EntrepreneursVenture Capital

Hiring, firing and managing executives

By September 4, 2007 3 Comments

No. 8 in Marc Andreessen‘s guide to startups series is on hiring, managing and firing executives. As ever the post is long, full of juicy goodness and well worth the read.

His advice is aimed at founders/CEOs if you are a VC/shareholder though, things are often subtly different.

Most importantly Marc’s advice is all about building the best possible team and company. Fair enough – if you are running a company that is what you should be doing. If like Marc you are focused on billion dollar opportunities that is what you should be doing.

I am all for aiming high and believe that without ambition you will get nowhere, but the reality is that for most of us in most of the companies we deal with our goal will be to maximise the situation not build the perfect company. You start off wanting to build that perfect company (I hope) but for the majority of situations that is just not where things end up. The outcome can still be great for all concerned, just at a valuation that is considerably less than $1bn.

This can be because the market doesn’t open up as expected, time starts to run out on the market or any number of reasons. Whatever the reason it has a huge impact on the logic for hiring and firing changes.

Firstly, if you find yourself in this situation you will probably start to think about exiting in the short to medium term (particularly if you have VC backers with 7-10 year funds). Secondly, if you have a company like this you probably won’t be able to persuade the next Larry and Sergey to join you.

So your hiring and firing decisions become tradeoffs between what you have, and what you might be able to get in what sort of time frame. And remember it takes a lot of effort and a long time to hire people. Unless you have someone in your back pocket you should figure six months to get them through the door and then a further three months for them to get productive. You should also factor in a 50% chance of the person not working out (that is Marc’s percentage, but it matches my experience).
The impact of this is that in the maximising situation I would be more forgiving than Marc of some of the symptoms of poor performance that he lists.

You should read the whole post, but here are the highlights (for me anyway):

On hiring

  • hire the best person for the next nine months, not the next three years— if you hear yourself saying, “this person will be great when we get bigger” — you are most likely hiring someone who, best case, isn’t that interested in doing things at the scale you need, and worst case, doesn’t know how.
  • Beware hiring a big company executive for a startup. The executive skill sets required for a big company vs a startup are very different. Even great big company executives frequently have no idea what to do once they arrive at a startup. Back in the 80’s, you often heard, “never hire anyone straight out of IBM — first, let them go somewhere else and fail, and then hire them”. Believe it.
  • This probably goes without saying, but look for a pattern of output — accomplishment. Validate it by reference checking peers, reports, and bosses. Along the way, reference check personality and teamwork, but look first and foremost for a pattern of output.
  • be ready to pay market compensation, including more cash compensation than you want, butWatch out for candidates who want egregious amounts of cash, high bonuses, restricted stock, vacation days, perks, or — worst of all — guaranteed severance. A candiate who is focused on those things, as opposed to the option package, is not ready to do a startup.

On managing

  • ruthlessly violate the chain of command in order to gather data – ask questions, continually, at all levels of the organization. How are things going? What do you think of the new hires? How often are you meeting with your manager? And so on.You never want the bulk of your information about a function coming from the executive running that function. That’s the best way to be completely and utterly surprised when everything blows up.

    Here’s the kicker: a great executive never minds when the CEO talks to people in her organization. In fact, she loves it, because it means the CEO just hears more great things about her

On firing – some bad signs to watch out for

  • Is the executive hiring? If there are open headcount slots and nobody’s coming in the door, you have a problem. Just as bad is when the new hires aren’t very good — when they’re bringing down the average quality of the organization.
  • What do the other executives think? Great executives are often imperfect but their peers always respect them. If your other executives are skeptical of a new executive after the first few months, you have a problem.
  • Is it painful for you to interact with the executive? Do you try to avoid or cancel your 1:1’s? Does talking to her give you a headache? Do you often not understand what point she’s trying to make or why she’s focused on such an odd issue? If the answer to any of these questions is yes, you have a problem.

And finally – if you do have to fire someone don’t feel guilty. You haven’t beheaded anyone. Marc says:

More often than not, when you fire an executive, you are doing her a favor — you are giving her a chance to find a better fit in a different company where she will be more valued, more respected, and more successful. This sounds mushy, but I mean it. And if she can’t, then she has a much deeper problem and you just dodged a huge bullet.