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Startups: Executive Hiring Challenges or Beware of the Suits

In a recent post about Atlassian’s quest to hire a VP of Marketing, I hinted at a bigger subject: the dilemma almost all successful and fast-growing startups face at some point.  When they reach 150-300 employees, should they still hire “startup talent”, or is it time for them to bring in some grey hair, and the corporate experience that comes with it?

I’ve seen this movie too many times, and it’s not a particularly good one. In the 90’s startup Founders rarely had the chance to make the decision themselves: they typically were heavily VC funded, and the VC-dominated Board’s standard formula was to bring in “4-star generals”: ex-corporate VPs, SVPs, who would likely have  the experience to take the business to “the next level”.  Or not.  I’ve seen too many of these  fail, in fact I personally experienced the pain of two businesses: aggressive growth, 300 or so employees, hiring top-notch (per their pedigree) Executives and mid-management, and a year later the Founders were wondering just where their ROI was… big $ spent, nothing got done.   With more of the corporate-types on board, politicking began, and soon the early employees, really more members than employees, who defined the very fabric of the company started to leave.

During the post-bubble, nuclear 2000-2002 when the job market was essentially dead, this trend only got worse. The surviving startups still had loads of VC money, and their Boards  felt survival depended on smart hiring.  In came the Executive Recruiters, who often did not even understand the business, they just ticked off items on their shopping list.  Experience, experience, experience: you had to have been there, done it – in the exact same position, title, and preferably five times.

The only problem with this hiring mentality was that it completely ignored human nature. If you’ve “done it all”, there’s little challenge left in the new job.  And challenge you need: that’s what makes you strive to become an over-achiever, which is what a startup needs.  The “been there, done that” types often have a sense of entitlement, having descended on the startup world, they expect smooth sailing till the IPO, than retirement.  Smooth sailing is not what you need in a startup: you need fighters.  Don’t hire somebody who steps down into the role for the equity; ideally don’t even hire someone making a lateral move.  You need hungry, driven fighters, who while have the skills and experience, will truly step up to the new job.  You need someone who does not want a job, but a passion, a lifestyle.

Another problem with hiring former corporate hotshots is that they  often turn out to be quite incapable of performing without their previous support infrastructure and staff.  They are leaders, not doers – a startup needs both in one person.

I remember interviewing for a VP position at a well-funded startup: the rounds with the CEO and his co-founders went well,  not only did we “click”l on a personal level, but my enterprise software background was a perfect match and  we had intense business conversations right from the first moment. Then I met the freshly minted VP of Sales, who just got hired from Siebel (which was a good brand back than).   Mr. Sales was a corporate BS-er who had absolutely no clue about the business. He avoided answering any specific questions on market positioning, differentiation,  giving me the “our product is best” generic BS, and any initiatives we discussed started with “I’m about to hire a manager for this”.  In minutes I knew that not only it was the end of my application there, but worse, the company was in big trouble, too.  I felt bad for the founding team: they were so proud of their latest hire (“big fish from Siebel, so he must be good, so we’re on track with sales…) – but as an applicant I was in no position to open their eyes.  Lo and behold, a good year later the company was out of business: they got picked up in a garage-sale.

But enough of the negative examples:  let’s look at the success stories.  Back to Atlassian, where this story started: when Mike Cannon-Brookes and Scott Farquhar started their business in 2001, drawing $10k against their credit cards,  they had no clue just how successful a business they would build – yet 7 years later they are now running a $30 million fast growing international business, and are celebrated as Entrepreneurs of the Year.   Back then they certainly would not have been hired for *this job* by a recruiter firm.  And perhaps the best testament comes from Google: I read one of the Founders say that their current recruiting filters are so excruciatingly tough hat he himself could not get hired by Google today. ( I can’t locate the quote – would appreciate any reader help).

Perhaps the invasion of the suites is inevitable in any business – I don’t know if it happens at having 1000 employees… 5000.. or more, but it should certainly not happen at the 1-300 level, when a (former) startup is about to implement some management structure and processes for the first time.   Experience, some track record of course never hurts, but I think startups and “recent graduates” of startup-life owe it to themselves to hire someone with exceptional skills, drive, who would have major challenges and for whom the current job is a clear step up.  That’s the growth engine you give up when you bring in the suits, and IMHO, you should put it off as long as possible.

Disclaimer: I’ve been a Management Consultant, Startup Executive (President, VP), but not Founder of a successful startup… so what do I know?  I know I have CEO readers, also VC Board Members, so please come in here and comment below.

Update:  With perfect timing this old post showed up in my reader again.  Xobni’s Gabor Cselle talks about the three waves of startup hires:

    1. First-wave people want to create success from nothing.
    2. Second-wave people want to make something popular more successful.
    3. Third-wave people want to join a successful environment and preserve the status quo.

I was surprised to find my own comment on Gabor’s old post, essentially summarizing the above long rambling in one sentence:

Startups typically get into trouble when the Founders realize they need 2nd-wavers, work with “pro” recruiters and end up with a bunch of “big name” expensive 3rd-waivers.

Update (9/1/08): Since I started this post with Atlassian’s quest to hire a VP of Marketing, it’s only appropriate to follow up on it.   Atlassian President Jeffrey Walker reports:

All but one of our best candidates came from referrals

None from recruiters.   Even though many are smarter than this.   Takeway: network, network, network.

Related posts:

Update: This quick rant by Bob Warfield is worth reading:  Startups Need Starters

Comments

  1. Wow. Very good article.

    I must admit, I now have a bit of a bias (I’m now the founder of a venture-funded startup), but I’ve still spent 90%+ of my professional career as founder/CEO of bootstrapped software startups so feel like I’ve got a semi-objective opinion.

    I think you are dead on. Startups need aggressive, hungry AND talented people to succeed. Unfortunately, I think too many first-time founders get convinced that a pedigreed executive from a big-name company with large, impressive results are going to translate into startup-land. In my experience, it just doesn’t work out (most of the time).

    My condensed view: Startups shouldn’t try to hire Seth Godin for their VP of Marketing. They should hire the *next* Seth Godin.

  2. Zoli, this is an excellent post. I have concluded that people who come out of large companies or professional managerial backgrounds rarely have the skills required to run a startup. They seem to fall into one of two traps.

    1) They try to replicate their former environment, overhire, burn through tons of cash, usually kill the company.

    2) They fail at managing growth with limited resources, micromanage the company, starve it to death while faster moving companies take over their market.

    Managing a startup, especially when it is resource constrained, is a art, and not something you can learn by training. You simply have to start several companies, fall on your face a couple times, and hopefully learn from experience (and learn your own limitations).

    I’d rather hire someone who’s been through the meat grinder, and has a failure or two in their history. Those are the people who really learned something on the job. The guy who claimed responsibility for hundreds of millions of sales at Big Database Corp, I doubt it.

  3. Zoli, This is a very thought-provoking piece. I would agree with the theme. If you are considering hiring someone with a big company background, I would ask the following:
    – What is motivating this person? Is it a quick buck or is she passionate about the technology/product/market?
    – What does this person’s life tell me? Has he had it easy working for the cash-cow of the big company or has he struggled on the smaller products (startup within an enterprise)? Has he seen products fail?
    – Was he hands on? What was the last time he wrote code or even a whitepaper or such? How big was his empire?
    – Has he gone out of his way to engage in entrepreneurship?

    Yes, the big company culture can make people (especially in executive roles) assume infinite resources but I also believe that there are hundreds (if not thousands) of smart, hungry engineers and managers at large companies that have gained industry insight and are eager to go out in the real-world.

    Disclaimer: I am biased. Worked for a Big Database Corp. in the recent past.

  4. Anshu, obviously I am describing a stereotype of the big name “empty suit” to make a point, which is to be very selective and look for the talented individual, rather than the pedigree – and I think we agree in that.

    Btw, I also worked in a Very Big Very Blue company – and was a misfit. Just as you were too good for that Other Big Co.. you’re at a better place now:-)

  5. I have started over a dozen companies and have worked at other startups as well as in big corporate environments. I completely agree with your thesis Zoli. Maybe it is just jealousy but over and over I see the founding team replaced by suits who have great business backgrounds but no domain expertise. They get the big pay packages, including options, accelerated vesting, termination clauses, etc. They are typically in and out in a few years and off to another opportunity where they leverage their resume, not their ability.

    At *any* stage of a company I would hire for demonstrated ability. If someone has big corporate experience that is a definite down mod for me!

    -Stiennon

  6. Well, I wouldn’t go as far as claiming Big Co experience as indicator for auto-down mod :-)

    But I would say this:

    – Big Co experience in itself is not enough for startups success

    – If a candidate has *only* Big Co background, that’s a likely down mod case.

    And yes, another problem is that for most of this *type* (yes, I know, stereotyping is bad…) it’s really just a job, moving on in a few years.

  7. I think a good compromise would be to have both suits and geeks in all levels of management.

  8. Executive Hiring Challenges or Beware of the Suits infromation you have shared about this is nice . I Like it. There are Education Resumes in Sampleresumes.in

Trackbacks

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