'Management' is a word that has come up several times in the previous sessions. Why are investors so keen on management?

The scale of operations of a company is larger than in a research group. A drug discovery and development company can expect to grow to 30-50 people in 18 months, to over 100 people in 3 years, all working on essentially the same product or related groups of products. This cannot happen by chance--it must be organised. It must also be focused on a very specific goal. Company funding is based on success not on activity. If a line of research is not working someone has to make the hard decisions about what to do about it including, in extremis, firing the scientists involved.

This needs professional management--people who know how to organise and run a scientific programme with such defined goals. Sometimes the scientists can grow into this role. Sometimes they can accept it from an outsider recruited to the company specifically to manage it. But filling that role is an absolute condition of setting up a company, and companies without effective management almost always fail. Sometimes they take a long time and a lot of money to fail, which is why investors look for good management as part of the company team: without it, there is a very high probability that their money will be wasted.

This imposition of management is sometimes resented by scientists used to academic freedom, because they feel that they are 'giving up control' of their science. This is a fallacy for three reasons:

• They are not giving up control of anything--before the company was founded there was nothing there to control. No-one was developing the product, hiring the scientists, performing the work.
• It is not 'their' science. A successful company must be assembled from many scientific and technical strands, for reasons outlined in the previous sessions. They are a contributor, not a sole author.
• No one person is in control of a small company, if it is to perform with the energy, flexibility and enthusiasm that will carry it to success. It must be a team, not a dictatorship.

Where is management?
Finding appropriate management is difficult. You need quite different sorts of people at different stages of a company. The senior management, and particularly the Chief Executive Officer (CEO), of a new start-up with 10 employees must be able and willing to do everything, to do without formal reporting structures, and to know everything that goes on in the company. The manager of a public company of 400 employees must delegate nearly all of that and instead control a reporting and responsibility system that has several layers between him and the bench scientist. A company's management becomes more obvious, more structured and includes more people as the company grows.

As a company grows, the people who ran the company very well at one stage have to give way to ones who are competent to run it in the next. One of the skills of the entrepreneur who starts a small company is to know when their skills should be replaced by someone suited to run a more mature organisation.

Finding people who can perform these tasks, and particularly the many-sided and changing task of running a new start-up company, is hard. As in science, the only evidence that you can do it is a 'track record' of having done it before. The CEO is particularly critical, as he has overall responsibility for making the company work. CEOs for new biotechnology companies come from a variety of backgrounds, where their experience in management, in directing science and in relating to the needs and concerns of the board of a company fit them for the role. Academic research does not usually fit a scientist for such a role. Neither does being a management consultant (criticising how someone is performing is not the same as performing well yourself), nor does 'experience' of business gained solely through an MBA (Masters of Business Administration) course.

Critical tests for a CEO of a new biotechnology start-up could be caricatured as:

• The 'Nature' Test--can they read Nature and understand what they are reading? This is critical, as the fundamental of the start-up is good science. (They probably will not have time to read Nature but that is another problem.)
• The Lightbulb Test--can they (and are they willing to) change the lightbulb if it blows, i.e. do anything practical needed to keep the company running. There may be no-one else around to fix it.
• The Cat-Herder Test--can they convince a group of disparate scientists that what the CEO wants them to do is more worthwhile in scientific terms than what the scientists thought they wanted to do? (He or she can threaten to fire them but that will not capture the creativity and dedication of which the best scientists are capable.)
• The Deal Test--can the CEO go out and make deals that will bring the company money in return for a small amount of its technology of products? Such deals are critical for funding, but also to show that someone else has faith in you.
• The Suit Test--can the CEO put on a metaphorical (or literal) dark suit and convince investors that he or she is really on their side, so their investment is safe in his or her hands?

These general criteria apply to all the senior people in a small company. The 'head of molecular biology' in a start-up may find themselves watching the pilot plant or presenting to an investment banker who does not know what DNA stands for; there are few well-defined job descriptions in such an environment. This is half the fun of it.

As well as people who run the company as a whole, your start-up will need more specialist management functions such as financial and personnel management. Initially these will be provided by someone outside the company, such as the venture capital company backing the company, or by the CEO in his 'spare time'. As the company develops, a more specialised type of manager with less concern for science and more concern for management as a process and skill in its own right is needed. Scientists should note that these people are needed: they are not hired purely to make your life at the bench harder. Without them you might wake up one day and find that the company has run out of money.

This brings us into the realm of general management theory and practice, which this seminar will not discuss further. There are many books and courses on this available, some of them relevant to the unique environment of a small, science-based company.

Directors and others
In law, every company must have a Board of Directors. These people do exactly what their name implies--they direct the company so that its value to its shareholders is maximised. There are stringent laws about what company directors can and cannot do in general terms, and some financial scandals in major companies have involved directors abusing their position for their own gain.

The directors should add substantial value to the company, in terms of contacts, experience, advice and business acumen. Their role should emphatically not be just to rubber stamp what the CEO wants to do and for that reason it is considered bad practice for the Chairman of the Board to be the CEO. A venture capitalist looking to fund a company or a scientist looking to join it at a senior level will look at the Board to see whether they are there as window dressing or whether they will really help the company flourish.

Parallel to the Board, and often answering to it, most biotechnology companies have a Scientific Advisory Board (SAB). It should advise the CEO and directors on any technical aspect that the company needs guidance over and, specifically, provide perspective, contacts and advice on all areas of science that might be relevant to the company. For example, an agricultural genetics company might have an agrochemicals expert and a farmer among theirs.