Tuesday, February 2, 2021

Hiring Executives & Bad Advice

When your company hits strong product market fit, your company will be sucked into a vortex of customer demand and experience a Cambrian explosion of internal org complexity simultaneously. Things will initially seem to just truck along as usual, and then suddenly everything at the company will break at once. Most. but not all, of this breakage is avoidable, but most first-time (at scaling) founders screw it up[0]. The key to avoiding a melt-down is to hire key executives or functional leaders early.

During break-out growth the following things start to happen:

  • "The More More Moment": the pace of everything at the company accelerates. More customers, more support, more interest, more partnership offers - more more more more.
  • Complexity goes up dramatically. You need to manage an ever expanding org with many new functions, geographies, products etc.
  • You need to hire, retain, and communicate with more multiples of people. Going from 5 to 15 people feels like roughly the same company. Going from 15 to 30 means a new layer of management but still doesn't feel like *that* big of a shift. However going from 15 to 100 means three or 4 more new organizational layers. How you communicate, recruit (internal recruiter now needed as well as paid executive search) and retain people shifts.
  • Bottle-necks & breaks emerge everywhere. Things will start breaking all at once - your backend servers will melt down, your managers' capabilities will hit their limits, your customer NPS will drop, your ability to be in every meeting stops. 
It Starts Slow, And Then Accelerates
The early days post-PMF may feel like no big deal. Growing from 5 to 10 or 15 people seems like much of the same. However, you need to remember everything about your business is compounding. Growing 20% a month is a 9X in a year. Small numbers growing linearly for a while continue to be small. Small numbers compounding into suddenly large numbers can create sudden melt downs. High growth companies are less like boiling a frog, and more like standing on top of a volcano that suddenly erupts[2]. You go from juggling 1 ball to 2 balls (not too bad) to 4 balls (starting to get tough) to 8 balls to 16 balls (blargh!).....

Hiring Executives Early Is the Key To Avoiding A Meltdown
Hiring bona-fide executives well in advance before things break is the difference between a sudden ongoing meltdown at your company versus not. Many founders wait to hire executives "when we have enough scale to support them", instead of viewing the executives as crucial to supporting future scale. The thought process is inappropriately inverted. Executives exist to help you scale and run the company, not the other way around. 

 

Remember - it will take 2-3 weeks to chose a search firm[1]. Then 2-3 months to find a close a promising candidate. And then 1-3 months for them to really scale. So from the time you kick off a search for an executive it may take 4-6 months for that hire to be productive. Once you have product-market fit, you need to build out an executive team immediately. It feels like you can wait, but it is the organizational equivalent of technical debt - you will pay for it later.

Scaling Is All About Creating Bandwidth

The reason you need executives early is you need people who can:

  • Hire and recruit for their function. Wouldn't it be nice if someone else could work with recruiting to develop your pipeline, follow up on candidates, and close them? As a founder you are probably hiring for every function simultaneously. You will need to eventually focus on hiring the company leadership and delegate a meaningful subset of recruiting for roles to those executives. Of course you will still be involved with hiring and closing people. But a lot of the heavy lifting can be done in combination with others.
  • Plan ahead. Wouldn't it be nice if someone came to you proactively with a plan for their function? For everything they will be building? For avoiding meltdowns in customer support, backend engineers, or other areas? ICs usually do not do this. However, this is a key part of a leadership or executive role.
  • Provide additional executive bandwidth to pitch in. Good executives can sometimes create general purpose bandwidth for your company. For example, when Amac was General Counsel in the early days of Twitter (<100 people) he covered at different times more than just Legal. For example - M&A, Customer Support, Trust and Safety, and other functions. Extra "do-er" bandwidth at the executive level is often needed until you hire capable leadership for each area.
  • Manage people. Eventually there will be lots of people to manage. Even at 30 people you will need a handful of managers. The more junior they are, the more you will need to be involved with every conflict and every decision. Better to delegate this to an executive early so you can spend your time thinking ahead on your product, customers, company, and market.

Second Time (Scaling) Founders And Hiring Executives

As a first time founder I would always shake my head in dismay when I would see a successful second time founder's early team. At 15 people they would have 3-4 VPs! "Why do they need all that overhead??" I would think in flustered founder outrage[4]. That changed after I sold my first startup to Twitter and I helped Twitter scale from 90 to 1500 people in 2.5 years. I realized the power of strong functional leaders while going through hypergrowth. For my next startup, Color, we hired a COO in the first dozen people and both I, and one of my cofounders Othman Laraki had been VPs at Twitter before.

Second time founders who have been through a scaling experience recognize the enormous advantages to having people on board who have run and built a function before. While you want to hire for slope, you also want to hire for experience once you hit product-market fit.

Bad Pre-PMF Advice For Post-PMF Companies

Traditionally, pre-PMF companies were given very bad post-PMF advice. For example "go ramp your sales team" in the absence of product-market-fit can cause a company to burn all its money and die.

More recently, this has flipped and post-PMF companies are increasingly getting advice that only really applies before-PMF. Some awful advice is given to scaling companies by people who have never scaled anything. If one of your angels grew their startup to 11 people and sold it to Google, that does not mean they understand anything about running a post-product market fit company, scaling a sales team, or building a real organization. 

Common bad advice includes:

  • "Hire two junior people instead of a VP". 
    • This crops up most commonly for sales. "Go hire 2 SDRs and learn how sales works" is good advice in the absence of PMF. If you have product-market fit, you are often better served in hiring a leader. This person does not need to be your "forever VP" and could be an up-and-coming director or VP. However, they should understand sales processes, compensation, and hiring well. 
    • If your sales process is working and you are closing large accounts, you should accelerate that by bringing someone to run the function and set up basic processes. Just as engineering teams benefit from early process excellence, so do sales organizations.
    • Pre- and post- product market fit companies are the difference between an egg and a chicken. While you can scramble an egg, you would be loathe to scramble a chicken[3].
  • "You must do (or run) every function yourself before you hire someone to run it". 
    • This is some of my least favorite bad generic startup advice. While I agree you should try to *understand* most functions and (more importantly) how to hire a leader for a given area, actually running or doing every job is a poor use of time and probably slows or hurts the company. This reminds me of COVID vaccine roll outs - a series of convoluted rule that slows things down and hurts the overall goals of getting shots in arms. The same is true here - keep it simple and go hire an executive. You really do *not* need to build and scale customer success (CS) on your own first before hiring a head of CS.
    • When I co-founded Color we had the following functions quite early: product, design, engineering, sales, BD, marketing (growth, content, enterprise, brand), genetic counseling, clinical lab science, lab R&D, lab automation, genetic variant classification, medical affairs, finance, accounting, HR, recruiting etc. Running all these things myself, or trying to do them myself, would have been an incredible waste of time. Instead, I tried to learn how to spot excellence in each role so I could hire someone else who could lead the area(s) for me. For example, our early COO ran facilities, HR, recruiting, sales, BD, legal, and other areas. That allowed me to be involved in those areas only to the degree necessary.
    • If done right, the person you hire to run an area may teach you more about the area than your weeks of bumbling through it. Or, maybe there are some aspects that are not crucial for you to learn. I never learned how to provide a patient with a genetic counseling session while at Color, and that is probably OK.
    • There are some areas of the company you will always be quite hands on for - for example product and sales. Hiring someone to run a function does not mean you will not be involved.
    • Equivalently silly advice would be "in order to learn how to drive a car, you should first learn how to injection mold the steering wheel".
  • "Don't scale too fast! Don't get too much overhead". This is again great advice if your company is not working or is pre-PMF. Post-PMF you want to build out an executive function early so your company can win the market fast, enter new areas, and generally win. You need executives to scale, not scale to hire executives.

With PMF, You Are Instantly A Two Product Company
Post-product market-fit companies have two products: (1) what you sell to companies and (2) your company. Just as you have a roadmap for your product, you should have a roadmap for your org structure and company. Planning ahead on hiring, and in particular to hiring leaders, is equivalent to making sure your backend can deal with future traffic spikes. If you do not do the planning, and hiring, you are likely to hit a major bump and meltdown in the reasonably near term.

NOTES

[0] "First time scaling" is different from "first time founders". You may have successfully sold a prior 15 person startup to Google, been a manager at Google and then started company #2. The early part of startup 2 will likely be much easier (fundraising, hiring the first employees etc). However if you have never been part of growing a company from tens to hundreds or thousands of people as a founder or executive, you may need to learn high growth lessons first hand just like any first time founder.

[1] Executive search firms are terrible for individual contributors but great for executives. Your investors or other break-out company founders can suggest good recruiting firms for you. In general search firms will have better networks for VP/CxO level roles and understand the process you need to run to hire them.

[2] This post is riddled with terrible analogies, for which I apologize.

[3] This sadly reminds me of the Ross Perot "chicken in a bathtub" quote.

[4] I am, of course, exaggerating my reaction.

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