Hiring Executives

Just last week I saw another case of a startup making a bad hiring decision. It happens all the time, especially when you have founders who are terrific scientists but inexperienced businesspeople. It happens most often when these ventures try to hire executives.

Hiring executives is a tough thing to do, no matter what size your company is. This kind of hiring is different from hiring technical staff because you’re bringing in people who, from day one, have the opportunity to change your culture, commit resources, and boost or harm sales and delivery. You can’t really know what their impact will be until they arrive. So make sure you really spend time in your selection, and build safeguards into the hire.

In general, I’ve seen at least half of executive hires not work out. Big companies make mistakes just as easily as small ones. But startups have some characteristic problems, which come from their approach to hiring.

Common Mistakes Startups Make

Startups frequently make these errors:

• They hire the first person they interview.
  

• They don’t get help from their advisors or legal counsel in interviewing and negotiating.
  

• They feel as though the person they’re interviewing knows more about the job than the founding team does.
  

• They hire people who built their careers in big companies, surrounded by resources, and who have never dealt with the bare-bones startup existence.
  

• They hire without a job description, or really, a good idea of what the new hire should do.
  

• They hire people who have been service providers rather than executives.
  

• They accept the terms offered by the candidate—equity, salary, fuzzy goals, perks.
  

Young companies often feel as though they must convince an experienced candidate to join them. They should instead probe to find out if the candidate actually understands what they will be doing.

What to Do Instead

What are some things young companies should do when hiring outsiders into executive positions? First, you need to know what this executive will do.

• Start with a job description. Not the kind of thing an HR department would write, but a few simple responsibilities and goals. Will this person sell? Raise money? Build your team?
  

• Decide on goals for the new executive. Be explicit and numerical. Make sure the goals relate to the new hire’s job.

  I recall one hire at a company with which I spent a lot of time, brilliant people who rushed off and made a bad executive hire, with many of the mistakes mentioned above.  The new hire was so inept that his big achievement for his first nine months was to reorganize the cafeteria.
  

• Interview multiple candidates. You will immediately see differences among them.  You’ll wonder why you were considering some of them. Look for enthusiasm, a desire to help, understanding of where you want to take the company, ideas for selling and delivering, and a tolerance for risk. When you find a candidate who did their own research and has a plan around strategies for success, that’s a candidate to consider very seriously.
  
  By contrast, you’ll see candidates who don’t want to answer questions, but want to name-drop about all their connections. These candidates tend not to listen to what you’re saying, don’t understand your business, and can’t be bothered to learn about your technology. They expect you to be impressed by their resume, and constantly refer to their former big company experience, which isn’t relevant to your startup.
  

• If possible, ask for a short presentation. If there’s a chance to get a finalist to do a brief presentation on how they’ll do the job, that’s useful information.  You’ll mutually get to know one another, and see how you work together.
  
  

Don’t Rush to Close

What if the candidate says they have another offer and need an answer immediately?

Use your judgment. Is this a used-car-dealer ploy? (“The people who test drove it before you just left and might come back in an hour…”)

Or is it real?  If it is real, do you know enough about this candidate to make a decision?  If not, you can only wish them well and move on.

Protect Your Company

And my last caution.  Set terms of the hire so that you can get out of the hire without harming your company if it doesn’t work out.  

• Don’t promise anything that doesn’t revert back if the new hire is gone within a year.
  

• Remember: this person isn’t a founder. Founders get better equity treatment than later hires.
  

•  If this new executive becomes a brilliant key member of your executive team, you can reward them later–and you should

The Takeaway

In general, an executive hire is a high-risk situation.  Hope for the best and be prepared for failure. If it’s a failure, act quickly, both for the company’s sake and for the new hire’s sake. If it’s not a fit, they’re better off elsewhere.

If it works out well, be happy. You will find that that homework you did when you hired your executive was worth the effort.