marketing and sales executives from Silicon Valley

Wednesday, January 20, 2010

Did you hire moron X ?

I was recently asked by a colleague on how I believed startups should hire. When I prodded more, the question was narrowed to allow for a more meaningful discussion about the characteristics of people who work at different sized companies as suitable startup candidates. I explained the obvious, at least to me, that there was a different risk and needs profile for people who worked at early stage, established, and public companies and that the risk profile was amplified at higher and higher management levels.

At the risk of being offensive, I thought I would discuss my views on the topic further. While these may seem like generalizations, the experience of working in and around numerous companies in silicon valley has shown me that these classifications generally hold true, with a few exceptions. I offer this discussion since I've also heard the topic debated over and over again from entrepreneurs, angels, and VCs, usually with poor outcomes.

"They hired moron X from big company Y"

If you've never heard that statement, you've never worked in an early stage startup in silicon valley. The reason "moron X" was hired was because someone in management or a VC thought adult supervision was necessary. This is generally a good idea since many young entrepreneurs may not have the experience to deal with some of the rocky conditions that the startup may face, but the timing and personal character matters. When outside adult supervision is brought in, with it comes certain expectations internally and externally.Most of this discussion will focus on the early stage startup.

Internally, the existing team expects the person to be as sharp, nimble, and aggressive as they are, with a similar work ethic, and the ability to execute with the same level of resources that the team has had in the past. Externally, the new hire, management, and investors typically expect that the new hire will come in with the resources, buy-in, and capablities that he/she was used to their last position. Is the potential for disaster obvious enough?

Often times, the hiring of an outsider like "moron X" becomes a self-fulfilling prophecy. If the outsider does not meet the internal expectations, there will be a culture and alignment clash. The most common way I've seen this play out is that "moron X" joins and needs to hire 2 or 3 more people to be effective. This often takes the form of support staff, assistants, marketing consultants, business development consultants, and/or operations consultants. While those people may indeed be necessary to do the job right, the likely internal sentiment will be that the person doesn't have the skills or experience to do the job. The new hire has suddenly increased expenses not just by his or her head count, but by the 2 to 3 additional people he/she had to bring on board before even fully understanding the business. Basically, what looked like a 1 person hire for adult supervision, knowledge, and experience, suddenly became a 4 person increase in costs, and significant impact on an early stage company's runway.

So to avoid new hires being labled with the "moron X" title, I propose that the background and recent experience of outside hires matter. I've put together a chart belowto show how company size and company stage correlate to the products, customers, market, and channel experience for those types of companies. What this means is that people who work at the company stage listed are accustomed to the situations described in the boxes.

Company stage vs. Market

Big companyStartup late stageStartup early stage
several, with established customer profiles, wants, needs, and use cases
product works for at least one market segment, some product differentiation may be in placeproduct may be defined, but not proven
many existing segments served, often with products addressing each segment
company has customers, prospects, & suspects, with an active pipeline and lead gen to conversion processcustomers are suspects, and possibly prospects, but not a dependable/well-defined segment
Marketmarket need has been established for most company products
a market need is established and segmentation is being applieda market is suspected, and generally makes sense to the founders
channels for marketing, sales, and influence are already established.
some channels are established, but channel optimization is a current or near term goalchannels have not been established and must be vetted
** assumption is that startup is not simply copying an existing product but introducing something with a new or better value proposition

Based on my personal experience, and feel free to argue if you disagree, people in the far right column can move to the left much easier than people on the left moving right. Why? People on the right are tasked with essentially creating a business with less resources than they need, so moving left simply means more resources to execute on plans. People on the far left are used to established products and companies, but moving right means less budget to build both a product and a company. Very difficult transition, just ask around.

Next time I'll discuss product, so stay tuned.

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