You made it! Your startup has some early traction and now you’ve hired your first leaders to help grow the company.
Trouble is that things aren’t going as planned.
Some parts of the company have team members that aren’t up to the bar you initially meant to set. These same parts of the company aren’t really performing, and progress seems to be slowing almost to a halt. You’re starting to hear more about what can’t be done than what can.
You’re starting to question your own judgment with respect to the leaders that you’ve hired, and now you’re not sure what to do, but you’re pretty sure someone has to go. You may have even spent a lot of time generating buzz with the board and the team about how awesome these leaders are. You probably celebrated with high-fives when you closed the offer and got them on board. Yet here we are.
Let’s backtrack and see what went wrong and talk about what to do now that we’re in this position.
The silent startup killer: over-delegation combined with bad hiring management
When startups get early traction then struggle and start going sideways, most of the time I think it’s because of bad initial leadership hires leading to poor execution. This combines with the CEOs inability to recognize the leadership hiring mistakes quickly enough, transition them out, and get those functions back into shape.
That’s why I think bad leadership hires and failure to respond to them is the biggest silent killer of startups that have already got some early traction.
The reason that the issue gets out of hand so quickly is that when you’re hiring new leaders, these are senior people that you want to give autonomy and ownership over a lot of critical decisions. There’s nothing more critical than who they hire onto their teams. CEOs often don’t know how to both give the leaders space while also ensuring accountability for results and maintaining the high bar they want to set for talent.
The trouble is that if you over-delegate to the new leaders without any mechanism for review and accountability, and those leaders turn out to be weak hiring managers, these folks are going to build entire teams of mediocrity and you are the one who has to clean it up.
It’s a tricky problem and I’ve messed it up as many times as anyone — probably in ten companies at this point. I’ve had to be the one to clean it up, and I’m going to tell you how to avoid the problem, and how to deal with it when you inevitably make mistakes.
Rule #1: forgive yourself and act quickly
This is bound to happen. I’ve looked at a bunch of different studies and f no more than 50% of leadership hires that CEOs make in the early years actually pan out and perform long-term at the company. So you are going to make some mistakes. It’s inevitable and it’s normal.
So many times you see famous CEOs or VCs being quoted that their biggest operating mistakes are not firing people quickly enough. Notice that the biggest mistake is not that they hired the wrong person, it’s that they didn’t trust their instincts and their data when they knew they needed to get rid of the person.
Listen, this sucks. You don’t want to be here, it’s your mistake, you own it, and it’s slowing everything down. It feels awful fighting people, especially in this situation. But here’s the thing. The faster you forgive yourself, the faster you’re going to have clear judgment to make the right call. The more you allow psychological defenses to bias you towards letting the situation drag out, the higher the likelihood that you’re going to fail the entire company because of this mistake rather than correcting it and moving on.
So forgive yourself. This is a normal mistake. It’s a cost of doing business. A rite of passage. You’re going to recover much faster by acknowledging it, acting, and moving on with life.
Rule #2: trust but verify with the direction-review-approve loop
One of the reasons it’s so difficult to see if a leader isn’t working out and act quickly enough is that we don’t have good enough alignment on direction, review cycle for results, and accountability to the results.
So first, sit down with a leader and align on direction. For example, if you have a new sales leader it’s okay to sit down and align on general sales processes, tools, the profiles that they want to hire for, and as a founding CEO who’s probably led a bunch of the initial deals yourself, you should have a strong say in these topics.
If your initial sales leader is being defensive, wants to own everything, and can’t even accept input from you as a CEO, then you’ve already hired the wrong person and the time to move them out is right now. I know this may seem crazy but I’m serious. This kind of defensiveness and inability to collaborate closely is one of the biggest signs that the person won’t work out in a startup environment. At really big companies, people are accustomed to having budgets and quite a lot of autonomy within some group. In the early stage startup environment, the group is still pretty small, and the lines are blurred between functions. The founders are meant to be heavily involved in a lot of the execution work which is very different from the CEO of a large established corporation.
When I’m sitting down to align on direction with my leaders, I like to be explicit about what things I want to approve versus not. So for example I like to explicitly approve sales and marketing hires for quite a while actually — until it’s clear that the model is repeatedly working. Whenever I’ve let go of this, it’s always been a road to failure. A big part of the founders job, especially a founder CEO, is the navigation to product-market fit. When we talk about product-market fit, we talk about repeatability. So if I’ve got a sales leader in place and we don’t think that the sales motion and marketing materials are fully repeatable, we can’t get success out of most of the reps that we’re hiring, and sales is still heavily dependent on a small number of folks, then we’re not yet at a point where I want to take my eye off the ball. We’re not running playbooks, we’re defining playbooks. A sales leader who thinks they’re coming in with a defined playbook that’s just going to work without significant iteration and specialization to the product and company, is someone who’s just not going to get it done. You want people with a big toolkit and an open mind. They can look at the problem and build solutions based on the tools they have, rather than just simple pattern matching and rolling out of what they think worked elsewhere.
So my direction-review-approve loop here starts by sitting down with my sales leader to talk about the overall direction for sales and we’re aligning on many ideas around process and the profile of reps. Then when the sales leader comes back with their concrete plans I’m reviewing them, and the sales leader knows which things I explicitly want to approve versus where I’m just going to give them feedback about their plan and they can do as they choose. Maybe I’ve decided that I don’t care so much about CRM tools or how they experiment with different decks to pitch the product in different ways, but maybe I want to explicitly approve the sales rep profiles, interview flow, and first 10 reps. Or maybe I have a very strong sense of what we think is working when we’re presenting to clients, so I actually do want to have a strong approval on slides in the deck. It’s situational based on what the CEO feels they need to be able to approve because they feel the strongest confidence in the startup’s collective knowledge there. If I know we spent a ton of time with a ton of customers testing and iterating until we got to a message and slide sequence that’s really working, then I don’t want to start over without significant data saying we should. On the other hand, if I know we haven’t invested as much as we should into the sales materials then I’m going to encourage a lot more experimentation, and requiring my approval is just going to slow down the volume and pace of experiments.
By establishing clarity of alignment on direction, how we’re going to review work, and what I actually want to approve or not, we can figure out up front whether the leader and I are going to work together effectively. I can also determine my opinion of whether or not the leader is going to work out an early-stage startup environment or they’re going to be touchy about everything in their domain and unable to align with other leaders and take feedback. By placing my approval on areas that can cause the ship to go off course in the worst ways, like making key hires or fiddling with things that are working instead of addressing things that aren’t working, I can mitigate risk in the event that I find out I’ve made the wrong decision and I need to move this leader out.
Rule #3: Hiring management is half the job
Great startup leaders view recruiting as their number two responsibility behind winning. Weak startup leaders expect some kind of a machine you just generate good hires. They toss a job posting up online and expect to hire from the inbound.
I’ve actually never hired a single person inbound from a job listing myself, and I’ve never posted a job listing myself. I’ve had some people on my team try it, and have made some hires, and I think the results have been pretty mediocre compared with when myself or one of my key leaders really digs in and spends a significant amount of time with recruiters conducting an organic search by creating a market map and leveraging our networks.
I tell people they should spend 50% of their interview time with leaders on their hiring management approach, and the other 50% on management and domain skills.
One of the worst problems that happens in early startups is when you get a bad manager in who wants to build organizations instead of getting traction. Ironically, the ones who want to org-build almost always end up being the worst hiring managers too, so you get hit with a double whammy. Performance goes down, headcount and burn goes up, and then you have to conduct a Sherlock Holmes forensic examination just to uncover and unroll the shitshow that this person has created.
So when you’re interviewing managers ask them a bunch of recruiting questions. Ask them about their interview process for various roles. Ask how they’d source for different roles. Ask how they like to work with recruiting and what they expect to do versus what they expect recruiters to do. Ask them about how they win in competitive hires and what their offer process looks like. Ask them what they expect their team to do in the recruiting and interviewing process vs. what they expect recruiters to do.
Great leaders expect their teams to invest a pretty significant amount of time in talent. During fast growth periods, I’ve often told product, engineering, sales, or marketing teams that I’m expecting them to invest up to 20% of their time in hiring.
There are common and clear patterns among weak leaders in that they really don’t understand what quality talent is and how competitive you need to be in order to get a lot of talented people together and build an awesome team. They don’t expect the team to work very hard on recruiting. They expect that the recruiters are going to do everything for them and show up at the front door with hires. They have mediocre or non-existent interview processes. They expect to hire from job listings and they don’t know anything about sourcing. Their only playbook is to hire randoms from past jobs and they have no playbook for going outbound to find new talent. They think more in terms of putting bodies into slots then in terms of the overall capabilities of their teams. Rather than trying to find the best people that they possibly can, they think in terms of needing three mid-level engineers or four junior marketing people or whatever. They think in terms of headcount not capability.
Rule #4 : Your first leaders are more like founders than corporate executives
I just wrote a guide to building founding teams, and I’d recommend that as a close reference for building your early stage leadership teams as well.
When you get some early traction and start wanting to build up a team, it’s very common to make the mistake of hiring somebody who looks more like a corporate executive than a startup leader. There are many reasons why this is a natural thing that happens. You think you’re about to scale a lot so you think you need somebody who can manage at scale. You want somebody who understands the industry really well, comes from a big-name company, and seems impressive. Usually the founders aren’t really big organization people, so it seems like you’re balancing out the team by having more mature executives paired off with more visionary risk-taking founders.
Unfortunately this thinking is all wrong. The reality is that the startup is still way closer to its point of founding than it is to its point of being a stable running large corporation. So when you are hiring leaders from large corporates and drop them into startups you really end up with fish out of water.
Although it might seem counterintuitive, the first leaders that you want look a lot more like founders than they do like corporate executives. Maybe we should be asking ourselves — “if this startup works, and I make a bunch of money, would I back this person as a founder of their own startup as the next step in their career?” If the answer is yes, that’s probably a great early leadership hire for your startup. If the answer is no, it’s almost certainly not a high-caliber enough person who is well-suited to being one of the first leaders of a fast-growing early-stage startup. Rather than maintain or increase your trajectory, this is a person who can’t keep up with your trajectory and will hold you back and potentially even kill the company. I can’t emphasize this enough; it really is binary at the early stages. It’s totally normal to go from a point of pretty good traction straight into death after a very painful period of 12-24 months. Founders make mistakes about how they build their leadership team, and then they don’t have the skills, awareness or courage to make the changes they need to quickly enough, and before you know it, the cash is out, the music stops, and the party’s over.
You can also get people who are very corporate, even though they don’t necessarily come from that background. They could have spent a lot of time and startups before. Maybe they worked at a corporate in the past but have been in midsize businesses for some time. Nevertheless, their actual work habits and leadership approach looks a lot more like someone coming from a large corporate. They expect too much from the things around them — expecting to have support systems in place that they should be expected to help build later on when the time is right. They tend to want to over-hire, they’re too touchy in interacting with other leaders. Rather than engaging deeply in discussing and debating different choices about what to do and how to hire, they demand full autonomy. They snarl to give them space and they scoff at accountability — they already know what they’re doing! They expect to be treated as if they already know how to do everything and the results should be taken for granted. These org-builders will settle for weaker hires because they just want to put bodies into slots. They will spend inordinate amounts of time on operating infrastructure and things that the company doesn’t need yet.
Corporate-minded leaders will completely fail to get themselves and their resources focus adequately on generating traction, which is really the only thing that matters at the early stage. If we’re not figuring out how to show enough incremental traction to make it to the next stage of the business, we’re going to die. So when you see people focusing on things that aren’t needed in order to get to the next phase because they think they’re going to be needed in the future, that’s telling you immediately that this isn’t a leader who is going to work in a startup.
I’m reminded of two of my most recent executive hiring failures. They both hired very high-priced operating executives out of big-name firms in their domain as one of their first moves. These folks in turn hired other back office support. Before long, in both cases, we ended up with a back office infrastructure suited to a company that was about ready to scale massively, but one of the companies only had one customer (which I brought in), and the other company didn’t even have a live product yet. This kind of premature operational build is a telltale sign you’re headed in the wrong direction with a corporate-minded leader. It’s important to dismantle this kind of stuff very quickly because it normally adds quite a lot to the burn and establishes the wrong mindset at the company. You want everyone paranoid about getting enough traction, not taking results for granted and building out speculative infrastructure.
Ironically, the more corporate and the more org-builder the profile of the leader, the worse they seem to be at operational planning. I’ve always gotten the absolute worst planning documents, roadmaps, KPIs, and directional work from the corporate folks. So don’t be surprised by the counterintuitive truth when you discover crazy specialtive org builds correlated with awful planning.
Detailed instructions for cleaning up when you get it wrong
When you see that you can’t work with the leader, or they can’t achieve goals you need them to, then it’s time to transition them out.
First, audit their organization. Get a hold of any road maps, KPIs, planning documents, and a list of their team members. Get whatever context on the people you can — capabilities, their last review cycle, feedback from other teams, etc.
Second, plan how reporting is going to work after the manager is out.
Third, review all of the planning materials roadmaps KPIs etc. Form your view of what needs to be done by whoever is taking over this team. If you suspect there are weak players in the team and the new leader is going to need to conduct layoffs, be direct with them about why, and leave it to them to assess and act.
Fourth, define the transition plan for the leader. If you think they’re toxic and harmful or will be once they know they’re out, then you should define an immediate transition where they turn things over this week, or even right away. If you think it’s amicable and there’s value in a more gradual transition, you could have this take place over a couple weeks, even up to six weeks or more in rare cases.
If this is a person you’ve sold extensively to the board or other leaders, and you’re afraid that you can’t just fire this person without buy in from others or potential backlash, then you’re going to want to check in with whoever you feel has a voice before you go and have a 1:1 with the leader that you’re letting go. This can be especially important if it’s an executive-level leader and the board has been part of the interview process.
Next go and have a 1:1 with the leader. Tell them clearly why you think it doesn’t make sense to continue together. Make it clear that it’s a final decision and not a negotiation. Make it clear that if there’s a transition, it’s not a trial. Tell them you wanted to give them the respect of telling them first and so you’d like to speak with some of the other leaders and outline a plan before discussing specifics of what you might need from them in the transition.
Lastly, talk with whoever is taking over their reports next. Tell them the view you formed from the planning materials, share those materials with them and have them go read up and form their own opinion and have a second 1:1 with them to get their proposal for how they want to take over the execution and management reports. This should include a timeline for their first round of 1:1s.
At this point you can have your second 1:1 with the leader that you’re transitioning out. Present them with the plan for who’s taking over their reports and what if anything they’re going to need from the departing leader.
These 1:1s with the departing leader, the one taking over their team, and the team members, should ideally all be done on the same day so that you avoid wasting time on rumors and drama.
Make sure you have at least a weekly 1:1 with the leader who is taking over this part of the team until performance is where you want it and the team is stabilized. If this is meant to only be a temporary solution, then make sure you have a clear plan with this leader how you will work together to identify when it’s time to bring somebody new in and how to run that search.
It’s normal to hire the wrong leaders, especially ones that aren’t well suited to early stage startups, hiring closer to a corporate executive profile than a startup founder profile.
These early leadership hires that tend to go into org-building mode can cause a lot of damage very quickly by remaining unchecked while making a lot of the wrong hires. As an anecdote to this, we’ve talked a lot about hiring management, including 50% time allocation ot=n hiring management skills in the leadership interview process, and also how the founders can and should engage in the hiring process.
We’ve talked about how to try to avoid this mistake, how to maintain awareness with the direction-review-approve loop, and how to clean up the problem once you recognize that you have inevitably made this mistake.