WHY EARLY INVESTORS SHOULD DEMAND EXECUTIVE COACHES TO WORK WITH THEIR TECHNOLOGY STARTUP CEOs.

Columbia University Coaching Center of Excellence

Marcos Paim C. Fonteles

Abstract: This paper defends, especially for technology startup ventures, that early investors should demand for a specialized executive coach for the CEOs of their ventures instead of only Board of Directors positions to secure and boost their investments. The peculiar scenario of these startups and its high demands: product development, high growth, and fierce competition; in an immature company structure frequently led by a CEOs with no or small management experience, is a very risky environment where most fail. By coaching, the bright, inexperienced, and often narcissist CEOs would benefit from having a safe and supportive environment to reflect on his or her own beliefs and increase their self-awareness, reducing common communication and behavior pitfalls, which directly impact company’s risk and performance.

Keywords: executive coaching, technology startups, board of directors, private equity, startup risk.

Introduction

Technological advances and recent cases of spectacular financial gains from startups have encouraged investors to seek new investment opportunities. Company projects with high growth expectations and potential disruptive solutions are the most wanted. On the other side, talented young entrepreneurs have been investing their talents and effort on risky and ambitious ideas, highly motivated by previous success stories and possible high gains.

These young CEOs see themselves as future Steve Jobs, Elon Musk or Jeff Bezos, who created big companies starting from tiny garage businesses. Media presents them as bright, visionary, aggressive, and unstoppable executives capable of achieving very challenging targets. Their talent and execution capacity were capable to turn dreams into reality: iPhones from Jobs, electric cars from Musk or the Everything Store by Bezos.

Investors accept the high risk involved, betting on possible high gains. Most of these ventures are led by young entrepreneurs and founders, supported and controlled by the Board of Directors, normally appointed by their main investors.

Startups are a very challenging environment. The CEO has to combine intelligence and executive capacity in order to deliver ambitious and disruptive solutions, recruit and maintain a talented and committed team on an overloaded demand of work, and also sustain reliable connections with investors in order to have the necessary capital flow to the business.

Besides all success stories, most of the ventures die in their first years[i]. It is a challenge to combine unique business demands with the necessary company operations and market issues. The CEO has to move the company over its own limits, becoming sometimes difficult for investors to differentiate an audacious from an irresponsible executive. The unstoppable CEOs can disrupt markets and achieve exceptional results but also can overstress their team and companies, leading them to fail.

Traditionally investors protect their investments appointing Board of Directors, Committees and other report, control and advisory strategies. Board members provide expertise, experience, network, and reputation for startups; they also set boundaries of the CEO actuation, trying not to compromise his independence and business developments.

Disruptive CEOs come onboard with their talents and limitations. It is easy to trace a common line over them: bright, narcissist[ii], visionary, workaholic, independent, perfectionist and very challenging on their teams, are the most usual. It seems to be necessary to have all of these characteristics in order to change the status quo.[iii] On the other hand, this kind of personality reduces the possibility of a closer follow-up of venture’s hidden risks and threats. Startup CEOs, as icebreakers, are confident on their ability to overcome difficulties and also tend to assume high risks. Because of that, investors often happen to have limited access to company true overall risks.

The Board of Directors is a traditional hedge for the top management risks, but on startups where velocity is a must, they seem to be old fashioned. Narcissist CEOs tend to limit Board access to not official information and retain decisions to his own scrutiny. Limited and formal relationships reduce Board access to real-time information, essential to really access startup risks and opportunities. The narcissist overachiever CEO himself is a risk and opportunity for the company. There are several cases of hidden liabilities only discovered by losses, chance, press, or legal disputes.

Assuming that the unstoppable CEO is a must to try to pursue unicorn[iv] startups, it seems that investors should rethink their traditional instruments, accept higher risks or look for alternatives. This study proposes that investors should not only ask to appoint Board Directors, but also an executive coach for the venture CEOs.

A specialized professional coach would not block or mentor CEO decisions, but challenge him or her to think again, review and understand his or her actions, biases, plans, believes, goals and his or her interaction with other people, including the startup team, company board, and key stakeholders; being responsible and conscious of his or her attitudes and believes, and their respective consequences and impact on others.

This alternative would challenge but not restrict CEO actions, essential for the company success in such a stress mode, but would develop better communication channels among CEO, team, Board, and investors reducing risks and increase the use of Board assets[v].

Personally, I am an independent researcher, executive coach, board member, advisor of investment committees, and also an experienced CEO of startups, who have led four different ventures in energy, logistics, cement, and technology markets. From that experience of more than twenty-five years, I can see the huge potential of the coaching practice for young and bright CEOs, with significant results for themselves, the board of directors, investors and the company.

Review of Selected Literature

It is common to see cases of misalignment between CEOs and investors. The first asks for empowerment, and the second for more participation and information. This paper revised selected literature about this relationship, specially applied on technological startups, its Board of Directors and the value of a professional coach as risk mitigation factor for startups.

The research stared from biographies of business leaders, business and coaching theory books, and academic papers researched at Google Scholar and the Columbia University electronic library database, searching for the combination of these words: executive coaching, CEO coaching, Board of Directors, startup Board of Directors.

The author also used some research theoretical and empirical material from administration and coaching journals as the International Journal of Evidence Based Coaching & Mentoring and Academy of Management Journal, popular press as The Economist and Harvard Business School articles.

The study started with specific books related to startup ventures and their CEOs, studying the biographies of Steve Jobs, Elon Musk and Jeff Bezos, trying to find some common characteristics of the typical entrepreneur of technology startups: bright, hard and narcissist leaders.

On back of these findings, we looked for researchers who studied the impacts of this kind of personality on organizations. Gino (2013) studying the negative impact of leader power on team performance; Zhu and Chen (2014) the CEO narcissism and the impact on corporate strategy; and Kirrane, Breen and O’Connor (2017) the consequence of intensive working. All of them generated several data on performance constraints, strategic misleads and potential corporate risks for ventures on this route.

As Board of Directors has been a common tool to protect shareholders investments, we researched about their limitations on fast growing technological startups and their CEOs. Hasan, Khurshed and Mohamed (2017) studied if venture capital firms benefit from a presence on boards of directors of mature public companies, Garg and Eisenhardt (2017) how about the CEO-Board relationship and strategy happens in entrepreneurial firms, and MacCormick and Tobias (2017) how to re-shape the behavior of Boards in startups, challenging the conventional governance model.

After perceiving some of the Board limitations to manage such strong personalities, we studied the hypothesis to use an executive coaching professional to reduce risks on ventures led by bright, aggressive and narcissist CEOs. On this effort we studied coach competences and methods as posted on the Columbia Coaching Certification Program (2018) and related bibliography as Co-Active Coaching (2011) book from H. Kimsey-House, K. Kimsey-House, P. Sandahl and L. Whitworth and related academic articles to analyze the impact of how high potential coaching can add value, Taconis (2018), and to check the perceived the contribution of coaching to leaders, Gil (2017).

Definitions

During the course of this research, we selected three concepts that guided our tour: CEO power, the board of director role, and coaching effectiveness. For authority, we examined its different concepts, in order to compare them with the authority model seem on these technological startups. Most of the time, led by bright, young, and self-determined people. The second, we compare the Board of Directors role concepts to study board’s theoretical limits, especially when applied to startups. On the last one, we compared the traditional expectation on coaching services, as we would like to apply this alternative to the question raised by this research.

The tables presented below, summarized some of the most relevant findings.

Table 1: Definition of CEO Authority

Definitions of CEO Power

Anton Obholzer (1994)

Wikipedia https://en.wikipedia.org/wiki/Authority

T. McArthur, Jacqueline L. McArthur, and L. Fontaine (2018)

J. van Oosterhout (2006)

“Authority refers to the right to make an ultimate decision, and in an organization it refers to the right to make decisions which are biding on others.”

“Authority is the right to exercise power, which can be formalized by a state and exercised by way of judges, appointed executives of government, or the ecclesiastical or priestly appointed representatives of a God or other deities.”

“Legitimate power, decision-making capacity, and the means to cause others to obey. The word applies both to the abstract quality and to the individual or organization in command.”

“The first kind of authority distinguished by McMahon (1994) is the authority of experts. (…) The second kind of authority that McMahon distinguishes is P-authority, or the authority that comes into existence when one person promises to obey another person or organization. (…) The third kind of authority distinguished by McMahon is authority that facilitates mutually beneficial cooperation.”

Table 2: Definition of Board of Directors and its role

Definitions of Board of Directors and its role

https://en.wikipedia.org/wiki/Board_of_directors

S. Vollmer (2017)

R. G. Eccles, T. Youmans (2016)

“A board of directors is a recognized group of people who jointly oversee the activities of an organization, which can be either a for-profit business, non-profit organization or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations (including the jurisdiction's corporations law) and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet. (…)

The board of directors appoints the chief executive officer of the corporation and sets out the overall strategic direction.”

“As part of their legal and fiduciary duties, which include setting policy with the best interest of shareholders in mind, corporate boards are increasingly given the task of dealing with volatility—be it from worldwide economic turbulence, cyber attacks, activist investors, or competitive disruptions.”

“Contrary to the prevailing belief that the fiduciary duty of the board is to place shareholders’ interests first, nothing precludes corporate boards from issuing such a statement. Recent research, including the compilation of legal memos on fiduciary duty and nonfinancial reporting for all G20 countries, makes it clear that the board's fiduciary duty is to ‘the corporation itself’.”

Table 3: Definition of Coaching Effectiveness

Definitions of Coaching Effectiveness

H. Kimsey-House, K. Kimsey-House, P. Sandahl, L. Whitworth (2011)

M. Taconis (2018)

S. Boysen, M. Cherry, W. Amerie and M. Takagawa (2018)

Natale, S. M., & Diamante, T. (2005)

“In our view, coaching is not about solving problems, although problems will be solved. It is not primary about improving performance, attaining goals, or achieving results, although all of that will certainly happen, over time in an effective co-active coaching relationship. We believe that coaching is largely about discovery, awareness, and choice. It is a way of effectively empowering people to find their own answers, encouraging and supporting them on the path as they continue to make important life-giving and life-changing choices.”

“(…) increase of their self-awareness and self-knowledge were the insights they gained in their strengths and capabilities, in their growth limiting beliefs and in their impact on others.”

“An increase in their leadership skills, resulting from the coaching programme. With these gained leadership skills they could more consciously choose how to lead and were able to adjust their style to the situation or individual.”

“Through coaching they learned to better deal with their superiors.”

“These include goals of improving leadership, assessment of current effectiveness, a strong coaching relationship of challenge and support, and objectives of behavior change and increase in wisdom.”

“(…) achievement of personal and professional goals, increased sales, enhanced employee satisfaction, better organizational communication, greater self-knowledge, ability to lead more effectively change, and capacity to make quicker and better decisions.”

CEO Power

CEO power is derived from a combination of product, market segment, company culture, CEO personal characteristics and time. From the early days of organizations, when CEOs were an autocratic figure, to the current days of extremely complex scenarios, the CEO power has varied a lot.

Nowadays, CEO power and attitudes, especially from listed companies, are regulated by different agents: internal like Board of Directors and Audit Committee; and, external like Securities Exchange Commission (SEC), trade unions, justice, press, and even consumers or clients. As an example of the current conditions, because of a video with the Uber CEO and co-founder, a US$6bi/year income company, arguing with an Uber driver, the executive had to issue a press release apologizing.

Ocasio in his research paper Political Dynamics and the Circulation of Power: CEO Succession in U.S. Industrial Corporations, 1960-1990 (1994), says that most of the studies of power in organizations reported it as static or equilibrium process. In structural contingency models, power can be obtained by maintaining alignment between the capacities and resources of individuals and organization’s contingencies. If the dominant coalition is in constant alignment, power becomes a reflection of structural contingencies, but if the concept of power is to have independent explanatory power, an equilibrium model is not sufficient. Considering that startups are far away from the equilibrium due to its fast product development and market growth with very limited resources, is hard to believe that power could be a mere reflection of structural contingencies.

Different kind of business demands different kind of skills and personality from its CEO. It is not hard to imagine the difference between an executive from an engineering company against another one from a department store. Technological startups have their own specific challenges.

J. (Hans) van Oosterhout on his paper Authority and Democracy in Corporate Governance? (2006), describes the authority model from Christopher McMahons on his book Authority and Democracy; A General Theory of Government and Management (1994), defining three kinds of authority, the first one: authority of experts or E-authority, where the leader has an identified position by his competences and expertise, or when is recognized by his actions and moral standards. The second kind is P-authority when it is sustained by the promises of someone to obey another one. Corporations usually operate under this structure, as the employee signs a labor contract where he commits to obey company rules and power of authorities. The third kind of authority is the C-authority, an authority that facilitates mutually beneficial cooperation. McMahons argues that C-authority is much stronger than E and P authorities as what humans value requires human cooperation. He also points that E authorities can be always challenged by an external criterion, or have his expertise questioned and P authorities are also weak, as it is impossible to sustain indefinitely promises in a dynamic life.

Technological startup CEOs are strong leaders that can navigate over the three kinds of authorities. As experts and bright people, they are well recognized by their abilities and competence by their teams, as an E authority would be. Their employees appreciate their abilities, like one of Elon Musk’s team:

“Elon is brilliant. He’s involved in just about everything. He understands everything. If he asks you a question, you learn very quickly not to go give him a gut reaction. He wants answers that get down to the fundamental laws of physics.” Vance, Ashlee. Elon Musk (p. 238). Ecco. Kindle Edition.

The same as Steve Jobs employees:

“Then Jobs would go to a whiteboard and show them how to make it simpler and more user-friendly. ‘We would be nodding our heads and getting excited and say, ‘Yes, yes, this will be great!’’ Kerwin recalled. ‘And then he would leave and we would consider it for a moment and then say, ‘What the heck was he thinking!’ He was so weirdly charismatic that you almost had to get deprogrammed after you talked to him.’ ” Isaacson, Walter. Steve Jobs: The Exclusive Biography (p. 221). Little, Brown Book Group. Kindle Edition.

Also with Jeff Bezos’:

“’It was real easy for Jeff to spout off big ideas faster than anyone could practically do anything with them,’ says Bruce Jones, a longtime Amazon engineer.” Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon (p. 62). Little, Brown and Company. Kindle Edition.

The team easily follows these highly skilled CEOs as almost gurus in their field. Be part of this special force group justifies all efforts.

Not enough, they also developed a P Authority. Their companies run under specific mantras and beliefs. The new members should always agree and promise full commitment. Vance (2015) says on his Musk’s biography that he is more a General than a CEO, who is forming an army of engineers. Or Stone (2013) in Bezos biography citing the CEO quote, “You can work long, you can work hard, you can work smart, but at Amazon, you can’t choose two out of three”.

Finally, they attract their personnel being also C Authorities, not promoting some kind of fraternal human cooperation exactly as McMahons (1994) predict, but passionately sharing their dreams and vision. The team feels being part of a cooperated project trying to achieve an impossible dream, as the Mars Expedition[vi] from Musk, or and The Everything Store[vii] from Bezos.

Isaacson (2011), Stone (2013) and Vange (2015) described Jobs, Bezos, and Musk as very challenging personalities highly focused into their objectives. They mentioned several success stories and turnarounds of adverse situations, creativity to create new ventures and products, a lot of energy to demand the best from themselves and their teams, and strength to continue the hard work, producing after long hours, days and years. Definitely, they are examples of very special leaders, capable of conquering authority by all forms, but these talents come also with their counterparts. These CEOs have a strong narcissist personality, trusting on themselves well above others. As a consequence, they traditionally overload their teams with pressure and demands, sometimes disrespecting their limits and capacities. In their biographies (Isaacson 2011) (Stone 2013) (Vange 2015) there are several stories of verbal abuse and bullying from past employees against them, who sometimes act in a very destructive way, demonstrating some limitation to perceive other people perspectives[viii]. Startups are always on the edge by its high demands and unstable company structure, under this kind of circumstance the behavior of the individuals and of the enterprise as a whole can become dysfunctional and primitive (Kilburg 2000) with associated risks and benefits.

Of course, Jobs, Musk and Bezos are all extraordinary success stories. They were very talented and gifted people, capable to overcome their limitations with outstanding results overshadowing their costs. Nevertheless, it seems important to check this kind of management style becoming a model for other startup CEOs, its impacts and potential risks.

This kind of strong gifted and narcissist leadership affects all company, setting a culture standard for the rest of the team. The combination of extreme conditions: excessive hard work; narcissist posture; and aggressive communication; increase the company’s risks, sometimes over their limits.

Excessive hard working is seen as having a negative consequence for people, companies, and society. In spite of that, unlimited hard workers report intensive satisfaction on work and achieving their objectives, which push the company and results to their limits. In the other hand, they also reports that they have strong dissatisfaction to cooperate with others (Kirrane, Breen, O’Connor 2017), increasing startups risks, as teams with potential lower cooperation tend to lose from diversity and debates, reducing opportunities to raise new ideas and potential threats from the discussion of different positions and teamwork.

The narcissist CEO tends to spread a narcissist culture through the company and group behaviors, creating a self-sealing and perpetuating system of thoughts. Arrogant narcissist CEOs tend to hire and promote narcissist subordinates and set a standard way of thought, being passed downward by company structure (Godkin & Allcorn, 2009).

A healthy narcissism can improve performance and enhance the company’s position; a narcissist and talented CEOs tend to have high and challenging ambitions, therefore capable to accomplish differentiated results. In contrary, pathological levels of narcissism can destroy value for companies. Over narcissist leaders can interpret tasks as an opportunity to demonstrate their superior skills, overestimating their contributions, not considering other people opinions, attacking and self-defending his ideas from any discordance or critical position (Ronningstam, 2005). In contrary, to effectively leverage group performance, members should be able to recognize value on other member inputs (Bonner & Bolinger, 2013).

Aggressive communication can energize the team to be focused and go for challenging targets, but that power difference can also be negatively associated with team learning (Edmondson, 2003). The experience of power can influence CEO behavior toward his team, in ways that would threaten subordinates, reducing the quality of communication and their openness to talk and express their own ideas, significantly reducing the team performance and learning (Tost, Gino, & Larrick, 2013).

Leaders like Jobs, Musk and Bezos are well known as hard argumentative people, sometimes up to abuse their own team, an important moral, legal and business risk for any company, especially startups.

Board of Directors

Companies of all sizes and markets rely on the Board of Directors to oversee their business strategy and monitor the performance of their main executives. They are especially important in startup firms, where most of the entrepreneurs have little or no management experience, and can count on the Board of Directors, expertise, visibility, network, and reputation.

Most startups, and especially the ones that raised funds from external investors, have some form of board. Some of them are formally constituted under legal governance responsibilities; others have Advisory Boards not regulated by law (MacCormick & Tobias, 2017).

Private equity funds try to nominate experienced professional to protect their investments and empower the new venture by director’s credibility. Ventures with an experienced professional in their Board can raise more funds with higher targets and have more successful exit strategies (Hasan, Khurshed, Mohamed, & Wang, 2018). Nevertheless, 50% of start-ups fail in their first 4 years, 40% by incompetence or 30% by lack of managerial experience. Most founders have no executive track record or board of directors to direct or advise (MacCormick & Tobias, 2017).

Advisory boards start with high aspirations but commonly fall in the same problems of traditional boards. Traditionally, they do not have a diverse composition, prioritize past instead of future, have difficult to appoint and resolve potential conflicts of interest and fail to support the executive team in the soft skills, interfering too much in operational issues of the business. They should focus on strategic but not operational matters, contributing with their variety of experience and quality of judgment. Advisory Boards add value when they have well-defined expectations, duties, and responsibilities, with a diverse composition of directors, opened to deal with frank discussions (MacCormick & Tobias, 2017).

Besides all positive potential of Board of Directors and Advisory Boards to startup ventures, most of them fail to provide the full potential of their capacities. The quotes presented below may be surprising, as most of the investors firmly ask for board positions trying to boost and protect their investments, but it reflects a common and repetitive case (Garg & Eisenhardt, 2017):

“I bet that 70–80 percent [of venture board members] add negative value to a startup in their advising.”

(Vinod Khosla, renowned venture investor and former entrepreneur)

“I believe 50% of venture board members do nothing, 48% actively destroy value, and like 2% create value.” (Personal interview with an experienced venture board member)

Board effectiveness is highly dependent on its composition, but most of all on CEO’s personal characteristics. The ones capable to develop a strong connection in dyadic and unique relationships with their directors surpass others that only see them as a group of mostly undifferentiated members, interacting almost exclusively in-group settings (Garg & Eisenhardt, 2017).

This scenario is particularly critical in the technology industry because of its fast product cycle, high competition, and high velocity, making strategy cycles and board activities much more relevant. It is necessary to think alternatives to enhance communications between CEOs and Board of Directors, and consequently improve board performance and reduce startup risk.

There is the classic story of the power dispute at Apple between Steve Jobs, the founder, John Sculley, the CEO, and the Board of Directors[ix], when finally Jobs was sued by the board and left the company (Isaacson, 2011). An extreme situation where Board, Founder, and CEO could not relate to each other on a productive and reliable way, uprising company risks.

Coaching Effectiveness

Leadership literature refers to the high rate of leadership transitions, 40-50% failing in their first 18 months. Culture and politics are the biggest reasons, but other points that derailment is mostly caused by a lack of emotional intelligence and velocity to learn. Evidence suggests that most of who failed are leadership less self-aware and with inflated self-evaluations (Gill, 2017).

The management and psychology research, suggests that coaching could help executives on their career transitions. The coach would support and challenge them to self-reflective discussions, questioning values, assumptions, and leading them to a better self-awareness. At this point, executives could avoid derailment caused by their own idealized narcissist personas (Freedman, 2011).

Cases studies on coaching application report some common benefits from the process: increased self-knowledge and self-awareness; increase in their leadership skills; and better deal with superiors and manage of stakeholders (Taconis, 2018).

The result of the coaching process is based on its own elements: coach; client; coach-client relationship; coaching process; and the organizational context. To guarantee a successful project, coaches should have ability to transmit and generate trust to the client, vocation, communication skills, commitment to the client and the company, and knowledge of the human nature; clients should be motivated to learn and change, be responsible for his own process of self-development, and be committed to the process; the coach-client relationship should guarantee confidentiality, trust, empathy, authenticity, and mutual respect; the coaching process should ensure feedback to the client, fix and attain to objectives, and be in constant challenge; and the organization context should finally guarantee confidentiality and commitment from the management during and after the process (Rekalde, Landeta, & Albizu, 2015).

Summary of Major Findings

In this section we listed the major finds of this research.

CEOs:

· Bright and talented CEOs of technology startups can leverage their authority on their team by sharing and committing them to their ambitious vision and targets, being respected by their own high skills and competence, and being capable to recruit people under their specific company’s credo.

· Narcissists CEOs tend to rely on themselves being capable to achieve very challenging targets, but also tend to overestimate their contributions and be insensible to other people opinions.

· Narcissist CEOs tend to extract more value from their team, but also to overload them with pressure, work, and often abusing them, limiting their contribution to the company.

· Narcissist CEOs over perform company’s results but also increase its risks.

· Narcissist CEOs tend to consider Board of Directors as closed group discarding their individualities and extracting little from its values and assets.

Board of Directors:

· Early investors demand to appoint Board of Director seats to reduce startup risks and to leverage its performance.

· Board of Directors enhance startup access to capital, network, and experience, but is often perceived as underperforming compared to their full potential to contribute.

Executive coaching:

· Successful executive coaching processes increase the client’s self-knowledge and self-awareness, leadership skills, communication quality with superiors and teams, and the management of stakeholders.

· Successful executive coaching process depends on the coach, client, coach-client relationship, coaching process, and organizational context.

· Coaches should have the ability to transmit and generate trust, vocation, communication skills, commitment to the client and company, and knowledge of the human nature.

· Coach clients should be motivated to learn and change, be responsible for his own process of self-development, and be committed to the coaching process.

· The coach-client relationship should guarantee confidentiality, trust, empathy, authenticity, and mutual respect.

· The coaching process should ensure feedback to the client, fix and attain to coaching objectives, and be in a constant challenge.

· The organization context for a successful executive coaching process should guarantee confidentiality and commitment from the management during and after the process.

Application and Implication for Coaching Practice

Typically, technology startups are a very challenge environment with a lot of stress, hard work and competitive environment. These kinds of ventures offer a unique opportunity to obtain substantial economic results and expressive capital gains on investment. Recent success stories of successful IT companies like Apple, Google and Amazon have motivated a lot bright and young entrepreneurs to aggressively go for their chances on this market.

The heroes of this generation are business leaders as Steve Jobs, Jeff Bezos, Larry Page or Elon Musk, respectively the founders of the big companies with values more than US$1bilion each. These new young entrepreneurs fiercely study the history of these ventures from their small garage beginning up to their billion-dollar value. They look at these CEOs as models to pursue and imitate.

These bright and successful entrepreneurs, owner of extraordinary successful stories have some common characteristics: absolute brilliant minds, unstoppable capacity to work, and determination to achieve previously considered impossible targets; creating an unpredictable value for their companies.

Even though these same executives are described as people grinders, able to obtain much more results than expected from their team, but at the same time, very aggressive on them, being loved and but also hated by their strong and sometimes abusive attitudes. Because of their exceptional capacity to maximize results, they are forgiven by their excesses and appointed as models to be followed by the new comers.

Excessively self-confident executives generate risk and benefits for their companies. They are capable to achieve very expressive results, but at the same time, tend to despise and not consider other people opinions. An absolutely necessary skill to overpass the common sense and generate disruptive solutions, but also an attitude that restricts team contribution and debate, decreasing the potential value of them to the company’s performance improvement and risk mitigation.

These extremely bright executives, overpass their aggressive attitude by their special qualities and intelligence, proposing ultra challenging targets for the company and defining very restrictive criteria on team selection, which upraises company values and increases team moral, being part of a special group of talented people. To target a team of gifted people, they are very selective on hiring, contracting only top ranked people[x].

Even so this process has its limitations and surely increases company risks. To a venture investor, it can be very risky to bet that the CEO of his new investment is a new Jobs or Musk, that should be supported no matter why. In another way, limit him too much would also limit his performance and possible high gains. How to balance this risk and benefit equation?

Trying to do so, investors after a long and restrictive selection criteria of projects and entrepreneurs, evaluating their competences and business plans, normally focus their attention on the appointment of Board of Directors, experienced professionals who could control CEO excesses and leverage his/company performance. It is a tentative to mitigate risks without limiting the CEO and company potentials.

However, bright CEOs are often narcissist people too, self-confidents, over achievers and capable to achieve expressive results, but often not the best team workers, having hard relationships with peers and superiors. In a very challenging environment as startups, which demand constant round of strategic discussions, conflicts between CEOs and the Board of Directors or a cold and less productive relationship are a common. In both cases, companies lose value, and do not benefit from Board’s full potential.

Can investors reduce this risk? How to combine narcissist CEO empowerment with Board of Directors expertise and experience? Most of investors believe that this is an intrinsic equation of technology startups, high risks and rare but outstanding returns. In fact, this is the base case for angel capital firms investments: a high rate of failure among very scarce unicorns companies.

This CEO risk has been addressed by corporate and management strategies, but it could be also explored in a broader view, looking for an alternative solution to reduce this risk. The executive coaching is a well-known concept and process, which has been largely applied in corporations, obtaining important results and being considered an important development tool for company’s employees.

Why do not use it for the CEOs of tech startups? It seems to be a possible alternative to challenge these special entrepreneurs, develop their soft skills and reduce venture risks. Narcissist CEOs characteristics: overestimation of their capacity, difficulty to consider other people opinions, and self defense against critical positions; would be well addressed by executive coaching deliverables, like: client’s self-knowledge and self-awareness increase, leadership skills development, communication with superiors and teams enhancement, and better stakeholders management.

The visible correlation between supply and demand of the executive coaching professional and the narcissist technology startup CEO, indicates a possible success story for this application. Nevertheless, this technique should require special attention to the traditional key success factors as any other coaching process, from the coach, client, coach-client relationship, coaching process, and organization support, to finally develop a safe and supportive environment for the work between the coach and the client.

As any other coaching process it should be based on the basic foundations of the coaching practice, as defined by the Columbia[xi] approach: the coaching process; the coaching competences; and the guiding principles.

The coaching process and competences are defined by the skills of the professional coach being able to conduct a reliable and technical coaching process, but first of all, it should be based on the guiding principles, that should support the client-coach relationship. As defined by the Columbia Coaching Certification Program, the Guiding Principles are: adhere to high standards of ethical conduct; focus on client’s agenda; build commitment through involvement; and earn the right to advance at each stage of the coaching process.

Being indicated by the venture investors, the coach professional should be very conscious about his ethical conduct. The coach should guarantee confidentiality all over the process, even though investors had appointed him, being careful about potential conflicts of interest between CEO and investors issues. The CEO is the final client and should be the only reason to guide the coaching objectives, in his or her favor, not other parties or investors, regardless of who hired the coach or pays for the service. The coach has to ask for the right to advance through the process with the client, respecting his timing and limits, giving him space to speak and reflect, challenged by powerful and high-leverage questions, far from consultant or mentor positions.

Focus on client’s agenda and build commitment through involvement; are very important objectives for the type of coaching engagement proposed, but in this specific situation the coach will be dealing with executives with a high level of defenses, in a stressful startup company, and who were asked by investors to be coached. Because of that, the coaching process would be of a special challenge. The coach should invest an important effort to acquire respect, trust and commitment from the client, as the coaching demand came from third parties, not himself.

The coaching competences of relating[xii], listening[xiii], questioning[xiv], and coaching presence[xv]; are defined as the success pyramid of the coaching practice by the Columbia Coaching Certification Program, other competences are also important and necessary, but these four are the ones to be really mastered and secured. The relating competence - to be present and connected with the client, inspiring trust between both parties - is of a special challenge during a process not directly demanded by the client, being one of the key success factors of the process, it should be specially observed by the professional coach in order to obtain a successful process.

The startup is a unique business environment with very specific situations and demands. The desirable coach should invest time to understand and live this ambience in order to succeed. Organization acumen[xvi] is a common and necessary competence for any professional coach, but we should remark that startups and ongoing companies are very different and sometimes opposite places, therefore the coach should be aware and prepared about his or her own competences and professional limits to not jeopardy a process in such a critical situation and increase its risks.

Bright and narcissist CEOs are also refractory to other people opinions and critics, which reaffirms the benefits from the coach position of a challenger of beliefs, attitudes and desires, but not a mentor or consultant with positions and proposals. The supportive and trustful coaching environment would also provide a necessary safe space for self-reflection, change and development, apart from the stressful startup routine.

The CEO is always asked to decide and assume positions, in this new environment he must be able to relax and be opened to express his doubts and fears, a strange position to leaders, especially the inexperienced ones. The coach has to be patient and give him or her time; the client would use it as he or she becomes confident to do so. These CEOs also have strong beliefs and trues that would demand extra effort and attention in order to help them to reframe their concepts and values, as a part of the coaching process.

Considering that the coaching process would follow the structure proposed by the Columbia Coaching Certification Program, which divides the process in three phases: context, content and conduct[xvii]. The coach should invest more time in context, specially entry and contracting[xviii], and developmental frames[xix]. The first because the client must be specially engaged and committed, as the work motivation was demanded by the investors not the CEO. The second, because narcissist clients have strong convictions, therefore the coach should invest time exploring with the client his or her developmental frames, which define client’s main values and agenda. Another important phase should be, from the content phase: feedback[xx]. The narcissist CEOs tend to be self-confident and blinded to his own flaws. Feedback from others would help him or her to see their blind spots, opening opportunities for change.

The other coaching phases: situation analysis, exploring options, planning, action strategies, growth and renewal, and execution[xxi], are more aligned with CEO practices and his comfort zone, therefore they should flow easier with the coach.

Considering the attributes of a narcissist CEO, two common coaching tools would be very important: the NBI Assessment[xxii], and a 360-degree performance appraisal. The NBI would help the executive to understand better his preferences, but would also help him or her to see other people styles and preferences, supporting them to enhance their communication skills and modes of interaction with different people and preferences. The 360-degree appraisal would challenge his or her self-convictions and challenge them to reflect about the possible discrepancies between his or her self-evaluation and others.

A challenging coaching process would be also aligned with the risk taker CEO, used to be challenged by always new and defiant missions. The client challenged and supported by his coach, could retain his or her driven attitude and capacity to pursue almost impossible targets, but also would be able to contain his or her excesses and abuses, and most of all, would be open to a productive relationship with the team, pears, Board of Directors and stakeholders. Reducing the risk of a destructive behavior of a pathologic narcissism, usually triggered on over stress situations.

The mitigation of these defensive arrogant and aggressive usual overreactions would reinforce CEO’s talents and maximize the contribution of others, especially his or her direct reports and Board of Directors, increasing their valuable assets. A real contribution from the Board of Directors is a major value for the company, their maturity, experience, expertise and network, are the missing resources of almost all technology startup CEOs. The coached CEO would increase his efficiency and save time and effort on relationship crisis, which always disguise company’s focus and rhythm, critical on a high velocity environment.

Therefore, the executive coaching should be a key instrument to reinforce strengths and reduce risks of the high performing technology startup CEOs, and should be a necessary demand from investors to secure and leverage their investments.

Conclusions

This project appoints a business opportunity for specialized coaches to help and improve startup companies and their CEOs, which would demand special dedication from the professional to understand the very specific scenario of this kind of company and its leaders, but could highly contribute to an important performance increase of them.

It would very interesting to test this hypothesis with private equity firms and their startup ventures, and look for cases already in place.

Personally, I do have a large experience leading startups, investments, and Board of Directors; and as a professional coach for CEOs and C level executives, I can see the positive results of this practice with my clients and their companies.

References

Bonner, B. L., & Bolinger, A. R. (2013). Separating the confident from the correct: Leveraging member knowledge in groups to improve decision making and performance. Organizational Behavior and Human Decision Processes (122), 214–221.

Boysen, S., Cherry, M., Amerie, W., & Takagawa, M. (2018). Organisational Coaching Outcomes: A comparison of a practitioner survey and key findings from the literature. International Journal of Evidence Based Coaching and Mentoring (16), 159-166.

CB Insights. (2019, February 28). It's hard to say goodbye. A compilation of startup failure post-mortems by founders and investors.

Eccles, R. G., & Youmans, T. (2016, July). Materiality in Corporate Governance: The Statement of Signi cant Audiences and Materiality. Journal of Applied Corporate Finance .

Edmondson, A. C. (2003). Speaking up on the operating room: How. Journal of Management Studies team leaders promote learning in interdisciplinary action teams. (40), 1419-1452.

External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

Fontaine, L., McArthur, T., & Lam-McArthur, J. (2018). Oxford Companion to the English Language. Oxford: Oxford University Press.

Freedman, A. M. (2011). Some Implications of Validation of the Leadership Pipeline Concept: Guidelines for Assisting Managers-in-Transition. The Psychologist-Manager Journal (14), 140-159.

Garg, S., & Eisenhardt, K. M. (2017). Unpacking The CEO-Board Relationship: how Strategy Making Happens in Entrepentrepreneurial Firms. Academy of Management Journal , 60 (5), 1828–1858.

Gill, A. (2017). What is the perceived contribution of coaching to leaders transitioning to more senior roles in the NHS? International Journal of Evidence Based Coaching and Mentoring (11), 70-83.

Godkin, L., & Allcorn, S. (2009). Institutional narcissism, arrogant organization disorder and interruptions in organizational learning. The Learning Organization , 16 (1), 40-57.

Hasan, I., Khurshed, A., Mohamed, A., & Wang, F. (2018). Do venture capital firms benefit from a presence on boards of directors of mature public companies? Journal of Corporate Finance (49), 125–140.

Isaacson, W. (2011). Steve Jobs. New York: Simon & Schuster.

Kimsey-House, H., Kimsey-House, K., Sandahl, P., & Whirworth, L. (2011). Co-Active Coaching: Changing Business Transforming Lives. Boston: Nicholas Brealey Publishing.

Kirrane, M., Breen, M., & O ’ Connor, C. (2017). A Qualitative Study on the Consequences of Intensive Working. Human Resource Development Quarterly , 227-268.

MacCormick, J., & Tobias, J. (2017). Re-shaping the Behaviour of Boards in Start-ups. INSEAD Doriot Entrepreneurship Conference. Fontainebleau.

McMahon, C. (1994). Authority and Democracy: A General Theory of Government and Management. Princeton: Princeton University Press.

Natale, S. M. (2005). The five stages of executive coaching: Better process makes better practice. Journal of Business Ethics (59), 361–374.

Obholzer, A. (1994). Authority, power and leadership. In A. Obholzer, & V. Z. Roberts (Eds.), The Unconscious at Work (pp. 39-50). New York: Routledge.

Ocasio, W. (1994, Jun). Political Dynamics and the Circulation of Power: CEO Succession in U.S. IndustrialCorporations, 1960-1990. Administrative Science Quarterly, , 285-312.

Oosterhout, J. (. (2007, April). Authority and Democracy in Governance? Journal of Business Ethics , 359-370.

Peterson, J. S., Walumbwa, O. F., Byron, K., & Myrowitz, J. (2009). CEO Positive Psychological Traits, Transformational Leadership, and Firm Performance in High-Technology Start-up and Established Firms. Journal of Management , 35 (2), 348-368.

Rekalde, I., Landeta, J., & Albizu, E. (2015). Determining factors in the effectiveness of executive coaching as a management development tool. Management Decision , 53 (8), 1677-1697.

Ronningstam, E. (2005). Identifying and Understanding the Narcissistic Personality,. Oxford.: Oxford University Press.

Ston, B. (2013). The Everything Store. New York: Little, Brown, and Company.

Taconis, M. (2018). How high potential coaching can add value – for participants and the organisation. International Journal of Evidence Based Coaching and Mentoring (12), 61-72.

Tost, L. P., Gino, F., & Larrick, R. P. (2013). When power makes others speechless: the negative impact of leader power on team performance. Academy of Management Journal , 56 (5), 1465-1486.

Vange, A. (2015). Elon Musk: Tesla, SpaceX, and Quest for a Fantastic Future. New York: Ecco.

Vollmer, S. (2017, April). Building a More Effective Board: . CGMA Magazine .

Notes

[i] “In the spirit of failure, we dug into the data on startup death and found that 70% of upstart tech companies fail — usually around 20 months after first raising financing.” (“It's hard to say goodbye. A compilation of startup failure post-mortems by founders and investors.”, CB Insights, 2019)

[ii] “Narcissism — the degree to which an individual has an inflated self-view and craves affirmation of that self-view.” (“A principal components analysis of the Narcissistic Personality Inventory and further evidence of its construct validity”, Journal of Personality and Social Psychology, Raskin, R., and H. Terry, 1988, 54: 890–902)

[iii] “Individuals who can harness their own positive psychological capabilities such as being hopeful, optimistic, and resilient will be most likely to demonstrate a transformational style of leadership. In addition, we also assess whether the strength of relationship between transformational leadership and firm performance differs between

start-up firms and more established firms, wherein leadership style may have stronger effects in more dynamic, smaller firms than in larger, more stable firms.” (“CEO Positive Psychological Traits, Transformational Leadership, and Firm Performance in High-Technology Start-up and Established Firms”, S. J. Peterson, F. O. Walumbwa, K. Byron, J. Myrowitz, Journal of Management, 2009, p. 349)

[iv] Unicorn is a privately held startup company valued at over $1 billion. (Aileen Lee, 2013, https://en.wikipedia.org/wiki/Unicorn_(finance))

[v] “Companies that have the most turbulent and unknown futures are those that may have the most to gain from leadership development. This is somewhat paradoxical given that the uncertainty and volatility of these firms may allow them to invest less in programs to enhance their leaders’ skills.” (“CEO Positive Psychological Traits, Transformational Leadership, and Firm Performance in High-Technology Start-up and Established Firms”, S. J. Peterson, F. O. Walumbwa, K. Byron, J. Myrowitz, Journal of Management, 2009, p. 365)

[vi] “When Musk sets unrealistic goals, verbally abuses employees, and works them to the bone, it’s understood to be—on some level—part of the Mars agenda. Some employees love him for this. Others loathe him but remain oddly loyal out of respect for his drive and mission.” Vance, Ashlee. Elon Musk (p. 17). Ecco. Kindle Edition.

[vii] “(...) he prophesied what must have seemed like a radical future: that everyone would one day use the Internet at high speeds, not over screeching dial-up modems, and that the infinite shelf space of the Web would enable the fulfillment of the merchandiser’s dream of the everything store—a store with infinite selection.” Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon (pp. 41-42). Little, Brown and Company. Kindle Edition.

[viii] “I was hard on people sometimes, probably harder than I needed to be.” From Steve Jobs cited in: Isaacson, Walter. Steve Jobs: The Exclusive Biography (pp. 524-525). Little, Brown Book Group. Kindle Edition.

[ix] [“The board felt that I couldn’t run a company, and that was their decision to make,” he said. “But they made one mistake. They should have separated the decision of what to do with me and what to do with Sculley. They should have fired Sculley, even if they didn’t think I was ready to run Apple.”] Isaacson, Walter. Steve Jobs: The Exclusive Biography (p. 192). Little, Brown Book Group. Kindle Edition.

[x] “At trade shows and conferences, SpaceX recruiters wooed interesting candidates they had spotted with a cloak-and-dagger shtick. They would hand out blank envelopes that contained invitations to meet at a specific time and place, usually a bar or restaurant near the event, for an initial interview. The candidates that showed up would discover they were among only a handful of people who had been anointed out of all the conference attendees. They were immediately made to feel special and inspired.” Vance, Ashlee. Elon Musk (p. 220). Ecco. Kindle edition.

[xi] External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xii] “Establishes a personal bond with clients by creating a safe, supportive environment characterized by a trusted partnership, mutual respect, and freedom of expression.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xiii] “Focuses completely on what clients say (and don’t say), to understand the meaning of what is said in the context of the client’s desired results (i.e., performance and aspirations); includes behavioral observation.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xiv] “Ask questions that reveal the information needed for maximum benefit to the coaching relationship, the client, and capturing the learning embedded in experience.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xv] “Is conscience of one’s own thinking and effectively manages emotions (self and others) to ensure client engagements are experienced as open, flexible and productive.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xvi] “Knowledge of how organizations work and the core functions that drive business operations in order to understand the goals and context of clients.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xvii] “The Columbia Coaching Certification Program frames coaching as a process of learning, development and human performance. Specifically, it is a strategic learning process that focuses on individual and organizational change, growth and renewal. Our coaching framework consists of three strategic learning capabilities that parallel the three phases of coaching, each guided by essential questions: Achieving & Sustaining Contextual Awareness – What’s going on?; Creating Conceptual Clarity – What really matters?; Taking Informed Action – How to get there from here?).” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xviii] “Entry and Contracting: Inquiring about the nature of the presenting problem, trigger event, challenge or opportunity. Surfacing hopes and concerns. Clarifying expectations about the parameters of the coaching process.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xix] “Developmental Frames: Clarifying client’s relationship to self and to others. Determining emotional and social capacities (strengths and limitations). Building the client’s capability for growth and change.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xx] “Feedback, giving and receiving: Inviting clients to pay attention to observational feedback (in action and from others). Urging clients to summarize and interpret. Facilitating the examination of hunches about potential disparities.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xxi] “Situation Analysis: Engaging clients in the identifying questions to focus data collection and feedback. Co-creating data collection strategies to determine what information is needed. Working with clients to diagnose the situation. Exploring Options: Asking provocative questions to stimulate imaginative thinking about the future. Practicing ‘feed-forward’ with various options to help clients illuminate possible futures. Prompting clients to consider potential benefits and costs of options before taking action. Planning: Stimulating clients to integrate insights and define focus. Collaborating with clients to create a coaching plan and specific, measurable, achievable, relevant and time-bound goals, while attending to emergent goals. Reaffirming client’s agenda (align goals with personal values and organizational priorities). Action Strategies: Helping clients discover opportunities for ongoing learning. Combining challenge with support. Celebrating client’s successes and capabilities for continued growth. Growth and Renewal: Creating opportunities for clients to conduct honest, ongoing self-appraisal. Translating insights about strengths and limitations to focused & aligned commitments. Findings ways to promote self-renewal. Execution: Holding client’s attention on what’s important by following up on commitments. Building client’s capacity to recognize ‘teachable moments’. Modeling flexibility and adaptation by moving back and forth.” External Coach Intensive. April 22-27. (2018). Columbia Coaching Certification Program. Teachers College, Columbia University.

[xxii] “The NBI™ General Adult Assessment is the most widely used NBI™ assessment. It is a measure of your thinking preferences—left hemisphere/local processing and right hemisphere/global processing as well as top/cognitive processing and bottom/affective processing. (…) Your results from your report may have important implications for how you communication, build relationships, choose careers, make decisions, lead and collaborate with others, and more.” (Source: http://nbicertification.com/marketplace/nbi-general-adult-assessment/)