Case Study Simplex Solutions: Expanding the Entrepreneurial Team

Martin - Chief Executive Officer (CEO), and Peter - Chief Technology Officer (CTO), cofounders of Simplex Solutions, are considering two strategic hiring decisions that could make or break their vision for the next stage of the company's growth. In their search for a Chief Financial Officer and Chief Marketing Officer, they are facing a dilemma: Should they be hiring frontline employees or looking for individuals that will effectively be cofounders, in the sense that they will have significant ownership stakes in the venture and the same status and rank as the initial founders. After considerable debate, they conclude that they are, in fact, looking for cofounders who will jointly build their fledgling venture. Naturally, as cofounders, they will - like Martin and Peter - hold a considerable share of equity in the new venture and will be company officers. Founded in early 2002, Simplex Solutions is a software company dedicated to developing and marketing optimized event scheduling solutions. Combining the latest research in constraint programming, operations research, and heuristic search, their software platform provides robust and cost-effective solutions that provide unique value to customers by generating optimized event schedules reliably and extremely fast compared to existing solutions. The scheduling solutions are professionally designed, with user-friendly interfaces, and can be easily integrated into the customer's existing software and hardware infrastructure. These solutions can be applied to diverse markets, such as sports event scheduling, university timetabling, flight crew/cockpit crew scheduling, and nurse/doctor rostering. Simplex Solutions has secured angel investor funding for prototype development and currently has 10 full-time employees (mainly software programmers) on its payroll and a number of part-time staff. A near-fatal cash flow crisis a few months earlier and the need for a further cash infusion from external investors to fund the next stage of the venture's evolution have persuaded Martin and Peter that they desperately need a full-time Chief Financial Officer (CFO). In addition, successful user trials with National University Hospital and Johns Hopkins in Singapore have convinced them that the most promising application for their technology is to automate the duty roster of medical staff in large hospitals. Simplex Solutions urgently needs a full-time Chief Marketing Officer (CMO) who will build a sales and marketing organization and lead the development of a viable business in this market. Senior nursing staff and doctors in a large hospital typically spend about three days a month manually drawing up a duty roster - a significantly sub-optimal use of their time In contrast, Simplex Solution's software enables near-optimal rostering in less than an hour. Simplex hopes to capitalize on the three benefits that the product provides to hospitals: (i) enormous time savings for senior nurses and doctors who prepare the duty roster and whose time is better spent on surgical operations, (ii) integration of personnel management systems (such as leave and overtime) and payroll systems with the duty roster, and (iii) the inherent fairness of the system from the hospital employees' point of view since it allows them to "bid" for specific time off (much like the bidding system at business schools such as INSEAD, where MBA students are allocated a "capital" of 100 points which they use to "pay" for different electives). Martin, 33, was born and brought up in the United States and holds an MD from Harvard Medical School and a Ph.D. in artificial intelligence from MIT. Prior to starting Simplex, he spent four years as a Clinical Fellow in Internal Medicine at Johns Hopkins University's Singapore center in the clinical services practice. His career combines clinical medicine with a solid science and computer programming foundation. He has extensive experience in creating computer models of biological systems as well as numerous scientific publications in the area of neural network algorithms. Peter, 34, has 12 years of constraint programming research and practice. Prior to starting Simplex, he worked as a research scientist at the National University of Singapore's Center for Artificial Intelligence on event scheduling applications ranging from university timetabling and automated music composition to sports scheduling. He has authored several international publications on constraint programming applications and has served on the programming committee of the main international conferences on constraint programming and timetabling. Born and brought up in the United Kingdom, Peter has a Master of Science in computer science from Imperial College London. Expanding considerable time and resources, Martin and Peter assemble a list of 12 candidates. After several months of intensive reviews, they narrow the shortlist to three candidates each for two positions. A brief profile of each candidate is given below. Which candidate would you pick for each of the positions and why? Profile of Candidates for the Position of Chief Financial Officer (CFO) Candidate 1: Pierre In his mid-30s and currently CFO of an established medium-size manufacturing company on the west coast of the US, Pierre has a reputation for being an extremely high achiever. His peers rate him as excellent in managing internal control systems, and he has links with the banking and finance community on the west coast. Referees are universal of the opinion that he is someone who can do the job and has the track record to prove it. In his current job, he has created a novel organizational structure that encourages purposeful competition among his subordinates. Some of his former subordinates feel that he is a bit aloof, does not suffer fools gladly, and often comes across as rude and curt. However, more loyal subordinates feel the aloofness probably stems from his privileged background. Pierre is a certified accountant trained in France (his home country) as well as the US and holds an MBA from Wharton. Candidate 2: Wei CFO of a logistics company in Hong Kong, and in his mid-30s, Wei was part of the team that took this company from early stage start-up to a successful IPO under difficult financial market conditions. Having spent his entire professional career working in Hong Kong, he was looking for an opportunity to gain international experience. A soft-spoken person, Wei has a reputation for being a good team player with a trustworthy, low-key demeanor. His peers rate him as smart and thoughtful with a fine, analytic mind. Wei is a certified accountant trained in Hong Kong (his home country) as well as the US and holds an MBA from INSEAD. Candidate 3: Sau Yin Currently the CFO of an electronic waste recycling and processing services company based in Singapore, Sau Yin is a critical member of the management team that led the company to IPO. She has a reputation among subordinates for being an exceptional team builder who nurtured and coached them when they joined the company. In her early 30s, Sau Yin is perceived by her peers as an exceptionally gifted person with extraordinary technical as well as people skills. She holds an MBA from Harvard Business School and an undergraduate degree in Economics from the National University of Singapore (her home country). Profile of Candidates for the Position of Chief Marketing Officer (CMO) Candidate 1: Kumar VP of Marketing of a highly reputable medical imaging company, in his late 30s, Kumar has strong marketing skills and experience. In his current position, based out of Singapore, he leads a sales and marketing team of 25 people. Prior to joining this company, he was the proprietor of a small advertising business. Kumar attended the Delhi School of Economics, arguably the best school for economics in India (his home country) and an MBA from Wharton. He has a reputation for providing strong leadership to his team, and he projects tremendous enthusiasm about Simplex's future - offering numerous ideas about leveraging the company's lead in the marketplace through strategic partnerships. However, some of his former subordinates feel that Kumar's people management skills need improvement. Candidate 2: Lucia VP of marketing with a large and highly reputed American medical devices company in her early 30s, Lucia has a reputation as an extraordinary team builder, earning the loyalty of employees at all levels. In her current position, as the head of a business unit selling specialized surgical equipment to hospitals in Asia-Pacific, she has increased revenues from $1 million to $50 million in 30 months. Prior to this, Lucia was the founder and CEO of a failed start-up selling medical equipment training services to hospitals. She holds a bachelor's degree in English literature from the National University of Singapore (her home country) and an MBA from INSEAD. Candidate 3: Alan In his late 30s and currently VP Marketing of a fledgling division within a large and established manufacturing company in the American mid-west, Alan is an exceptionally high achiever. In his current job, he increased divisional revenues from zero to $20 million in a year and, more importantly, was instrumental in developing an excellent new product pipeline, assuring the future growth of the division. His peers and superiors rate him as having a razor-sharp mind with excellent verbal, written, and visual communication skills. However, some of them feel that he is a bit unapproachable because he can be short-tempered and argumentative, especially in stressful situations. Despite his underprivileged background, his excellent academic performance got him a fellowship to attend the University of Pennsylvania, where he majored in economics. He also holds an MBA from Harvard.

Questions:

1. Pick one candidate for each position and explain your reasons for your decisions.

2. Discuss what skill sets are needed for the positions of CMO and CFO in technological startups like Simplex at this stage of their evolution and business concept.

3. Should the hiring decision be based on demonstrated skills vs. potential? How much weight should be placed on the task competence of a candidate vs. interpersonal style?

4. What do you think about the diversity of a founding team? Is it good or bad? Please explain.