Dec 19, 2022 | Financial Acceleration

If my investor demands I fire my head of sales, do I have to?

Q. Dear Zenagos, I have a “silent” partner who invested quite a bit of money in my business. Lately she has been complaining about my team’s sales numbers, and she won’t let it go. She wants me to fire my head of sales! I don’t think I can do that. He’s a good guy – just hit a bit of rough patch – and I think people are being a little more conservative with their spending right now. How can I handle this investor?
–Dennis

When your investor begins interfering with the daily operations of your business, you need to assess your situation before responding. It is always a good idea to deal tactfully with investors. They play an important role in your business, and even if you think you will never need their money again, they deserve courtesy and respect for the role they have already played. So, at a minimum, you will want to have a one-on-one conversation with your investor, to make sure that she feels heard, and to ensure that you understand what is motivating the concern.

However, before you have that conversation, it is wise to review how your business is organized. In the event that the conflict cannot be resolved, you need to understand whether your investor has the power to force you to fire your head of sales, or even to force you out of the company.

If you have given your investor stock in your company in exchange for the investment, who holds the controlling share? If you own more than 50% of the company, you probably hold the controlling share. However, even if you own more than 50% of the company, you need to review your company’s organizing documents, including bylaws, to understand how voting works. How many votes are there for decision-making purposes, and how are ties resolved? Before you play hardball with your investor, make sure that you are in charge from a legal perspective. The history of entrepreneurship is full of stories of entrepreneurs who were kicked out of their own business by investors who held the legal voting rights in the company.

If you hold the controlling share (including the voting rights), then you can take a stronger position – though, it always pays to be gracious and negotiate in good faith with your investors. If you do not hold the controlling share, then you will need to try to influence your investor, helping her understand why the head of sales is performing up to your expectations and what milestones you see coming up that can provide evidence of progress.

If you do not have anything in writing, then your situation is less predictable. If you take a hard position against your investor, you could end up in court, where the outcome may or may not be in your favor. When you are not certain of your position, it is wise to avoid taking an aggressive posture. Instead, take whatever time is required to get to a better place with your investor, so you can move forward together.

How do I influence my investor?
Every person is different, so there is no simple answer to how to influence your investor, but these tips may help:

1. Don’t Get Angry
Influencing investors is just like influencing anyone else, but investors may begin the conversation with a proprietary feeling, like they have a right to tell you what to do. The first key to influencing investors is to manage your feelings about this proprietary attitude. If you feel angry about the investor’s attitude, you are more likely to make a mistake that you will regret later. Before you enter the conversation, fill yourself with warm feelings for your investor. Convince yourself that the investor’s intentions are only good, and the conversation will work out well. Work actively to be patient and avoid feeling angry.

2. Be An Active Listener
This advice comes from a wide variety of reputable leadership experts: If you listen, you have a better chance of arriving at a mutually agreeable solution. Entrepreneur writes that you should “be present and connect” (Smith, 2021). Forbes advises, “When people feel heard, they’re more open to being influenced” (Glass, 2018). Harvard Business Review recommends that you “become an active listener, rather than a transmitter” (Laker & Patel, 2020). The first step toward successfully influencing your investor is to seek to sincerely understand her issues and motivation.

3. Search for a Solution, Not a Victory
If you need to “win” the conversation, then you will be a poor negotiator. In the best outcomes, both parties feel that they won a little, and both parties feel that they lost a little. Work with your investor to find a solution that both parties can accept. That is the true path to victory.

It is never fun to have someone telling you what to do, and it is worse when you disagree with the instruction. However, investor money generally comes with strings attached, making it necessary for you to deal with your investor directly and fairly. Consider this an opportunity to build your influencing skills. You will need them throughout your career, so any chance to work on them is an opportunity to become a better leader.

 

References

Glass, A. (2018, October 5). Five principles to follow if you want to influence others. Forbes. Retrieved on December 18, 2022, from https://www.forbes.com/sites/forbescoachescouncil/2018/10/05/five-principles-to-follow-if-you-want-to-influence-others/?sh=585c3ba16e29

Laker, B. and Patel, C. (2020, August 28). Strengthen your ability to influence people. Harvard Business Review. Retrieved on December 18, 2022, from https://hbr.org/2020/08/strengthen-your-ability-to-influence-people

Smith, F. (2021, February 5). 7 ways to influence other people. Entrepreneur. Retrieved on December 18, 2022, from https://www.entrepreneur.com/leadership/7-ways-to-influence-other-people/361700

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