11 Questions for Your First Investor Meeting

When it’s time to start raising capital, just asking for money isn’t the whole pitch. Startups need to ask questions of potential investors and figure out if they are good for their company.

Most founders spend little time asking investors questions, and that’s too bad. Good investors love it when you ask them questions, because it shows that you are thoughtful and don’t think of them as just a walking wallet.

By asking the right questions, you can really qualify investors in your funnel get clear answers, and minimize the chance of wasting your time with investors who will not invest.

Are you interested in potentially investing in my company, and if so, what are the next steps?

No first meeting with an angel or VC should end without you asking this question. Be direct. Do not be shy.  Every investor by the end of the meeting will make up his or her mind.

By asking this simple and direct question, you will know exactly where you stand. If the investor indicates interest in continuing the conversation, then ask about the next steps. Listen carefully to what the investor is saying.

For example, the investor might say keep me posted, or I am traveling the next few weeks or I have a lot of things I am working on – this is known as a soft NO or definitely not now. When an investor is vague, assume he / she is not interested.

On the other hand, if the investor proposes to set up a follow-up meeting or a call in the next week or so, this means there is interest. Listen carefully to what the next steps are and decide if the interest is real.

What is your investment process, and how long does it take?

If the investor is interested in taking the next steps, you need to ask about the whole investment process. The process will vary widely depending on the type of investor.

Some angels like to co-invest with others, and that often prolongs the process. Typically, a formal angel group will assign a team of angels to an investment committee for each deal. You will need to meet with them at least a few times and then, if things go well, present to the entire angel group. After that, there maybe more diligence.

The process for Micro VC and VC firms varies but generally takes 3-4 meetings to get a positive decision. Every firm meets regularly to evaluate the deal flow. When you hear that you will be talked about during the partner meeting this week, in general, this a positive thing, but be ready for a quick NO coming out of that meeting. If the VC is engaged, you should be meeting with more and more partners in the firm as the process unfolds. For larger checks, you will be invited to present at a partner meeting. That would be a critical meeting for a YES decision.

What is your check size?

Knowing the check size helps influence the timeline and, frankly, the effort you put into this particular pitch. For example, if you are raising a $1MM round you can’t spend a ton of time with people who write $25K checks. You simply won’t be able to get to the finish line if you focus on those.

Oftentimes you will hear a range. An angel can say I invest $25K-$200K, or a VC invests anywhere from $300K to $5MM. Ranges, in general, aren’t great because they lack clarity. There may be complexity or another message behind them. For example, an angel who says $25K-$200K may only invest $25K personally and then syndicate out the rest.

Similarly, when a VC names a range, it might actually mean that they do seed exceptionally rarely. Find out their minimum investment before you spend your time.

How many more investments are you planning to make this year?

Number of investments per year is called pacing, and the disciplined investors pay a lot of attention to it because they want to be investing continuously through the year. For example, if a VC has a seed program, and you are talking to them in October, and they decided to fund 10 deals a year and they already funded all 10, there are no more checks left. With this information, the founder should reduce the chance of being funded by this firm to basically 0.

Another, much more subtle issue with VC would be capacity. Some partners just don’t have the bandwidth to take on any more investments. In that case, they would still meet with the founders, but they just can’t invest. Asking about an ability to invest upfront saves a lot of time.

Who else needs to be involved in making the decision to invest?

ABC in sales is to find a champion and to find who can cut the check. Similarly with fundraising, when you are dealing with angel groups and venture firms, it is important to understand who will be involved in making the decision. Some angels tell you that they co-invest with friends. This can be both a good thing or a bad thing. The good is that there may be more capital available if you succeed, the bad is that the decision is distributed. Be sure to meet everyone who is involved in making a decision, don’t let other people present the business on your behalf.

In most VC firms, associates will not be able to make a decision without involving a partner. Which partner is making a decision? Can you meet them? Again, making sure that you meet with the decision maker is critical on the path to getting a YES. Another way to think about this is that if you don’t meet the partner, it is basically an NO.

What is the last company backed, and why?

This is a simple but relevant question. You are testing for how quickly the answer comes, how enthusiastic the investor is and when was the investment made.

It can be quite telling one way or another. Has it been a really long time since last investment? If so, what does it mean? Is it that the investor has a high bar or is it that they don’t have capital left to invest this year? Ask about the number of planned investments question and you will have the answer.

You also want to hear the WHY. What made the investor write the check? Was it an amazing founder, vision, market, etc? Listen carefully to the answer, as it should be helpful to figure out what the investor will look for in your startup.

Have you invested in a competitor, or evaluating investing in one?

You should ask this question 100 percent of the time, because unfortunately, some investors will not tell you this unless you ask.

If an investor invested in a competitor, even if it is not a super close competitor, the chance of you getting a check from them is close to zero. VCs don’t invest in competitors, and angels avoid doing it too. It is essentially a conflict of interest.

Evaluating investing in a competitor is much more subtle. It is typical that when a venture firm is planning to make an investment in the space, they do a lot of digging and research. Part of the research is that they would reach out to all competitors and try to get more information. A VC is trying to do its best to pick the best company in the space.

You may get a call from an associate of a firm saying that the firm is interested in the space and wants to talk. You will be asked a lot of questions, and at times, even move through the process only to find out in the end that it was a so-called “brain suck”.

This may seem very unfair to the founders, but it is the reality of what’s happening in the market. To avoid wasting time and getting hurt, ask about competitive investments or research upfront.

What are your concerns about our business?

This is a great question that Steve Schlafman from RRE ventures suggested founders ask. Why wouldn’t you invest in my company? How do you see the risk here? What do you think won’t work or that I am doing wrong?

By asking this question directly, you are accomplishing several things. First, you are signaling that you are open to feedback and value it. Secondly, that you respect the opinion of this investor. More importantly, you are likely getting valuable information, a perspective of an investor who sees dozens and hundreds of companies per month.

The concerns will range from market size to acquisition channels, to competition and pricing. Having this information can help you work through the concerns and address them during the investment process.

What is your follow-on strategy?

Some investors follow on. i.e. put more money into the companies, and some don’t. Both strategies are perfectly fine, but it pays off to know.

Specifically, if you are raising money from angels, say $1MM round, and most of your backers do not follow on, this means that you may have a hard time raising the second seed. Most companies need more capital before they get to series A, and most of this capital comes from insiders – investors who already invested. If most of your insiders don’t follow on, you will need to go outside to raise more capital. This can be tricky, especially when you post seed and before series A.

With VC firms, the dynamic is different. Some VC firms deploy a smaller amount of capital at the seed stage with the idea of leading series A. The follow-on strategy is to lead series A. However, there is a potential issue that founders need to be aware of – IF the firm decides to not lead series A, there may be a signaling issue to the rest of the market. It pays off to connect with other founders that the firm backed to get the color on this dynamic.

How do you help companies you back?

Many investors talk about being a “value add” in addition to funds. Ask how exactly does this particular investor help and ask for specific examples involving companies the investor backed. Some investors come with a massive network. Some larger VC firms will help you recruit and scale. Some smaller angels are great at pricing and financial modeling. Some investors really understand distribution.

Whatever it is, investors like being asked this question and it is helpful for the founders to know.

Who are some of the founders you backed that I can talk to?

Much like how investors reference check founders, the founders should reference check investors. Ask for 2-3 founders that this investor has worked with.

You don’t necessarily need to connect with them after your firm’s meeting with the investor, but it is a good question to ask and see what the answer is. Great investors will have raving references from the founders they supported and less than great investors will be reluctant to name names.

   Source : http://bit.ly/2enuDAS

The 4 Essential Questions Your Content Must Answer in Less than 15 Seconds

A rodeo cowboy gets eight seconds to become a champion. What can content marketers do with nearly twice that time?

HubSpot reports it takes less than 15 seconds for a reader to decide whether or not content is worth the effort. Think about that : In half of the Jeopardy theme, your reader’s mind is already made up.

You’re probably familiar with that statistic–it’s a marketing classic. But what exactly is happening in those 15 seconds?

There’s a series of subconscious questions anyone asks as they’re contemplating reading content. You ask them; I ask them; and our fellow human beings that we call an “audience” ask them, too.

Your content must answer these four essential questions, and fast.

#1: Are You Talking to Me?

Marketers would phrase this question as “Am I the intended audience for this piece?” In the mind of a non-marketer, though, this question is full-on DeNiro in Taxi Driver.

The hard part about addressing this question is that a “maybe” is the same as a “no.” If your reader can’t tell if they’re your intended audience straight away, they’re going to bounce like a ping-pong ball.

So don’t play coy; call out your audience in the first few minutes. Cut everyone else loose. Make it clear exactly who should keep reading.

Full disclosure: This post used to have 250 more words in the intro. I spent the first two paragraphs introducing a metaphor. Then I cut it to the bone, to start with a call-out to the audience. Are you a content marketer? Then yes, I’m talking to you.

It’s important your readers get an equally clear message.

#2: What’s in It for Me?

It may seem strange to have to address this question. After all, you created the content specifically to address your reader’s needs. You’d think it would be obvious what benefit they will get from reading it.

But think about how you search for content. If you’re like me, you do a Google search, and then click into the most promising couple of links to check them out.  In that context, the article that tells me exactly what I’m in for is going to win every time.

The folks at Social Media Examiner are great at answering this question. In the first paragraph or two of every post, there’s a bolded sentence that says exactly what’s in it for the reader. That’s part of the reason their posts get read and shared like nobody’s business.

#3: Says Who?

This question is all about the credibility of the source. Based on the scant information your reader gets in the first 15 seconds, they will decide whether or not to trust you.

The easiest way to fail this test is to either omit the author by line, or bury it at the end. If your reader sees no attribution at the top of the article, they may assume it’s a generic piece written by committee, solely to promote a corporation’s products.

If someone won’t even take credit for the content, how trustworthy can it be?

People want to read work written by humans for humans. Make sure your content has an author’s name, photo, and a link to their bio right up top.

#4: How Hard Will This Be to Read?

The last question your reader asks before committing is how much of a commitment you’re asking for, and how easy it will be to fulfill that commitment.

Now, I realize that not all content is text-based, but the phrase “consume content” give me hives. So we can apply this question to video and content like SlideShare presentations as well.

For text, make sure your content is optimized for web readability. Short paragraphs, headers, visual interest. You can write a 1500-word article and people will read it—but you have to make it easy.

The same applies to video. A single 50-minute video is a big ask. Five ten-minute videos is smaller. Three 5-minute videos that really get to the heart of things is even better. Once someone watches the first one, they’ll be more compelled to finish the series.

I’d say think of SlideShare presentations in the same way. It’s easy to put up the slides from your last webinar and ask readers to click through 192 slides. 192 slides that start, by the way, with greetings to your webinar attendees and instructions on how to ask questions during the webinar. In other words, with completely irrelevant information.

It’s possible to get readers to make that commitment. But imagine there’s another SlideShare that starts with a compelling intro aimed at the reader and hits the key points in 20 slides…which one do you think wins?

A Lot Can Happen in 15 Seconds

The battle for readers’ attention takes place in 15-second intervals. And that’s a generous assessment. For a rodeo cowboy or a viral internet celebrity (remember Chewbacca Mom? Vaguely?), that is an eternity. For the rest of us, it’s a daunting deadline.

Before you post that next piece of content, take off your marketing hat for a moment and see if it answers these four questions. Is it clear your piece is:

1. Calling out a specific audience?
2. Providing a clear benefit?
3. Written by an actual human?
4. Not a chore to read?

The clock is ticking. Make every second count.

Source : http://bit.ly/2eoWY7E

How to Make Your Startup Dreams a Reality in 12 Days

With two simple goals, you can get your business momentum in less than two weeks.

Millions of people dream of becoming entrepreneurs and starting a business.

However, according to the 2015 Kauffman Index Report, only about three in every 1,000 people in the United States start a business every month. For many potential entrepreneurs, the outcome seems uncertain and the possibility of failure too great.

In many cases, procrastination kills entrepreneurial dreams long before would-be founders even land their first customers.

The key is to start small and take one step at a time. The goals in the first few days are simple:

1. Look like a real business, and
2. Land at least one customer.

The first six days should be dedicated to creating a brand and making your startup look and feel like a real business. You'll feel a sense of accomplishment and momentum that will propel you into the next six days of focusing on customers.

Here's what those first 12 days can look like:

Day 1. Define a minimum viable product or service.

What will your product or service be, at least in the short-term? What can you get out the door quickly? How can you immediately start servicing customers? Who will your customers be?

Day 2. Create your business name.

Pick a name that's simple and that has a direct connection to what you do.

I came up with a company name for my business FreeLogoServices and later renamed the company LogoMix. (We kept the original brand, but we needed another name to use with partners and different groups of customers.)

Don't waste all of your time trying to come up with the perfect name. You'll end up putting off starting your business and bringing in revenue.

Instead, just go with something straightforward and descriptive. If you're waiting to think of the perfect name, you're also waiting to start your business.

Day 3. Buy a domain.

When you search for a domain there are obviously a number of options available.

Think simple: (yourname).com, or (yourname).net if that is not available. You can also try (yourcompany)inc.com or (yourcompany)town.com.

Once you set up your domain, get a business email address such as yourfirstname@yourbusiness.com.

Day 4. Create a logo.

The "perfect" logo for your business probably doesn't exist, but a great logo is definitely achievable. Make sure you don't waste too much time looking for the perfect one.

You don't need fancy software or incredible design skills. There are a number of online services that make it easy to design your own logo.

Day 5. Set up a one-page website.

Keep it simple. Stick to one page with two pictures, a paragraph describing what you do, and a contact form.

Remember, the goal is just to start the process of branding your company. You can--and will--go back later and flesh out your website.

There are a number of free website builder tools and free stock photo services you can find online.

Day 6. Set up a Facebook page.

Social media marketing will be an important part of your marketing efforts--53 percent of small businesses use social media--so the small time investment it takes to learn will definitely pay dividends as you grow your business.

A simple Google search on quick tips for small business social media marketing can help you get started.

Day 7. Create business cards.

Use an online service to order business cards. Make sure to include your web address, Facebook page and business email.

Day 8. Create a list of 50 potential customers.

Whether you're selling a $1 or $100,000 product or service, you still need to talk to customers. You still need to determine their needs, their pain points, their objections.

Go through your personal contacts, and use LinkedIn and other social media points to determine a list of at least 50 people who may be interested in your product.

Then, get on the phone with them and discuss your product to learn if it is viable and how it can be improved.

Day 9-11. Get on the phone.

Dedicate a few days to calling customers and telling them about your product. Ask them to buy. Take notes on the conversation.

Making calls to customers is the toughest part of being an entrepreneur, but it is also the most important. Our initial calls helped us figure out what our customers wanted, and build a tool around that.

Day 12. Evaluate your calls.

Review your notes and evaluate what went well and what you can improve. Assess what is most important to potential customers. Change your pitch... and if necessary change your product or service.

Remember, most businesses never make it out of the idea stage. The goal is to start by overcoming procrastination and building a bit of momentum.

 Source: http://on.inc.com/2c43P4y

7 Ways to Take Your Content Marketing to the Next Level

Online marketing is all about the content. Content marketing is an essential part of building your business.

 How else will people find your content — and by extension your website. Part of converting is a good content plan that allows people to find you and decide that you offer something valuable enough to buy. But is your content marketing as effective as it could be? If you are struggling a little bit with getting your site to the next level, here are seven ways you can improve:

1. Start with Quality

 In the past, content marketing was a quantity game. While quantity can help, don’t forget about quality. Search engines — and consumers — are more sophisticated than they were 10 years ago. Quality content is a must if you want to stand out. Even if you post less frequently, you can see results if the content is high quality. This means including in­depth, useful pieces. While it’s tempting to give in and focus on the click­bait, at some point you need to provide value to your audience. 

2. Check Your Grammar 

While you might not be completely error­free all the time (we all make mistakes), you want to do your best to use proper spelling and grammar. Proofread your content before releasing. This goes beyond looking at website copy and blog posts. When content marketing, it also includes your social posts. You want everything to look as clean as possible. 

3. Post Consistently

 Start with a smaller number of posts if you aren’t sure you will be able to maintain quality output. These days, it’s more about expectations and readers and customers know that you will post consistently once a week, and your information will be high­quality, they will be more likely to return. They will even look forward to what you have to say

4. Research Your Topics 

Just because you think something is a great idea for your content marketing strategy doesn’t mean that it is. Instead, research your topics. There are plenty of tools out there that can help you analyze results of different topics. You can even figure out which are likely to do well using keywords or URL. Research to make sure that your chosen topics are going to convert well with your audience before you commit

5. Take Advantage of A/B Testing

 It can be a little tedious to use A/B testing with your content. However, effective content marketing includes keeping metrics on what works and what doesn’t. Pay attention to things like short articles and long articles, which headlines seem to do better, and which topics your readership prefer. Compare different efforts so you can refine your topics and approach to become more effective

6. Optimize Your Website 

Make sure your website is optimized for search engines. You want people to find you, and to stick around. Don’t forget to optimize your social posts as well. Content marketing that goes to the next level requires a great deal of planning on optimization. You need to coordinate what goes on your website with your social sharing.

7. Know Your Audience 

Understand what you audience is looking for and deliver. You don’t need to try to appeal to everyone. In fact, you are likely to fail if you try that approach. Instead, consider who is likely to buy your product or service, and focus your content on what is likely to be useful and relevant to that segment of the population.

  Source : http://huff.to/2bl5Bzi

Quote of the day!

Are good leaders born or made?

For many an ambitious worker, the measure of success lies just ahead in a path toward management. Career arcs in a wide variety of sectors are simply built that way, and sooner or later the serious-minded employee finds him or herself champing at the bit to be a leader. “For those who are front-line employees thinking about a long-term future, the question of whether to go into management, whether it is good for you and for others, and figuring out whether you have the temperament to master it, is a career issue that many people are trying to answer,” says Michael Useem, Wharton management professor and director of Wharton’s Center for Leadership and Change Management.

And yet, not everyone is cut out for a role that requires setting aside doing the work of the firm in favor of empowering others to do the work. But can anyone, with enough desire and proper training, become a manager? In other words, are good managers born or made? “This is a question as old as management, and we have lost a lot of wisdom about it in practice along the way because cost-cutting trumped all other concerns,” says Peter Cappelli, Wharton management professor and director of Wharton’s Center for Human Resources.

The easiest approach and some might say the most meritocratic, Cappelli notes, is to give the management role to the best performer in the role below — a management theory popularly known as the Peter Principle.

“The problem is that … the competitiveness to win that often makes [an individual] the best performer is directly at odds with the requirements of managing other people and trying to get them to succeed,” he points out. “As in sports, where a lot of our lessons for business seem to come from, the best individual performers don’t necessarily make the best coaches.”

Unfortunately, even in the modern business world, becoming the office equivalent of a coach is what many workers are conditioned to aspire to, even if it’s not the best fit for them — or their would-be underlings. “We still have a pretty conventional view of the organization today, even though we have thought a lot about flatter organizations and more employee engagement,” says Virginia J. Vanderslice, founding a partner and president of Praxis Consulting Group in Philadelphia and an adjunct faculty member at the University of Pennsylvania’sOrganizational Dynamics program.

 “In this country, we’re pretty traditional in our view of what success looks like, and I don’t mean that as just inside the firm. As individuals, we think success looks like a bigger title and more money, and even in school we need to start shifting how we think about these things.”

You’re So Vain

Narcissism is often cited as the major personality hurdle standing between the desire to be a good manager and actually being one, and several studies show that the trait is on the rise. One nationwide meta-analysis and an examination of data within one campus demonstrated significant increases in American college students’ narcissistic traits over the generations, according to Jean M. Twenge and Joshua D. Foster in “Birth Cohort Increases in Narcissistic Personality Traits Among American College Students, 1982–2009,” published in Social Psychological & Personality Science.

“As in sports, where a lot of our lessons for business seem to come from, the best individual performers don’t necessarily make the best coaches.”–Peter Cappelli

“The larger cultural changes in parenting, education, family life, and the media toward greater individualism have apparently affected the personality traits of individuals,” they write. The nationwide meta-analysis shows that the increases are a little more than one-third of a standard deviation over one generation. These results were, rather strikingly, consistent with a large epidemiological study on narcissistic personality disorder, the more severe, clinical form of the trait, the study notes.

Narcissism can cut both ways in an organization. Sometimes, and for some employees, a narcissistic leader comes across as inspirational. Several studies, however, show that such leaders are more likely to commit transgressions of integrity, and to leave unhappy employees and destructive workplaces in their wake. “The difference between having healthy levels of self-confidence and self-esteem, which are appealing and useful qualities for leaders, and being narcissistic is that narcissists have an elevated sense of self-worth such that they value themselves as inherently better than others,” write Charles A. O’Reilly III, Bernadette Doerr, David F. Caldwell and Jennifer A. Chatman in “Narcissistic CEOs and Executive Compensation,” published in The Leadership Quarterly.“That said, the difference between those who are self-confident and those who are narcissistic is often difficult to detect.”

A ‘Deep Sense’ of Personal Security

Tests such as the Hogan Personality Assessments can be helpful in identifying employees with the kinds of qualities that might predict a good leader. Leadership can be learned, Vanderslice notes. “But my conclusion after 40 years of working with leaders is that there are a few core qualities that a person comes with that are the harder things to strengthen,” she says. “Not impossible, but really challenging. And the big one for me is a personal, deep level of self-confidence. And by that, I don’t mean, ‘Hey, I can beat my chest because I’m so good.’ I mean real self-confidence — a deep sense of personal security. If someone doesn’t have that, they are not going to be invested in others because they are too worried about themselves.”

So can any worker learn to become a manager if he or she wants it enough? “In principle, yes,” says Useem. “Most people in my experience can master what it takes to manage people. But I think we don’t appreciate how difficult that mastery is. Learning to manage others requires a very significant commitment, just like learning to play the piano or becoming a technical expert.” One way to think about how the average group breaks down in terms of being management timber: “A significant fraction is temperamentally ready to try out a managerial role if offered, another segment is likely to be indifferent, and a third sub-group would have no interest whatsoever,” says Useem.

“It is certainly possible for people to learn how to be good managers, but those who are not disposed to work with and through others are never going to be as good at it,” adds Cappelli. “If we don’t do training, and business is much less inclined to do so these days, and we appoint the best individual performers, we are bound to have problems.”

Part of the equation, Useem notes, is figuring out why someone wants to be a manager. Useem recalls hearing former Mexican President Felipe Calderón speak about why he decided to make the journey from community organizer to national leader. “As an organizer early in his career, he was working with people in a neighborhood to demand better services, but after a while, he said, ‘I’m helping to improve the lives of hundreds, but if I am willing to play a national role, I could affect millions.’”

Among other capabilities needed to make a good manager, Useem lists “a willingness to work with ambiguity, uncertainty, and unpredictability. If you want everything to be at right angles, that’s probably not the mindset you want if you plan to work through others.”

“As individuals, we think success looks like a bigger title and more money, and even in school we need to start shifting how we think about these things.” –Virginia J. Vanderslice

Managers must learn to appreciate how distinctive each individual is in what they want from work and what animates them to work well Useem notes. “As a company manager, for instance, you may learn that one employee wants to be home at 5 p.m. for family time with no after-hours obligations, while another is ready to shoulder far greater responsibility,” he says. “Coming to appreciate — and then manage — the great diversity in human motivation and purpose is essential for anybody going into management, and that requires becoming a lifelong student of human nature.”

Some firms are particularly good at cultivating management talent. Useem cites Johnson & Johnson as one. “They are very methodical at identifying front-line employees who can not only make pharmaceuticals and consumer products but can also manage others to help them get their jobs done.”

Getting Pushed Up — and Out

For many, no matter how good they are in their jobs, no matter how much recognition they receive, happiness lies in becoming a manager. The bank teller eyes becoming the branch manager, the associate plots of rising to partner, the section violinist dreams of one day leading the orchestra. But the criteria firms use for deciding who gets plucked for a management role often have more to do with how well that employee is doing in the work itself, and less to do with how they might manage others.

“A lot of us become very good at doing something — software engineer, investment banker, sales person — and we really build expertise in a subject and get very good at doing it, and then get pushed into a role where less and less of our time is spent doing whatever it is we were good at doing and more time is spent managing people,” says Wharton management professor Matthew Bidwell. “For a lot of us, we value expertise, so the big challenge in some areas is that we respect people based on coming up with brilliant solutions, and that’s not what a manager is supposed to do — and if they are trying to do that, they end up micromanaging.”

Thus, Bidwell adds, people struggle to make the shift to a manager, meaning they spend a lot of time trying to do the work and not enough time coaching, supporting and helping to develop employees, or running interference between them. “And that is really a central issue for people — letting go of the old role and embracing the value of the new one.”

Many companies allowed management training to fall by the wayside during the recession. Corporate spending on training dropped by 11% in 2008, and then another 11% in 2009, according to a Bersin by Deloitte survey. After a modest increase in 2010, spending experienced double-digit growth each year through 2013. The number-one area of spending was in management and leadership training, the survey says. Even so, in any economy, training is not what it should be. “Firms don’t train very much, full stop,” says Bidwell.

But many firms contribute to the problem by rewarding employees with management positions because of skills that have nothing to do with management. In one study in progress, data on salespeople at hundreds of firms were examined through a company that provides sales administration software through the cloud. Researchers tracked employees promoted to management and their resulting performance. The study, “When Good Tournaments Make Bad Matches: Evidence of the Peter Principle in Sales,” found that the best-promoted managers had displayed evidence of teamwork and cooperation before they were promoted. But organizations instead tended to promote the best salespeople, who did not generally make great managers.

“Coming to appreciate — and then manage — the great diversity in human motivation and purpose is essential for anybody going into management, and that requires becoming a lifelong student of human nature.”–Michael Useem

“Our study suggests that the greatest potential managers may not ever make it into management because firms pass them over by promoting their best salespeople,” says Alan Benson, a professor at the Carlson School of Management at the University of Minnesota-Twin Cities, who co-authored the study with Danielle Li and Kelly Shue. “The same might be said of engineers, architects, lawyers, academics, or lots of others who can be promoted because they’re great at one thing that’s not necessarily related to management.”

If Not Management, Then What?

Some won’t ever make it in management. And in those cases, firms are often not always adept at recognizing when that is happening and coming up with solutions. “What do we do with good individual contributors who don’t make it as managers?” asks Cappelli. “The challenge is that working through others in most roles has a much bigger impact than one can have as an individual. That’s why a good executive running an operation is just more valuable than an equally good engineer working [in the same operation] could likely be. Many organizations have created ‘dual tracks’ to recognize and acknowledge those in individual roles, and those are a good idea. But those people just aren’t as valuable as leaders are.”

As an alternative to traditional management, Vanderslice suggests a master technician track, “where someone really good at the job is encouraged to further develop technical or professional skills and then be recognized for being the most accomplished. If they are the right person, they could take on an education or mentoring role with younger folks in the aspect of what they’re doing.” People who are masters of their profession — for example, lawyers, architects or engineers — may not be the most interested in or best equipped to do well-managing people, Vanderslice points out. “You don’t want to lose those people entirely or lose them into management if they are, for instance, a great architect. But they might be great teachers. The other thing for them and the firm is to think about how they can broaden what they know, as well as doing it well. What’s the newest thing in their field, and can you develop that?”

But not every firm makes these kinds of accommodations. Managerial aspirants beware. Says Useem: “For those considering a management opportunity, make certain you are ready for it and capable of mastering it. The costs and risks are high if you fail to do either. But the rewards and impacts are also high if you can do both.”

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