eaton and colleagues left the University and founded Waterloo Management Education Center to provide management courses. Such courses can range from one-day to a multiple-day event. Well qualified speakers and lecturers deliver the course content. The FBDB (Federal Business Development Bank) and various community business centers now offer similar seminar/workshop programs.

Guidelines

In addition to providing courses, the Center also decided to take on the responsibility of organizing the EDG meetings. To their credit, Eaton and Agranove developed some guidelines. Some of these are: •all discussions must be held in the strictest confidence
•limit the group size to 10 CEOs
•participants must be owner/managers of their businesses
•participants can not be from the same firm or related firms
•members must not be direct competitors
•full attendance is mandatory for all meetings
•frank assessment by members of each meeting's value
•sessions would be monthly, full-days, at a hotel site These rules must be strictly observed. There have been cases where members have missed a few meetings. They usually have a good business reason for this, but often it was due to a problem which the EDG may have been able to provide some guidance on. Members recognize that they have committed to adhering to these rules, and peer pressure provides sufficient incentive to comply.

Each member would be charged a fee by the Center (the fee was in the $125-250 range per meeting) to cover the cost of renting a suitable seminar room at a convenient location (e.g. a hotel suite) expenses, cost of hiring a tope level resource person, but not necessarily for each meeting (which could run to $1000, even at that time), and a retainer to the Center and the organizers. There was no intention to try to do this on a low-cast budget. The attitude was that it should be done professionally and that participants should be demanding and expect significant results.

Members of the EDG were originally invited by the organizers who explained the basic concept and "sold" it to the prospective participants. In mid-1978, two of the members retired from their businesses and hence from the EDG. This left two vacancies one of which was filled by the author. As the vacancies arose, prospective candidates were suggested by the membership and two prospective members were asked by Eaton to join in a few of the meetings on a mutual trial basis. If both the existing members and the new prospect approved of one another, as was (fortunately) the case, the membership would be considered complete. Since then, there have been no resignations or other departures from the EDG and the membership has remained intact for almost 10 years!

Who's Who?

To the authors' amusement and delight, with the exception of the member who invited him, no others were known to him. Whereas the author was in the computer industry, the others were involved in sod farming, dairy products, metal fabrication, transformer production, automotive industry supplies, iron foundry parts, precision parts, stampings, and printing. The members varied in age from (at that time) under 30 to almost 60 years. Their backgrounds, interests, and experiences were all quite different. The common denominator was that each was responsible for the success/failure of his own firm and each one saw on-going practical education a key element to his personal growth. Today, the aggregate sales revenues of the 10 firms is in the $100 million range.

The members and their companies are not all located in the same geographical area. The cities represented by them include Waterloo, Brantford, Toronto, and Wingham. Meeting locations often rotate among and around these cities. In the earlier days, the meetings were held in Waterloo because the organizers were located where and it was the most central location.

What's New?

Each meeting would typically begin with a "what's new" session wherein each member would take about 10 minutes to appraise the others of his own progress, personal and business-wise, since the last meeting. This served several purposes. It was an excellent follow-up mechanism for ensuring action. For example, if Joe said that he was going to replace his financial VP, the EDG members would hold his to the task - insisting not only that he live up to his undertaking, but also give him the moral support and courage that was often required alongside. "What's new" would also allow members to become familiar with others' businesses and hence be more able to make sound recommendations. In essence, the EDG served the purpose of an advisory board for each member. This is why confidentiality was stresses from the outset.

Initially, Eaton and Agranove played a crucial role in the formation of the EDG by facilitating and effecting group dynamics. At the outset, it was difficult for members to be totally open with each other and the trust relationships that exist today had to be carefully nurtured from the beginning.

Agranove and Eaton would also contribute to "what's new" by updating the members as to new political developments, changes in tax law, and other such business matters.

The Resource Person

Occasionally, a resource person would be invited to address the meeting. The selection of the resource person was handled by the Center (not a trivial task). Usually the resource person would make a somewhat formal presentation in the morning with an open discussion taking place after lunch - but only if at lunch the members felt that the resource person was useful to them. If not, he would be politely asked to shorten or even terminate his presentation. This was a delicate matter, especially in cases where well-known resource people were not charging for their time. Because of the diverse backgrounds of the members and their respective zones of influence, it was often possible for a member to invite someone renown to join the meeting. This included people such as the Hon. Frank Miller or John Crispo (radio political economics commentator) - another benefit or networking!

Benefits

In terms of networking, a significant main benefit of the EDG experience is that whenever a member is confronted with a problem or opportunity, it is likely that someone who is known to a member could be of assistance. EDG members would often go out of their way to use their owns contacts to help other members. There are countless examples of this. It should be noted that over the past 10 years, there have been no business failures among EDG members!

Perhaps the single most important benefit was the EDG served as a board of advisors for each member. The author can attest to some very trying business crisis for which his only salvation was to rely on the "hard-nosed" business advice from his "ruthless" EDG colleagues! Business planning sessions proved vary valuable. The EDG listened patiently and critiqued very thoroughly the business plans of its membership on a regular in-depth basis. The therapeutic effect of an EDG meeting must also be stressed. CEO's can identify with the saying, "It's lonely at the top". The EDG provides good company.

Board of Advisors versus Board of Directors

A board of directors, representing the interests of the shareholders in important to a company - large or small. Many entrepreneurs will attest to the value of having outside directors on one's board. People who do not have a day-to-day role nor a vested interest can often be more objective in their advice and guidance. The benefit of the EDG's role as a board of advisors stems from one very significant difference: the EDG provides its advice and support to the participant, and not necessarily the firm. For example, what if the participant's problem is a shareholder-related issue? What if he wishes to buy out his partners? Sometimes and owner/managers concerns are in direct conflict with the interests of shareholders collectively. It is in such matters that the EDG can be particularly useful. One EDG member introduced this writer to a mergers/acquisitions specialist who not only helped him to restructure ownership of his firm, but who eventually also joined him as a partner!

Tennis Anyone?

Each June, the meeting would be held at the cottage of one of the members in the Muskokas. The meeting would be of a 3-day duration to allow for more in-depth analysis, discussion, and of course some recreation. Not only would this occasion allow one to rest from the demands of one's business, but it would also allow one to do some soul searching in terms of business goals, personal objectives, future directions and dreams. Because of the lengthier June session, there would be no meeting in July. An August meeting was sometimes held and this was usually a 2-day event, again allowing for a more relaxed in-depth meeting.

The Agenda

An appropriate meeting agenda, and one which was frequently adopted takes the following format:

8:00 - 8:30 am      Meet for Coffee at Happy Valley Inn
8:30 - 10:30 am    What's New
10:30 - 12:30 am Resource Person (Jack Spratt on "Firing Made Easy")
12:30 - 2:30 pm    Lunch & What's New (continued)
2:30 - 4:30 pm     Discussion with Jack Spratt on de-hiring
4:30 - 5:00 pm     Housekeeping - meeting dates, speakers, etc.

Evolution

In the early 1980's, the Center stopped providing its services to the EDG. It's seminar business was flourishing and it was not particularly economical (i.e. the opportunity cost was too high) for the Center to continue. Even though the EDG members were willing to pay twice their monthly dues, it would still be difficult for the organizers to spend as much time and effort as they had in the past. Once cannot underestimate the time and expense involved in preparing for the meetings (recall the EDG's demanding nature) and the follow-up which often resulted (minutes, notes, etc.). Because the EDG was deemed a successful activity by the members, it was decided that the EDG would continue on its own, without outside managers. Various organizational approaches were tried - rotating meeting chairmen, appointing specific duties (e.g. taking minutes), sharing responsibilities, etc. This was largely a trial and error exercise, and had it not been for the strong relationships that had developed to date, it is highly likely that the EDG would have vanished. The monthly format was eventually abandoned in favor of five or six overnight sessions.

At one time, the EDG even experimented with having participation from members' wives. Topics relating to how being an entrepreneur can impact family life were of interest. One weekend session was held with members and their wives at which the resources person was a marriage counselor. It was found that sessions such as these were not overly successful. Perhaps the EDG's raison d'être was being stretched somewhat. Similarly, it was found that the social aspect of getting together (it is reasonable to expect solid friendships to evolve over the years) was really not the drawing card. It always came down to "what have we learned today that can help us be better executives?".

How To?

Whereas the structure and format are always being modified in attempts to improve on the status quo, it is clear that this is not the determining factor as to whether of not an EDG will be successful. The one essential ingredient for success lies in, and this should not come as a surprise to the seasoned executive, the management and organization of the group. The contribution made by the Waterloo Management Education Center cannot be easily replicated. A prescription for setting up an EDG, along with some do's and don'ts follows.

Someone must play the role of the entrepreneur - the one who initiates the creation of the EDG. This person need not be the organizer; he might work with someone who would commit the time and who has the contacts and can work with groups. A university professor or a business professional could satisfy this requirement. From the outset, it should be made clear that the newly formed EDG is not a Voltaire type of undertaking. The organizer should be paid for his efforts, thereby also extracting a fiduciary obligation from him. When someone is being paid for performing a service, it is less likely to be treated with a lower priority, as many volunteer projects often are. The same guidelines should apply as stated earlier in that they have been very effective.

Perhaps the small business centers or centers for entrepreneurship which are now emerging in growing numbers could include EDG formations as part of their agenda.

The necessary steps are:

Recruit (or take on the role of) the organizer (i.e. manager)
Recruit 10 members, explaining the guidelines above
Extract a financial and moral commitment from prospects (the exercise must be seen as participatory and demanding)
Begin with monthly one-day sessions (plan dates several months ahead)
Organize resource people, and set meeting format

One should not be too concerned about having exactly 10 participants at the beginning. There will certainly be some attrition and then new members can be invited and accepted by consensus. The initial selection should be done by the manager and it is best that prospects not know each other.

Concerns

Whereas the benefits from EDG participation are immeasurably valuable, a critical examination will reveal that there do exist some valid concerns. Are members becoming too comfortable with each other? Do members have the same needs which they had 15 years ago? Are their interests now too specific for group discussion with a resource person? Do members still challenge one another? Some members have sold their businesses and are no longer CEOs. Should they resign if they do not remain active executives? Should some membership turnover be encouraged in order to bring in new blood and fresh ideas?

The Opportunity for Educators

People in the business of educating entrepreneurs and would-be entrepreneurs are ideally suited to the role of EDG managers. It gives them the opportunity to educate and to be educated. As a side benefit, they can acquire many new case-study samples. They can take on the role of organizing and managing an EDG group. It should be profitable as well as gratifying and educational.

Conclusion

The EDG approach to management education is one of the most intense and disciplined attempts at networking. It can be one of the most rewarding experiences in an entrepreneur's business experience. The existence of relatively few EDG groups can be attributed to both the management and the individual commitment demanded.

Entrepreneurs need an "EDG"!

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