Hiring Startup Executives

February 16th, 2016

I was meeting with a startup founder last week, and he started chatting about some advice he got after his latest round of investment about bringing in a senior management team. He then said he spent the last year doing that. I stopped him right there and asked “Are you batting .500?”. Only about half of those executives were still at the company, and the company promoted from within generally to fill those roles after the executives left. The reason I was able to ask about that batting average is that I have see this happen at many startups before. The new investor asks them to beef up their management team, so the founders recruit talent from bigger companies, and the company experiences, as this founder put it, “organ rejection” way too often.

This advice from investors to scaling companies is very common, but I wish those investors would provide more advice on who actually is a good fit for startup executive roles. Startups are very special animals, and they have different stages. Many founders look for executives at companies they want to emulate someday, but don’t test for if that executive can scale down to their smaller environment. There are many executives that are great for public companies, but terrible for startups, and many executives that are great at one stage of a startup, but terrible for others. What founders need to screen for, I might argue about all else, is adaptability and pragmatism.

Why is adaptability important? Because it will be something that is tested every day starting the first day. The startup will have less process, less infrastructure, and a different way of accomplishing things than the executive is used to. Executives that are poor fits for startup will try to copy and paste the approach from their (usually much bigger) former company without adapting it to stage, talent, or business model. It’s easy for founders to be fooled by this early on because they think “this is why I hired this person – to bring in best practices”. That is wrong. Great startup executives spend all their time starting out learning about how an organization works so they can create new processes and ways of accomplishing things that will enhance what the startup is already doing. When we brought on a VP of Marketing at GrubHub, she spent all her time soaking up what was going on and not making any personnel changes. It turns out she didn’t need to make many to be successful. We were growing faster, had a new brand and better coverage of our marketing initiatives by adding only two people and one consultant in the first year.

Why is pragmatism important? As many startups forgot over the last couple of years, startups are on a timer. The timer is the amount of runway you have, and what the startups needs to do is find a sustainable model before that timer gets to zero. Poor startup executives have their way of doing things, and that is usually correlated with needing to create a very big team. They will want to do this as soon as possible, with accelerates burn, shortening the runway before doing anything that will speed up the ability to find a sustainable model. I remember meeting with a new startup exec, and had her run me through her plan for building a team. She was in maybe her second week, and at the end of our conversation I counted at least 15 hires she needed to make. I thought, “this isn’t going work.” She lasted about six months. A good startup executive learns before hiring, and tries things before committing to them fully. Once they know something works, they try to build scale and infrastructure around it. A good startup executive thinks in terms of costs: opportunity costs, capital costs, and payroll. Good executives will trade on opportunity costs and capital costs before payroll because salaries are generally the most expensive and the hardest to change without serious morale implications (layoffs, salary reductions, et al.).

Startup founders shouldn’t feel like batting .500 is good in executive hiring. Let’s all strive to improve that average by searching for the right people from the start by testing for adaptability and pragmatism. You’ll hire a better team, cause less churn on your team, and be more productive.

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