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The Importance of Managing Expectations
There is an old phrase very commonly used in a
variety of professions that states “you should
always under promise and over deliver”. Although
I do not personally subscribe to this doctrine, it
does have some interesting implications for
leaders who are starting or already managing
their own companies. Managing expectations is
one of the most critical and difficult balancing acts
you will undertake. If you do not understand and
execute this skill successfully, it can undermine
both your company’s future as well as your own.
First, Manage Your Own Expectations
Before you start managing the expectations of
other’s it is best to begin by managing your own.
One of the surest ways to significantly increase
the risk of your venture and your personal future
is to begin with unrealistic expectations. We have
all read the motivating stories about the fearless
entrepreneur, who in spite of overwhelming odds
and hoards of naysayer’s, charges ahead and
winds up dominating a multi-billion dollar market
segment. These rare success stories are
compelling, but for most entrepreneurs and
business leaders to utilize this strategy is both
foolhardy and unrealistic. Most successful
businesses in the world today were built
methodically and systematically over a period of
several years, often up to a decade depending on
the industry. During that time the company and its
management team had to systematically reinvent
themselves in order to possess the characteristics
required to achieve the next level of growth (read
my June 2008 Newsletter – What Position Do
You Play?). There are ways to accelerate this
process, and even to execute it more efficiently,
but there are very few realistic shortcuts. If you
know and accept this at the start, you will be
prepared to manage the journey over the long
haul. To manage your own expectations start by
answering the following questions:
• Why am I undertaking this venture (or accepting
this position)?
• What are my personal expectations? Business
expectations? Financial expectations? Time
commitment expectations? Title/Position
expectations?
• What skills and experience am I able to bring to
this venture?
• What skills and experience are realistic for me
to learn along the way?
• What skills and experience are unrealistic for
me to sufficiently learn?
• Are my overall expectations reasonable given
the answers above?
By answering the questions above you can
accurately establish the following critical criteria:
• If you are starting or joining a company to get
rich quick your odds of success are pretty remote.
• From the paragraph above it should be clear
that it will take years, perhaps up to a decade to
build a successful company. This does not
translate into liquidity (barring an IPO), however,
which means much of your wealth will be still tied
up in the company (see get the rich quick point
above).
September 2008
The Importance of Managing Expectations

2. • If you are a technical founder/manager and
have little business and financial expertise it is
probably unrealistic for you to retain the CEO
position over the long haul.
• You will need to hire to buttress your weak
areas in order to build a successful management
team and ultimately, a successful company. This
takes both courage and strong self esteem (not
confidence or ego). The right people to hire will
absolutely ask you hard questions and expect
straight answers and will always be a professional
threat to your current position. Look at how many
CEO’s came out of Jack Welch’s management
team at GE.
Managing The Expectations of Others
Once you have realistically managed your own
expectations you can now turn to managing the
expectations of others. Managing the
expectations of other’s does not mean providing
overly conservative financial estimates or
forecasts, padding development schedules, or
down playing market opportunities, in essence,
under promising. It also does not mean the
opposite; employing overly optimistic estimates in
these areas. Rather, successfully managing the
expectations of other’s means that in addition to
providing the most accurate information possible,
you also need to provide the context and risk
scenarios in which these activities will take place.
Let’s look at a couple of real world examples.
The CEO of a technology startup was looking to
hire a top sales and marketing executive to round
out his management team. He met a very
impressive candidate and was convinced this
individual could make a major impact on his
company. During the several rounds of interviews
the CEO painted an optimistic view of the future
of the company, and the status of its product
development. One month after the new sales and
marketing executive started, he abruptly resigned.
The reason for the resignation was that the
scenario painted by the CEO was vastly different
from the sales and marketing executive’s view.
The CEO in his enthusiasm failed to provide the
context and risk scenarios for the development of
the company’s products. He had portrayed them
as ready for sale, when in reality there were still
several key development risks to overcome
before release. The sales and marketing
executive concluded that either he was misled or
the CEO was naïve. He wanted to work for
neither.
The founder/CEO of an early stage technology
company was looking to raise his first round of
venture funding. After several very successful
presentations the company was able to secure a
Series A round of $3M. Within 18 months a new
CEO was brought in by the investors and the
founder/CEO was moved into a CTO role within
his own company. Within a year he left the
company. The defining issue was that the
founder/CEO had signed up to providing a
growing revenue stream beginning at the end of
the first year of venture investment when in reality
the product still had several risky development
hurdles to overcome. The founder/CEO had not
sufficiently managed the expectations of the
investors regarding the remaining risks in the
product development process. In his mind he was
raising development funding while the investors
thought they had a guaranteed revenue stream
beginning at the end of the year. Sadly, there are
several types of investors who might have gladly
invested in this company under expectation they
were funding the next stage of product
development in a pre-revenue company. The
quickest way to find yourself looking at your
company from the outside in is to mismanage the
expectations of investors.
Lessons to be leaned from these unfortunately all
too common stories:
• When managing the expectations of others do
not forget that they do not have the intimate
knowledge of you, your company, your market, or
September 2008
The Importance of Managing Expectations

3. your products. You do not have to get into the
minute details of each but make sure they fully
understand the overall context, risk, and
interrelation of each.
• Be sure to establish what is in your control from
what is not. For instance, a big driver of current
investment in the clean energy sector is a series
of temporary government tax subsidies. There is
no guarantee that these will be extended,
especially in an election year. You probably have
very little control over this but it will have a major
impact on your ability to grow the business. Make
sure your key employees and investors
understand this.
• As in the hiring example above it is better to be
realistic and open when discussing your
company’s status and future. Everyone
appreciates enthusiasm, but no one appreciates
deception. Your new employee will know
everything within their first week on the job.
• The difference between research and
development is that you cannot schedule
research. Research is the investigation of the
unknown. Development is the crisp scheduling
and execution of the known. This can be
scheduled. The CEO in the example above tried
to schedule research.
• Always have a backup plan. Managing
expectations is not a “get out of jail free” card.
When challenges arise, if you properly managed
expectations, they should not be a surprise to you
or others. Therefore, you should already have a
backup plan in place, ready to execute.
Copyright 2006 - 2008 The Rockland Group, Inc.
All rights reserved. Reproduction without
permission prohibited.
September 2008
The Importance of Managing Expectations