3 startup leadership hiring mistakes to avoid
Some of the most common mistakes I see early stage startups make are around poor leadership hiring strategy. If you’re pressed for time — here’s the TLDR:
Founders should focus on hiring leadership that matches the stage and scale of their startup (i.e. revenue scale, headcount volume), and should avoid title inflation. As a rule of thumb, I recommend this:
- Seed stage — hire managers and individual contributors with commensurate experience.
- Series A stage — hire Directors/ “Head of” with commensurate experience.
- Series B stage — hire Vice Presidents with commensurate experience.
- Series C stage — hire C level (e.g. Chief Sales Officer) with commensurate experience.
Here are a few examples of what can happen when leadership hiring isn’t aligned with company stage and scale:
Handing out inflated titles causes change management issues as the company scales.
Many people join startups because they want increased responsibilities. Some candidates also want to advance their career goals with a title bump by moving to a smaller company. This “title bump” desire can be misguided, and lead to problems for the company.
Imagine this; you’re a cofounder, and you have someone in your network who is a solid marketing manager at a late stage tech company. They want to join your Seed stage startup. Their experience is commensurate with manager level, but they want a director title. You really need to fill the role, so you hire the manager level candidate and give them a director title. The hire performs well over the next three quarters, but the company does even better- growing at an impressive rate. You now need a marketing leader with even greater experience; you need a proper director level hire. You have 3 options, none of them are ideal:
- you can demote the marketing manager
- you can fire them
- you can hire a director level hire, but give them a VP title; effectively repeating your mistake and putting off the organization structure issues you’ll inevitably have to deal with
Keep in mind that when a tech company is growing, its velocity will outpace anyone’s skillset growth. You’ll be constantly paving over last year’s leadership layer with even more senior talent that has aligned experience for your newfound scale. Handing out inflated titles early on makes for hurt feelings when demotions have to occur later on, and that change management can be painful and disruptive to productivity. Instead of meeting a candidate’s misguided title ambitions, help them focus on the experience and the equity they’ll gain as an early leadership hire.
Strong senior leaders are brought in too early and bring “big company” pain with them
Conversely, hiring strong senior leadership talent too early is another pitfall. High caliber senior leaders often come from larger startups and tech companies, where they are used to larger budgets, bigger teams, and more resources. Early stage startups often require a “player coach” skillset and “do more with less” mindset from leaders up until Series C or so. While this is exciting for some leadership hires, others may have an expectation that their role will be strictly high level- or find they aren’t as keen on rolling up their sleeves as initially anticipated.
One potential result of this is what you’d expect; the senior leadership insists they need more resources to hit their goals. All good if the company is growing rapidly, but absent that growth the increase in resources drives up cash burn prematurely (before the company has found good market fit), the startup moves slower because at its greater headcount scale, runway gets shorter, senior leaders bail as the startup goes under.
There’s another risk here; founders giving away control of key functions when the company and product are too early on. In my opinion, founders should be leading key functions such as company strategy and product direction until Series C (growth stage). Market fit is often still nascent at early stage (Seed) and venture stage (Series A and B), and it’s important for founders to determine and define their startup’s unique opportunity. Here’s a reference for what I consider to be proper leadership and function alignment Seed through Series C:
Note; It’s rare that a new startup has so much demand for their product that their technical infrastructure is literally collapsing under the sheer volume of signups — but one can dream. In that case, the founders would need to hire senior leaders immediately to meet their scale because they’ve effectively gone from early to growth/late stage very quickly.
Founders hire senior leadership to solve their growth issues when there’s no market fit
Startups are literally defined by their growth. Technology startups especially have to grow at such a clip that they disrupt a market of significant size.
If you, as a founder, have not been able to find and grow a customer base for the product that you invented; the likelihood of you hiring someone else to successfully do that for you is effectively zero. To be clear, I’m not talking about startups who have found nascent growth channels that demonstrate some level of scalability, I’m talking about early stage startups who are flat on growth, or never validated their market in the first place.
Growth is the life source of startups, and should not be “outsourced” beyond the founders in the earliest days.
Think about it like this. If there is someone out there smart enough and skilled enough to find and grow a market for your product, they’re probably also smart enough to go find a technical cofounder and start a competitor.
The founder(s) of a startup are bottom line accountable for growth, and they should be the ones to pioneer their company’s sales and marketing channels to figure out what works and what doesn’t. Once a couple of growth channels are shown to yield repeatable results, it’s a fantastic idea to bring in subject matter experts in sales, marketing, advertising, channel partnerships etc to further explore and optimize growth channels.
Note; Sometimes the cofounding team is missing a key ingredient. The cofounders think they need to hire a senior leader to help with growth or engineering, but what they really need is an additional cofounder, or one of the existing cofounders needs to be replaced.
If you’ve made one of the aforementioned mistakes, but your revenue growth chart resembles a hockey stick; feel free to ignore. If the aforementioned resonates — taking action sooner rather than later may save you a significant amount of company pain.