In one sense, the process of finding, recruiting, and hiring leaders and managers is no different from the process required to bring in other employees. As always, the skills/competencies component is essential, but not as important as the mission/values element. If you’re looking for someone who will fit within your entrepreneurial culture—looking for an individual who will contribute greatly to the company’s success now and in the long term—then the key is finding someone whose work style and personal mission and values resonates with your own.
If you’re seeking to fill a top leadership or managerial position, however, you’ve set the bar higher. Whether you’re looking for a COO or the head of a function or a key manager, creating clarity around the person and the position is essential. Generalities kill at leadership levels. It will likely result in a poor fit that entrepreneurs especially can ill afford.
Entrepreneurs often run relatively small operations. The number of leadership and senior management positions is limited. As a result, every hire at this level counts. Stanford’s Irving Grousbeck quotes the legendary Jim Collins (author of Good to Great), referencing the need to “get the A players on the bus in the key seats. No matter what a great leader you may be, if you’ve got B players in key seats, it’s going to be tough slogging.”
Making a mistake in recruiting a leader at best will hamper the company’s growth and at worst can be fatal. Therefore, I’d like to provide some advice to increase the odds of your finding the right person, as well as to share some stories that will motivate you to be especially diligent when hiring someone for a crucial, high-level position.
Joe was an ambitious entrepreneur. He worked hard and was an expert in the advertising technology industry, having been a valuable individual contributor and manager for the leading companies in this sector. Because of his reputation and contacts, Joe had little difficulty raising venture capital when he launched his startup. Like many neophyte entrepreneurs, Joe was obsessed with controlling expenses. While managing money is essential, especially in the early phases of a company’s existence, it can prove problematic when taken to extremes.
Joe figured that he didn’t have to spend a lot of money to hire top people for marketing, finance, and legal positions: He felt he knew enough about each area to get by with a small staff of friends and family—people who were loyal to Joe but weren’t leaders or managers. More to the point, their values and personal mission had little to do with what Joe believed in. He was driven to pursue growth, and was willing to work to turn his startup into the biggest and best company in its field
After an initial growth spurt, Joe’s company stalled, got stuck, and ultimately failed. While he had a number of highly skilled employees, their skills weren’t enough to get the company over the hump. They attracted a significant amount of business during their first year of operation, but they couldn’t build on it. The problem: Joe and his top people weren’t aligned. The misalignment meant that when they tried to work as a team, they failed; their meetings were characterized by bickering and an inability to achieve consensus. Some of his best people were wrapped up in their egos. Others were so functionally myopic (i.e., the tech manager couldn’t even bring himself to think about marketing) that they never could implement a holistic strategy that took all parts of a problem or opportunity into consideration. And on a big picture level, no one was as driven as Joe to grow the company. It wasn’t just that his leadership team didn’t work as hard as Joe. They made decisions based on the short-term rather than the long-term sustainability and growth of the company; they voted for taking bigger bonuses rather than investing some of that bonus money back into the company.
The outcome: the company was sold for the assumption of debt plus the below-market salaries of five remaining employees who transitioned to the acquiring company.
Now let’s look at an entrepreneur who was smart about finding and hiring the right type of leaders. Carrie was a serial entrepreneur who was an early adopter of Facebook marketing. Carrie relished building companies quickly, creating a buzz about them, and then selling them; she was looking to create a company that gave her a billion dollar exit. Though Carrie was in the game for the money, she also loved the process of creating something of value to a market and she valued the learning and agility that was essential to her success.
In her most recent startup, Carrie worked with us to hire a leadership team within a three-month period. During this time, we brought in a CFO, CTO, controller, SVP client services, and a handful of other high-level managers. From the start, Carrie had great clarity about her ambitious financial goals for the company as well as her fervent belief in learning and agility and crucial traits of her top people, based on her past experiences. She made it a point to tell us that she wanted to recruit leaders who were excited about the fast-paced way she ran her companies, who relished pivoting as a volatile marketplace required adjustments, and who were eager to acquire new knowledge and skills to keep up with the rapid pace of change.
Carrie told us she wanted us to find skilled practitioners, but she agreed that she was willing to sacrifice a bit of experience and expertise for people who shared her beliefs about what was important in running and growing a startup. All the leadership-level people who we hired met Carrie’s criteria, and though the company grew quickly because they had good products and excellent marketing, a lot of their success can be attributed to the alignment of their leadership team around values and mission. Sitting in on a team meeting, it was almost as if all the people at the table were communicating on a psychic level; they finished each other’s sentences and when they argued, the debates were brief and resolved without bitter feelings.
Three years after the company’s inception, Carrie sold it for $800 million. It didn’t hit Carrie’s $1 billion goal, but it seems likely that such a sale is in Carrie’s future.
This is one of the biggest hires you’ve ever made. You have a lot riding on bringing in the right leader for your company. Perhaps it’s the first time you’ve ever hired a CEO, COO, or CTO. Maybe you’re going to give a big equity stake in the company to this executive with the idea of partnership or him buying you out at some point in the future. And it might simply be that you hope to fill this position with the person who will take the company to the next level.
Whatever the scenario is, the search and recruitment process takes on a lot more meaning for you than it would for a lesser position. In these instances, some entrepreneurs make a fatal mistake: They opt for control over profit.
Harvard Business School Professor Noam Wasserman has written about “the founder’s dilemma,” and it boils down to choosing to maintain great control of the company versus giving up some of this control in exchange for growth and profit. The greatest value an entrepreneur will create happens when she either becomes a leader of leaders or hires one. This takes courage. It means letting go of some control. It makes an entrepreneur vulnerable. And this can cause discomfort. When it comes to recruiting leaders, entrepreneurs often choose control. This means that they internalize the hiring process, refusing to involve or listen to other advisors. They believe that no one knows their company as well as they do, that no one has more to gain or lose based on this one hire.
Enter the board member or advisor. A board comprised of independent executives with strong operating experience will outperform a board comprised of financial engineers. I like to match entrepreneurs with board members or advisors who have real operating chops and who can help them clear personal growth hurdles. Following a structured process with input from operational-savvy board members requires relinquishing a bit of control, but it will yield far better results than relying only on one’s instinct. This may seem counterintuitive to entrepreneurs, but it avoids the mistake of choosing someone who seems right but is actually wrong for a key position.
And while entrepreneurs often do have great instincts, these instincts can betray them when it comes to crucial hiring decisions. More often than not, an entrepreneur’s gut tells him to hire someone who resembles himself. What’s reassuring is a candidate who was raised in the same neighborhood, who is the same religion or from the same ethnic group, who went to the same school, who worked for the same company, or who has a similar personality. Without knowing it, this entrepreneur ends up hiring a clone of himself, when what he really needs is someone who brings a different perspective, set of experiences, and skills to the table.
Hiring a clone, though, fosters the illusion of control. And so it’s not unusual to find entrepreneurs who hire their college buddies for top positions or people with whom they started their careers. As reassuring as this may be, these individuals often lack not only the complementary ideas and skills that are crucial to the company, but they don’t share the entrepreneur’s mission and values.
To avoid this situation, seek input from others about your leadership hires. Whether it’s your internal executive team or outside consultants, they usually can counterbalance your unconscious desire for control. Or do what Amazon and Google do: When they are contemplating a hire, they bring in an employee from a different group or function than the position being filled and give this employee “yes” or “no” power over the hire. Consider bringing in an employee who isn’t enmeshed in the function where you have a leadership opening (or someone who isn’t part of your leadership team) and solicit their opinion on a candidate. This outside viewpoint will provide an objective look at a candidate and her fit in the organization; this employee isn’t concerned about control issues but is focused on how a given candidate might benefit the company and help it achieve its goals.
I absolutely believe that entrepreneurs can find, secure, and keep great leaders. You don’t have to be General Motors or IBM to hire someone who will contribute mightily to your vision for your company. As the late radio personality Casey Kasem once said, “Keep your feet on the ground and reach for the stars.” But the first part of that quote means anchoring your ambitious search in reality. If you can’t afford a seven figure package for a leader, don’t interview people who are in that salary stratosphere. At the same time, don’t forget that you can attract an incredible executive to your company if you find a values match—people who resonate with what you’re trying to do and how you’re trying to do it will be drawn to your company.
With that in mind, here are four suggestions that can help you find a top executive who can help you realize your entrepreneurial vision:
Entrepreneurs often move quickly, many times out of necessity. The demands of running a small, nimble company often require quick decisions, and their personalities sometimes predispose them to be impatient.
Impulsive hiring is never a good idea, no matter what position you’re hiring for. But it’s an especially bad idea when you’re looking for a leader. Therefore, slow down. I’m not talking about the time frame necessarily (sometimes you do need to hire someone quickly) but the thought process. Put everything down on paper—the skills/ knowledge necessary to do the job well as well as the values/mission that are critical for a leader to have. Use the Blueprint (introduced in Chapter 5) if it helps you articulate the skills and values that are your non-negotiables. Here it is again on the next page.
Focus on the non-negotiables you require for a position—the crucial qualities beyond the job skills that you cannot do without. Discuss with your team what’s most important for the company, now and in the future. Is it a brilliantly innovative mind; the ability to empathize; a willingness to develop people and help them become great at their jobs? Is one of these qualities more important than all the others? Think about the discussion and determine the top four non-negotiables. Then, when you start interviewing candidates, you know what you’re looking for. By slowing your process, you are much more thoughtful and informed about what you need and are less likely to fall victim to confirmation bias: drawing quick conclusions about who you need to hire and then interviewing candidates and looking for “evidence” that support these conclusions. For instance, you determine that your new COO must be highly organized (perhaps because your last COO was poorly organized and that created headaches for everyone). You interview a candidate who is a neat freak, and he shows you his iPad which is tightly organized; he also speaks in a very precise, clear manner. But being organized isn’t as important as an inclusive mindset or a willingness to generate affiliation among employees. This highly organized candidate might be a disaster when it comes to creating and elevating diverse teams. Slowing down before the interview will ensure that you hire for the values that are mission critical.
For a PDF download of the Blueprint and other resources, go to www.HireSmartFromTheStart.com
Leaders are custodians and amplifiers of the company’s values. When you’re hiring someone to head a function, however, you can become a victim of value confusion. For instance, Tom seems like a great potential CFO hire. He’s great with numbers, and has the right kind of experience handling the financial issues that pertain to your industry. And he looks like he can slide in seamlessly as a member of your financial group. Like most of the employees in finance, he’s thorough, deadline-focused, and is a bit of a nerd.
While Tom may be a great fit for finance, he may not be a great fit for the company. As a leader, he needs to embrace and embody the larger values that you as an entrepreneur prize and that inform the larger culture. Is Tom a consensus-builder? Does he prioritize learning and development?
Most companies have cultures within cultures, values within values. Typically, each department or function has its own distinguishing traits or qualities that the majority of people share. If you’re hiring someone at a lower level for a function, it makes sense that you want to bring in someone who fits that function. But when you hire a manager, you have to assess for higher, core values.
When you think about it, leaders in most entrepreneurial companies are responsible for no more than eight people. Unlike a large corporation where leaders may supervise many more employees, entrepreneurial leaders tend to run relatively small, agile teams. In a big company, a leader who is cold and distant, who embodies the old command-and-control model, who is a high-level strategist but not particularly good with people, might still be effective. In a smaller, entrepreneurial setting, this type of leader will probably fail.
A great small team leader is someone who facilitates team agility, who can help the team pivot to capitalize on rapidly changing events. This leader listens to team members without prejudice. She is open to everyone’s input and ideas, no matter how different they are from her own or the norm. This type of leader is also a transparent and active communicator; no one has to guess what’s on her mind. Above all else, a small team leader is the champion of organization values and drives the team toward the company mission.
If you’re interviewing ten candidates for a leadership position and you hire the one who has absolutely the best technical qualifications for the position, you may be hiring the wrong person. I know the head of a printing company who, when hiring a vice president, maintains that he’s going to look for the individual with the best combination of experience and expertise, saying, “I’m going to pay a lot of money to this person, so I’m not going to compromise with a candidate who isn’t in the top 1 percent of skills and knowledge.”
Like other entrepreneurs, this small business owner wants to hire the best engineer, financial expert, salesperson, and so on. And it’s entirely possible that leaders in entrepreneurial companies won’t just lead but will be individual contributors; they may run a team but they’ll also create the budget, sell to customers, and fix the machines. Nonetheless, if that leader doesn’t embody the values that the company holds sacred, then all this technical skill is for naught; he’ll either leave prematurely or prevent the company from achieving its mission. Right from the search’s inception, establish the level of technical chops required. More importantly, determine the underlying core competencies like intelligence, analytic capabilities, coaching, creativity, and so on.
I’m not suggesting ignoring a candidate’s qualifications to do the job; you need a high level of competence. At the same time, you can make a much better hire if you choose the candidate who is the best match in terms of values and mission, even if there’s a slight drop off in expertise or experience. Remember, technical chops is only up to a 20 percent determinant of whether candidates succeed. It’s a tradeoff, and entrepreneurs are good at tradeoffs. You may lose a small degree of ability and gain a high degree of values.
At this point, let’s pause and ask a question that might be on your mind: Why do you have to hire a top executive; why can’t you just promote from within?
After considering the advice I’ve offered, you may wonder about whether investing time and energy in recruiting the right leader is worth it. Perhaps you’re dubious about all the interviews you need to conduct to locate someone who isn’t just technically skilled but has congruent mission and values. Perhaps you’re worried about the expense of bringing in a high-level person to your company.
If so, let’s consider your options to recruiting an outside leader:
•Promoting an existing manager to a top position. This is the ideal solution . . . if you have an ideal candidate ready and waiting. Most entrepreneurs don’t. It may be that you need to replace someone who left suddenly when she received a great offer from another company. Or you’ve experienced a sudden growth spurt and need someone who has the experience and expertise to lead a fast-growing team. The odds are that you haven’t had the opportunity to groom an internal candidate or that the person with the skills and experience you require doesn’t exist in your company.
•Training an internal candidate for the role. Again, this is a great idea with two big IFs—IF you have the time and IF you have an employee with the skills and values crucial for a top job. Most leaders are made, not born. Even if you have a great executive development program, it can require months or longer to prepare someone to become a COO or CMO. In addition, you may have highly skilled individual contributors—people who are incredible salespeople or experts at finance or brilliant techies—but there’s no guarantee that that these skills mean they’ll do well when promoted to positions of great responsibility.
•Stepping in and doing it yourself. This is often an entrepreneurial reflex. Your CFO leaves and you say to yourself, I’m good with the numbers, I can handle these tasks for a while. Maybe you can. But at what cost to the company? Whatever you’re best at—strategy, creating new products, and so on—is diminished when you spend an increasing amount of time in a role that is secondary to your main contributions.
•Doing nothing. This is the default option. Entrepreneurs are often so busy with the quotidian details of work that they figure that they can get by without a functional group leader or other top executive and that everyone will pitch in and compensate for the missing leader. They rationalize that they don’t have the time or the budget to recruit someone, that they’ll see how things go and if necessary, start looking for someone at some point in the future. The problem, of course, is that in the interim things can go to hell in a handbasket; and at the point you decide you need to fill a leader position, you’re going to be facing a delay of weeks or months before you can identify candidates, interview them, make an offer, and have it accepted.
Let me be clear about all these options: I’m not telling you they’re bad. For some of you, they represent the right thing to do at a given moment in time, based on your circumstances. I should also state the obvious: I have a horse in this race. As an executive recruiter, I’m naturally biased in favor of recruiting leaders.
But my bias is based on years of experience. I believe in a world of abundance, not scarcity. When you try to fill a critical position in your company from a shallow pool—your existing employees—you may not find what you’re looking for. But if you search far and wide, your pool is much deeper. Every day, I’m amazed anew by how much talent exists, and by how many viable candidates are available for just about every entrepreneurial company at every job level.
Therefore, consider all your options, but don’t neglect the option of searching for a leader from the abundance of talent that’s out there.
All entrepreneurial companies have different leadership needs. A billion-dollar tech startup looking for a CEO has different requirements than a small chain of automobile repair shops searching for the same position. If you’re looking for a top functional manager, you need to tailor your search to experience and expertise within that function. Similarly, startups with hyper-aggressive growth cultures need to find leaders who are somewhat different in values and mission than slower growth, family-oriented operations.
Nonetheless, entrepreneurial enterprises of every size and cultural type share certain things. They all face an increasingly volatile environment and must be prepared to make changes quickly. They all exist in a world overflowing with emerging knowledge, where new technologies, processes, strategies, marketing, and other developments require a willingness to learn. They will all only attract and retain the best people if employees feel included and valued.
Leaders who are capable of addressing the following three factors are invaluable to every entrepreneurial company. Let’s look at these factors and how to identify them in leadership candidates:
You may be able to get away with hiring an individual contributor who’s somewhat rigid in his outlook and habits. But when it comes to a leader, agility is crucial. Think about your business and how it’s buffeted by change. For today’s entrepreneur, everything is in flux—your products, services, processes, and technologies. The ability to pivot in the face of change—to be able to adjust a familiar way of working to take advantage of a new development—is something you want in your leaders at all levels and in all functions.
But how do you know if a candidate possesses this agility? While it’s impossible to know for sure until you work with her, the following questions can help you probe whether she was agile in the past and is likely to be agile in the future:
Have you ever managed a team where your approach to a problem wasn’t working? How did you respond to help the team become more effective?
Can you describe an instance when you had to make a 180 degree shift in policy or strategy; where you had to try something completely different in response to changes internally or externally?
How have you changed as a leader over the years? How have you adjusted your management style and leadership persona from your first leadership job to now? Why did you make these shifts and how challenging was it to make them?
If you’re interviewing a candidate who is set in his ways, who thinks he knows everything, who dismisses new methods out of hand, then this is not someone you want to hire, no matter how sterling his other credentials might be. Every entrepreneurial company operates in data-rich environments. New developments in technology, manufacturing methods, governmental regulations and so on create a neverending stream of data. More to the point, all this data can be sifted for information and knowledge—information and knowledge that can help companies solve problems and take advantage of opportunities. Many times, it can yield a new and better way of doing things—from maintaining a customer relationship to entering a new market.
Even the sleepiest, most secure, most local ma-and-pa business must pay attention to all of this information and capitalize on it. In a global, interconnected work environment, entrepreneurs must learn or die. Leaders are the chief learning officers of entrepreneurial companies. They are the ones who must keep their eyes trained on all sectors of the outside world and monitor them for relevant events, trends, and knowledge.
Here are some questions that will help you identify a candidate who hungers to learn:
In your current job, do you actively monitor developments in relevant business sectors that might affect your company? What system do you have in place to monitor these developments?
Do you feel as if you’re innately curious? Do you like reading from a diversity of print and online publications about your business? Do you subscribe to a variety of publications and newsletters and attend industry workshops and conferences?
What is the single most important thing you’ve learned in the past year that has helped you be a more effective leader?
If I were to name a single trait that you should look for when interviewing top managerial or leadership candidates, humility would be at the top of the list (though here, I saved the best for last). This may not strike you as the trait that you’d put at the top of your list, but bear with me as I make my case.
First, let’s define humility. It is a virtue characterized by a modest view of your own importance. You still have a healthy ego; you still maintain your confidence. But you’re open to the importance of others, to the value of other opinions and ideas.
In an entrepreneurial environment, humility offers many advantages. Think about the chaotic, fast-paced nature of the work environment at times. Leaders who are arrogant tend to become hot-tempered and impatient during these times. They alienate their people. They don’t listen to concepts outside of their comfort zones. Humble leaders, on the other hand, are patient and trusting, even when they’re under stress. As deadlines approach and pressure is applied, they become even more inclusive in their decision making. They are more focused on the best idea to solve a problem rather than being the one who comes up with the best idea.
Leaders with humility also are able to manage the risk that comes with entrepreneurship. Keith Cunningham, my leadership mentor, notes that risk in business is inversely proportional to the perception of its existence. All leaders are one bad decision away from total calamity. The greater the perception that there is no risk, the more likely that risk will hurt the business in some way. Arrogance and overinflated egos make entrepreneurs especially vulnerable to risk; that same close-minded certainty, foolish bravado, and hubris caused the cataclysmic catastrophes at Enron, Barings Bank, and Lehman Brothers.
With humility, leaders are willing to acknowledge risk. They are attuned to how marketplace forces and their own decisions can increase risk, and they have the sense not to make decisions that create too much exposure to risk.
Thilo Semmelbauer of Shutterstock is one of the most successful leaders in the New York tech world. While he holds himself to high personal standards, he represents the professional virtues of compassion, empathy, and authenticity well. His humility has contributed mightily to this success. “I’m personally not sure if ‘humility’ per se contributed to my success. I never thought about it this way. I simply believe that you can’t do it alone, and that in order to get people on board with you, you have to listen, be open, and be willing to change directions when better ideas emerge. Maybe I’m just pragmatic.” Thilo took WeightWatchers.com from zero to over $400 million, and then ran all global operations for Weight Watchers (over $1.6 billion revenue) before I recruited him to Ladders. I only worked with Thilo for a few months before leaving to hang up my own shingle at Dave Partners and Thilo left a few months after that to run the business at Shutterstock. As I mentioned earlier, Thilo helped grow the Shutterstock business from $60 million to an IPO to more than $400 million in revenues. He is a leader in the true sense of the word and beloved by all.
He is an active listener, totally dedicated to his teams, and truly open to learning from the people he works with. He never thinks he’s the only one with the answers. If he comes up with a plan or a strategy, he is open to change if someone else has a good suggestion. Because he is honest and transparent, people aren’t intimidated by him. Instead, they feel he is someone they can talk to, and someone who will listen to them.
How do you identify Thilo-like humility in leadership candidates? Here are key questions to ask:
As confident as you are in your own ideas and decisions, do you encourage others to challenge them? Can you describe a situation where you recognized that someone else’s idea was better than your own and opted to do what they suggested?
Have you ever been described as arrogant? If so, do you feel that term was unfair? Why might someone have described you this way?
Is your office door always open, literally and figuratively? Do people routinely stop by to talk, to make suggestions, to offer constructive criticism? Are you able to manage your ego when you feel your authority is being challenged and refrain from using position power to stifle this challenge?