Executive Team Building Part 1: Hiring | Mark MacLeod

October 26, 2022 - Mark MacLeod

Executive Team Building Part 1: Hiring

As a startup grows, the CEO’s role in executive team building goes from doing everything early on to eventually handing off all day-to-day operational responsibility to a leadership team. Given this transition, a key success factor for any CEO looking to grow her company is to nail executive hiring and onboarding.

In this post, I offer some suggestions on how best to hire the right leaders for your executive team.

Hiring Leaders: One of Your Top 3 Responsibilities as CEO

Fred Wilson of Union Square Ventures has, what I consider to be the best, most condensed description of the role of a CEO, emphasizing the importance of hiring leaders. He boils it down to three things:

Communicating – vision, mission, values over and over again so that your people have the correct context and make that decisions that you would make in their place.

Hiring – the best team that your scale and resources allow. I boil this down further to hiring the best senior leaders. Nail that and they will take care of the hiring below them.

Funding – never running out of money.

CEOs succeed through the leaders that report to them. There is a 100% correlation between the strength of those leaders and the performance of the company (and your performance as CEO). It is this team that owns the results.

The cost of a bad executive hire is massive. First, in all likelihood, you will need an external recruiter to find candidates. Next, there is the significant amount of your and other leaders’ time spent in the interview process. Most importantly, if you get this hire wrong, then undoing that error has a big impact on the team reporting to that leader. It also impacts your credibility with the rest of your leadership team and the board.

Understanding Why Leaders Fail

Sadly, it is quite common for new leadership hires to not work out. This is why it’s so crucial to understand why leaders fail.

While there are many reasons for this, the two most common in my experience are bad interview processes and abdicating responsibility to the new leader because you think they are so good that you don’t need to manage them closely.

Interviewing: This is an art as much as a science. The most common interviewing mistakes I see in executive hiring are not realistically previewing the scope at which you expect this executive to operate at and not assessing values fit with you and your company.

Operating: This happens a lot when you hire from ‘big’, established companies. Ideally, you want someone who has been where you are going. But, if they come from a context that is too big (i.e. moving from being a leader at Google to your 100 person startup), they just don’t know how to operate.

The larger you get, the more the term ‘operating’ actually means coordinating and orchestrating the actions of others. It does not mean actually ‘doing’ anything yourself. This is perfectly fine, but often not what the startup CEO had in mind when making the hire.

Values: The best companies are values-driven. They live and die by their values. I firmly believe that almost every conflict or issue in a company can be connected back to an unarticulated or mismatched value as the source of that issue.

If you are hiring a leader as your agent to deliver results, you and that leader need to have aligned values and priorities. For example, if you want to build a profitable, capital-efficient business and your leader wants to build a high-flying/high-burn unicorn, it will be difficult for you both to agree on key decisions.

Abdicating: For founder CEOs especially, it can be intimidating to hire and then manage people who you perceive to be way way more experienced than you are. As a result, you end up giving them more space and managing them lightly, if at all.

All too often, you go from an initial honeymoon period where you think this new leader can do no wrong to gradually (or sometimes rapidly) realizing that the leader doesn’t know how to execute and deliver results in your company.

How to Improve Executive Hiring

So far, all I have done is articulate the problems. How do you solve them? Here are some (non-exhaustive) suggestions:

Invest in the best sourcing machine possible for executive hiring: In an ideal world, you want every great potential candidate to be part of your interview process. This means hiring a world-class, super-connected executive recruiting firm. Yes, they are expensive. 20 – 30% of exec comp, often with minimum fees. But this is your leverage. This is how you will deliver results and create value. This is not the place to cut corners.

Have a systematic executive interview process: The best method I have used is Topgrading (link to the book here). I have used this to systematically walk through the chronology of a candidate’s career and really get to understand why they chose the path they are on and exactly how they grew from role to role.

Change contexts: Traditional interviewing in an office, or on Zoom, is only one part of the process. The best CEOs will change contexts and really get to know candidates. Josh Reeves, co-founder and CEO of Gusto goes for a long hike with candidates that he is really serious about. This allows him to better get to know them (and vice versa). It is also a great, casual context for assessing values fit. (side note: he does the same with VCs looking at his business).

Have all key leaders involved in the hiring decision: When you get an organ replacement, sometimes the body rejects it. The same thing happens when you impose a new leader on a leadership team.

In my last operating role as CFO of FreshBooks, even though I had advised the CEO for years and he wanted to hire me, he still had me meet and interview with the other C-level leaders because he knew that collectively we would run the business. The fit had to be there.

Involve your board in executive hiring: As you get down to your final candidates have key board members get involved. Investor board members especially are great at assessing people (it is what they do for a living) and can also be key in selling the company to the right candidate. Also, if the candidate doesn’t work out, well they were part of the decision to hire that person.

Back door references: Don’t rely on the candidate’s reference. Leverage your and your board’s network to talk with key people who have worked directly with the candidate and can give you informed feedback on how they operate and how their values fit with yours.

I hope these suggestions help you with the recruitment phase of executive team building.

Photo by Natalie Pedigo on Unsplash

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