Whom Should you Hire at a Startup?

Posted on Oct 22, 2009 | 112 comments


Only Hire A+ People Who Punch Above Their Weight Class

boxing2This is part of my ongoing posts on Startup Advice.  There are people who tell startups that they should hire the most senior people that they can find.  I’m not one of those.  I believe that you should always hire people are are looking to “punch above their weight class,” which means to hire people who want to be one league above where they are today.

Don’t confuse this with the quality of the individual.  I’m a big believer in only hiring A+ team members.  I’ll explain both below.  Please don’t also confuse this with whether a VC should invest in a CEO who’s done it before – that’s a given.

I’m talking about what most of you are tempted to do.  I know because I have this chat all the time – including this morning.  You’re stressed.  Everyone in the outside world is talking about how great you are but internally you know that your sales aren’t ramping, your product isn’t shipping on time, you have doubts about the quality of your code, you’re not convinced you’re doing a good job on marketing – whatever.

Your solution?  Bring in a heavyweight.  My advice: don’t.

Weight Class: Let’s take sales.  I see a lot of CEO’s who haven’t gotten the quick ramp in sales that they had hoped for want to reach quickly to bring in a VP Sales who has done it all before.  It is tempting because you not only see that they were VP Sales at 3 other startups but also that they have great access (according to their resume) to senior executives at companies you’re trying to target.  Bringing in a senior person who’s “done it all before” is often a mistake in a startup.

Why?  Well, first let’s be honest.  At your stage of development do you really think a shit-hot VP Sales is going to join you to head up sales?  It reminds me of the famous Groucho Marx line, “I’d never want to join a club that would accept me as a member.” (I think Woody Allen then used this line?)

More likely this person who wants to work at your fledgling company is a decent performer but not a superstar.  But aside from that, the skills that are required to be a VP Sales (e.g. hiring / training / motivating staff, setting up sales compensation programs, implementboxinging and enforcing a sales policy) are not consistent with the skills you need in your company at this stage.

You’re far more likely to find success from an individual contributor.  You need the sales executive who aspires to be a VP Sales (e.g. one weight class above where he’s at) but has not yet been given the chance..  He’s got something to prove.  He’s joining you because your company offers him/her the hope of the big equity package but likely the step forward in his career that he’s been looking for.

And you can always bring on a senior person as a mentor / coach to help guide you personally to become a better sales leader until you’re ready for somebody more senior on your team.  In LA I know that people like Vince Thompson do a great job with this.  In NorCal there are zillions of people.  One group I talked to in the past and really liked was Sally Duby over at PhoneWorks.

So what if you’re already a mid-stage startup.   You’re doing $2-$5 million in sales and looking to take the company to the next level.  Shouldn’t you just hire the most senior guy you can out of Oracle, Salesforce.com, Microsoft, EA or whatever your relevant industry is?  Not so fast.  Hiring the big gun will often still be one weight class above where you want to hire.

Let me tell you my story.

In my first company we had achieved a small bit of scale.  In our first year of sales we did $2.1 million.  This was a reasonable achievement when you consider that it was 2001-02, one of the worst years to be selling enterprise software and we were selling it SaaS style, which was still evangelical back then.  In our second year of sales we did $5.9 million and our third year we hit $7.7 million.  So we were starting to become a real business.  I worked with the board who encouraged me to bring in heavy weights.  I shot as high as I could.

SaaS was hot so I was able to land a very impressive guy.  I was able to hire the former European head of sales for the largest document management player in the world.  He was 10 years my senior and way more accomplished in terms of big enterprise company experience.  I had always been a scrappy entrepreneur.  Now was time to bring in some process.

One of the things that I had done to help me gain access to senior people that I didn’t know was to bring on a senior guy from industry as a mentor.  He helped set up senior meetings for me based on his personal relationships with people.  I had given him a small equity stake in my company.  This relationship was invaluable because it got me in front of people who I would have ordinarily struggled to get access to in a timely manner.

unilever-logo-796609One such meeting that he set up was with the CIO of the largest consumer products company in Europe.  Think the equivalent of Proctor & Gamble.  I couldn’t possibly name the them, but it was a huge company, very senior executive.

I asked my new SVP Sales to take the meeting and he had spent a couple of weeks preparing.  I got a call the morning of the meeting from my assistant (who was also shared with this gentleman) that he was planning to cancel the CIO meeting.  I called him and asked him why and he said that he had scheduled a meeting with all of his top sales guys (we had about 8 by that point) to talk about sales pricing.  He felt that we didn’t price correctly and he didn’t want to see customers until he had a grip on it.

WTF!! ?? !!  Needless to say I took the meeting myself.  A startup CEO would never pass on that opportunity.  It is something that perhaps a big company person could fathom.  Maybe our pricing needed work – who knows.  But in small companies you have a certain ethos of hustling and taking every opportunity given to you.

Several weeks later we parted ways along with another senior executive brought on by this guy.  It was clear that there wasn’t a fit.  I don’t believe that this was something unique to me.  I believe that taking senior people from industry and assuming that they’ll do well in a startup is a farce.  I often tell people that it took 18 months for me to undo all of my Andersen Consulting experience to allow me to become an entrepreneur (although in my youth I had done several entrepreneurial activities)

So when I’m helping people think about whom to hire I given the following guidance:

- It’s OK to find somebody who’s had academy experience (e.g. IBM, Microsoft, Oracle) as long as they’ve done a start-up after that before coming to you

- It’s far better to hire somebody who’s shit hot but stepping up a role (e.g. director to VP) than to hire somebody who has already held a bigger role and is taking a step back because they’re after an equity play in a start-up

- Be careful not to hire managers for a job that requires individual contribution.  This is oil & water territory (chalk & cheese if you’re a UK reader ;-))

- Never hire somebody who is going to relocate for your job unless they’re young, single and have no attachments.  I’ve hired so many people who were going to move after they got my job offer.   I can’t tell you how many times I’ve encountered the house that wouldn’t sell, the need for the kids to finish the school year, the wife who can’t find a local job.  Life’s too short – find somebody geographically desirable or totally mobile.

gradesA Plus Employees:  One other quick note is about the quality of the people you hire.  In arguing for people who punch above their weight class I’m not arguing for tell talented individuals.  To the contrary.  I believe very much in hiring the best people you can possible attract and making compensation (either equity or cash) enough to motivate them to join and stay.

I never believe in hiring B players and then trying to upgrade with more talented people later when the company has more cash, more customers or is performing better.  The problem is that A players are only attracted to work at places where they see other A players.  They smell B from a mile away.  And also B players often don’t hire other B people.  In my experience B players hire C people.  A begets A, B begets C.  Don’t go there.

The advice to not hire too senior should come as no surprise to anybody who read my views that “Startup Founders Should Flip Burgers” or in other words should do many of the detailed jobs themselves.

Ok, I know it’s controversial.  If you want to call BS have at me in the comments ;-)

  • Mike O'Horo

    Twenty years ago, when I was a headhunter in the IT world, I had a smaller ($25m) software company client for whom I was recruiting some executives to start up and head key biz functions, e.g., customer support, education, etc. The CEO made it clear that under no circumstances would he hire anyone from big companies such as IBM, Oracle, SoftwareAG, etc. His reasoning was that such people were accustomed to a degree of internal support that couldn't occur at a company the size of his, that such people had been too long off the firing line. At first I had a problem with this constraint, seeing it only as an unwelcome shrinking of the talent pool from which I could recruit. After interviewing a handful of BigCo execs referred to me during the search, I saw that not only was the CEO right, but that he had understated the issue. The longer we're away from lean & mean, the harder it is to return to it.

  • Mike O'Horo

    Twenty years ago, when I was a headhunter in the IT world, I had a smaller ($25m) software company client for whom I was recruiting some executives to start up and head key biz functions, e.g., customer support, education, etc. The CEO made it clear that under no circumstances would he hire anyone from big companies such as IBM, Oracle, SoftwareAG, etc. His reasoning was that such people were accustomed to a degree of internal support that couldn't occur at a company the size of his, that such people had been too long off the firing line. At first I had a problem with this constraint, seeing it only as an unwelcome shrinking of the talent pool from which I could recruit. After interviewing a handful of BigCo execs referred to me during the search, I saw that not only was the CEO right, but that he had understated the issue. The longer we're away from lean & mean, the harder it is to return to it.

  • http://bothsidesofthetable.com msuster

    Too true. And you can only learn this if you've been there.

  • Mike O'Horo

    This whole thread reminds me of the really useful work being done by the Gallup Organization regarding understanding one's strengths, and employers aligning one's job with those strengths. They did 1 million employee interviews, which showed that, by an overwhelming percentage, the #1 consideration in job satisfaction was success, i.e., being good at one's job.

    A couple of years ago we created a new client team process for a big law firm, based on the radical notion (for law firms, anyway) that there were a number of support roles that must be performed well for the team to succeed, and that the only people you want on the team are those who have opted into an existing role of acknowledged inherent value that they know they can perform well. It's a self-governing system; no one opts into a role at which they'll fail. Such person/role alignment simplifies everyone's life. There's no need to motivate them, train them or supervise/manage them.

    The short version of the outcome is that once we filled all the roles and established a collaboration process, they were able to cut the consultant umbilical chord within 5 months and operate completely independently for the balance of the year (and, obviously, in subsequent years). In December, they shared the results with us: 1) They accomplished every one of the specific goals they had set in January, including penetrating two new service categories, and 2) achieved a 35% revenue increase with no write-downs or discounts. Oh, and all this occurred with a client who had declared a flat legal budget for the year.

    The point is that for everyone, there is an optimal setting and environment for success based on strengths, interests and other traits. Just because you don't belong here doesn't mean you're not valuable or won't have an important impact. It just means that you'll have to do that someplace where you're a better fit.

    Small company biases against big company experience is not based on arrogance, but recognition that small is, in fact, very different from large, and that it matters.

  • http://bothsidesofthetable.com msuster

    Too true. And you can only learn this if you've been there.

  • Mike O'Horo

    This whole thread reminds me of the really useful work being done by the Gallup Organization regarding understanding one's strengths, and employers aligning one's job with those strengths. They did 1 million employee interviews, which showed that, by an overwhelming percentage, the #1 consideration in job satisfaction was success, i.e., being good at one's job.

    A couple of years ago we created a new client team process for a big law firm, based on the radical notion (for law firms, anyway) that there were a number of support roles that must be performed well for the team to succeed, and that the only people you want on the team are those who have opted into an existing role of acknowledged inherent value that they know they can perform well. It's a self-governing system; no one opts into a role at which they'll fail. Such person/role alignment simplifies everyone's life. There's no need to motivate them, train them or supervise/manage them.

    The short version of the outcome is that once we filled all the roles and established a collaboration process, they were able to cut the consultant umbilical chord within 5 months and operate completely independently for the balance of the year (and, obviously, in subsequent years). In December, they shared the results with us: 1) They accomplished every one of the specific goals they had set in January, including penetrating two new service categories, and 2) achieved a 35% revenue increase with no write-downs or discounts. Oh, and all this occurred with a client who had declared a flat legal budget for the year.

    The point is that for everyone, there is an optimal setting and environment for success based on strengths, interests and other traits. Just because you don't belong here doesn't mean you're not valuable or won't have an important impact. It just means that you'll have to do that someplace where you're a better fit.

    Small company biases against big company experience is not based on arrogance, but recognition that small is, in fact, very different from large, and that it matters.

  • http://theoutsourcebot.com seo company

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  • Mike O'Horo

    Thanks. I'm flattered.

  • http://theoutsourcebot.com seo company

    i have posted your blog on my site

    Thanks
    james still
    ______________________________________________

  • http://theoutsourcebot.com seo company

    i have posted your blog on my site

    Thanks
    james still
    ______________________________________________

  • Mike O'Horo

    Thanks. I'm flattered.

  • Mike O'Horo

    Thanks. I'm flattered.

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  • http://www.businessabstraction.com/ Alex Jouravlev

    Another brilliant piece from Mark.

    In two words, you are advising to treat any position in a startup as a mini-startup in search of a founder?

  • http://www.swaglove.com/blog Casey Schorr

    Totally agree with this, have had a few really smart Denver/ Boulder CEO’s tell us this as well – SendGrid hires like this. It works, these have been our best hires to-date.

    – We tried hiring a more senior sales person, who came from corporate world – didn’t work
    – We hired an admin/ csr/ bookkeeper from craigslist who is kicking ass and moving up every year

    One additional comment you didn’t mention – we look for people who have “tasted success” but haven’t found it yet. Especially with younger, less experienced folks. For example, someone who got into an entrepreneurial company, realized they loved it, and then the company collapsed or they were laid off (for a legit reason, not because they sucked).

    We haven’t had as good of luck hiring fresh young folks right out of college, as they haven’t experienced what the real work world is really like. They are nieve and don’t realize most jobs suck, so they don’t appreciate what we have to offer as much as someone who’s struggled through a job or two and really sees what we can offer them in terms of responsibility, culture, flexibility, etc. These folks often accept less pay and are happier because they know the grass isn’t greener on the other side.

    Anyone else have similar thoughts?

  • Rjohnson

    Yes, startup founders should “flip burgers.” Great article. Dead on.
    Perhaps bringing in a senior person who’s “done it all before” is often a mistake in a startup.
    More likely, bringing in a senior person can be a mistake, but it can pay off. I have seen it both ways. 
    More so, I have been that senior person. It took me ten years to transition from being a big corporation Human Resources boss into a entrepreneurial doer. It took ten years to learn that in a small company, if you don’t do it yourself, it will not get done.
    The down side of hiring rookies is that they don’t know what they don’t know. They have never seen how to initiate structure. They wouldn’t know what they should be doing unless you create it for them, do it yourself, show them what you are doing, spell it out for them, train them, coach them, support them. You can’t create an entire organization out of rookies, and do that your self. You can’t bring job coaches in to develop everybody. New hires just out of school are worthless for the first year until they have had someone show them how to do their job. 
    I served as a mentor to a start up president and owner helping him delegate all the trivial jobs he was doing in order to focus on sales, marketing, developing a brand, and other important things. I defined new roles needed for the company to grow and set up selection systems to hire the right people for the job.
    Maybe that is what you mean about hiring A+ people–describe the job, define your criteria, and select the best.
    I helped create a lasting organization growing the sales 20 percent per year until we sold the company to a midsize growing corporation.

  • Ryan Hale

    I agree that setting your sights on the A+ players is good for the present and good for succession. if a “D player” accidentally gets through, try these 5 tips to minimize the damage and prevent it happening again: http://wp.me/p2b9ZX-4e 

  • http://www.facebook.com/davegle David Ng

    I agree about the rule, but how if the company has limited human resource further more it is difficult of finding the right person to fit in, should them still firing the bad seed?

  • Driftnik

    Great post.

  • http://fieldstudy.tumblr.com/ Keenan Cummings

    My advice to CEOs looking to work with designers is to hire design as a service/expertise rather than purchase design as a product. If you are designing a messaging app, don’t go out and find the best messaging app designer, find someone that has constantly had to prove themselves in unfamiliar territory. Messaging-app-design is a product you can buy. Being a quick learner that can adapt to new challenges and apply the principles of your craft to new problems — that is an expertise you cannot buy, only hire (and there is necessary risk with the associated unknowns).

    So in addition to looking for people that are ready to *prove themselves at the next tier* (punching above their weight), look for people that want to *prove themselves in a new sphere* (getting outside their comfort zone). There is a lot of value in offering A-players the opportunity for an upward move OR a lateral move. (my most rewarding experiences have been both upward and lateral).

    PS — Don’t count out those that are married and have kids! My wife and I have made flexibility and change a core value of our family. And we have planned accordingly, avoiding commitments that will tie us to one place for too long.