A Scaling Magic Trick

By definition, as a company scales rapidly, it adds people quickly. There are many things about this that are difficult, but a vexing one has to do with the leadership team.

Often times, the wrong people are in senior positions. The faster a company grows, or the less experienced the CEO is (e.g. a first time founding CEO), the more likely it is a problem. Per Fred Wilson’s famous post What A CEO Doesthis is one of the three key responsibilities of a CEO.

“A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.”

I’ve slightly modified in my brain to be that a great CEO has to do three things well. These three things. They can be great at many other things, but if they don’t do these three well, they won’t be successful long term.

Let’s focus on “recruits, hires, and retains the very best talent for the company.” This is where the vexing part comes in. As a company grows from 25 to 50 to 100 to 200 to 500 to 1000 people, the characteristics of who is the very best talent in leadership roles will change. It’s rarely the case that your leadership team at 1000 people is the same leadership team you had a 25 people. However, the CEO is often the same person, especially if it’s a founder.

Stress on fast growing companies comes from a lot of different places. The one that is often the largest, and creates the most second order issues, is the composition of the leadership team. More specifically, it’s specific people on the leadership who don’t have the scale experience their role requires at a particular moment in time.

Take a simple example. Imagine a 50 person company. Now, consider a VP Engineering who has never worked in a company smaller than 5,000 people. His last job was VP Engineering on top of a division representing 25% of the development resources of a very large company, reporting up to the division president. By definition he has never worked in a company that grew from 50 people to 100 people in a 12-month period. He might argue that he’s seen that kind of growth within a segment of the company, but he’s never experienced it working directly for a CEO of a small, rapidly growing company.

In comparison, consider a VP of Engineering who has worked in three different  companies. She started with one that grew from 20 to 200 and was acquired. The next one grew from 5 to 100 and then shrunk again to 10 before being acquired. The one you are recruiting her from grew from 100 to 1000 while she was in the role and is still going, but she’s now tired of the larger company dynamic and wants to get back to a smaller, fast growing company.

Which one sounds like a better fit? I hope you chose the second one – she’s a much better fit in my book.

Now, here’s the magic trick – if you are a CEO who is interviewing for a new member of your leadership team, ask the person you are interviewing if they have every been in the same role as a company that grew from size -50% to +200% of yours. So if you are the CEO of the 50 person company, you are looking for someone who has been in at least one company that grew from 25 to 100 people. Ideally, they participated in growth to a much larger scale, but at a minimum they should bracket these numbers.

Now, ask her to tell you the story of the company, the growth experience, how she built and managed her team, and how she interacted with the rest of the team. Keep digging into the dynamics she had with the CEO, with other executives, and with the people who worked for her. Focus a lot on a size you will be in a year so you know how she’s going to handle what’s in front of her.

Remember – you are looking for competence fit and culture fit. By using this approach, you are exploring both, in your current and near term context.

Also published on Medium.

  • Two comments. First, watching this season of Silicon Valley and the beginning of the first growth phase and that CEO Jack whatever’s arrival and departure is so classic. I thought they hit the interaction between engineering and the business/mgmt people right on the head. Excellent representation of that dynamic.

    Second, and this could be incidental, you use the phrase, “competence fit and culture fit” and I noticed the order, competence before culture. While I think senior managers set the culture and so that part if probably more important at that level, I’ve been interested to see how many people will talk about culture fit first, in a manner that leads you to believe they’re almost not thinking about competence. So many people say they can train somebody but can’t deal with them if they are assholes. While changing someone’s personality is hard, training somebody for a senior role when they haven’t acquired some of that themselves is much more difficult imho.

    • The order doesn’t matter – they are equivalent in importance. And I often put the more important thing second in a two item list, so I you are inferring something I didn’t intend (e.g. it is incidental …)

  • PatentsIntegrated

    I’ve seen this happen multiple times at different startups, where a few tech founders try to scale and run into a lot of issues because, well, they’re tech people. They want to just to work on their technology, and are forced to learn people management and culture building skills on the fly. They also tend to hire more tech people like themselves, rather than diversifying the company’s skill sets and perspectives.

    Still, I think it’s hard for the stereotypical charismatic, dynamic CEO to not fall into the aspirational pedigree trap, i.e., hiring the first person in your example because ultimately the CEO sees him/herself growing the company to the 5,000 employee corporate and would like to get more of those perspectives into his/her company.

    Ultimately, there’s a certain kind of person that does well as a CEO of a startup/50-person company/100-person company, and so on, as well as folks that thrive at each of those points in a company’s growth curve. It takes a very self-aware person to know that he/she is no longer the best person for a job and hire the right people into the company for support.

  • I have said a CEO does 5 things

    1. Find and keep the best people
    2. Orchestrate between departments
    3. Set up a commitment system
    4. Visit and understand customers and prospects
    5. Set the vision which most importantly is what you don’t do

    The most important thing about finding and keeping the best people is finding those that complement your weaknesses/blind sides.

    It’s not always possible to get somebody that has been with a high growth company in the same role you are looking for, you definitely need some.

    But by definition they had to have done it first once, that can happen at your company. I don’t mind taking somebody that has experience at a big company and a small company. That is probably the next best. I have found that they have to have experience at a small company. That’s the hardest part.

    What you are really talking about is going from doing to leading. It’s a hard transition, and its an analog continuum. That is to say when you are 1 you are 100% doing, when you are over 100 you are 100% leading, but it’s a mix on the journey.

    And it’s a journey that one should not be ashamed/think they’ll make less money if they don’t want to do. The best doer should get paid as much as the leader of the department.

    I love to have my fingers in every aspect of the business that works to about 100 to 200 people. After that I am one of those that need to get transitioned.

  • Kevin Owocki

    > Stress on fast growing companies comes from a lot of different places. The one that is often the largest, and creates the most second order issues, is the composition of the leadership team. More specifically, it’s specific people on the leadership who don’t have the scale experience their role requires at a particular moment in time.

    Brad, your post does a great job of talking about *hiring* for a person that can scale. I think this is one great way to frame an interview process at a high growth company. I’m curious how your scaling strategy changes once you have *already* composed a leadership team. How do you weigh the trade-offs between investing in growing people and “leveling-up your leadership team”?

    For context, I’ve had friends who’ve worked in small companies that have grown 2x-4x year over year and the CEO has invested heavily in their leadership team, in growing leaders via (1) providing the resources they need, (2) setting a cohesive vision, and (3) supporting them when they both (a) need help growing & (b) willing to put in the sweat equity.

    I’ve also had friends who’ve worked in small companies with similar growth numbers where the CEO took the opposite approach — Serially (1) picking off members of his leadership team that s/he presumed would not scale, (2) spreading FUD about them, and (3) eventually exiting them from the company. My 2c: The latter created a somewhat toxic culture wherein each leadership team member was obsessed with protecting their own fiefdom instead of growing the company as a whole. The company itself suffered as a result of in-fighting on the leadership team, which in my opinion was driven by the CEO’s obsessively competitive approach to “leveling up” the leadership team members.

    These are only two data points, and are admittedly anecdotal. My friends, who were both employees and also part-owner of both companies, seem to have much preferred the former, collaborative, style to the latter, competitive, style. Do you have any thoughts on how to enable your leadership team to scale? Do you favor a more competitive or collaborative style?

    Maybe this is more in the “Sets the overall vision and strategy of the company and communicates it to all stakeholders” than the “Recruits, hires, and retains the very best talent for the company”, but it feels pertinent nonetheless given we’re talking about scaling.

  • Great read Brad. I do not fully agree with hiring solely based on experience growing. That does not seem to be logical. As an entrepreneur in two tech companies and one ad agency, and now as a first hire/partner at a YC company, I strongly feel that talent management is something that is a natural social skill that whomever is doing the hiring should be able to read in the interview process.

    Furthermore, that person should have what I like to call “star” qualities. Something that they have done throughout their career that separates them from the heard.

    Third, I only like to hire passionate people. Passion that is inherently hard to hide. People with passion make great leaders.

    Lastly, I would look at the size of their previous company.

    That’s my style. Right or wrong. I’ve seen it work at so many different types of companies. Tech or traditional businesses.

  • Pointsandfigures

    Great advice. When I talk to corporate people about startups, I tell them they can be good mentors. But, I also mention that it is going to be tough for them to walk in the shoes of a startup since the resources are so different, and the reporting/structure/budgeting etc are 180 degrees. I have seen corporate people try to fit into startups and it’s usually a mismatch. Sometimes it can be fatal.

    Having a high degree of EQ inside the organization with open lines of communication can help solve the problem. It helps people recognize when they aren’t fitting in.

  • Joseph Prencipe

    Awesome Brad, thanks. I’m experiencing this right now.

  • Colleen McCreary

    What I’ve experienced in this space is finding people who are naturally more interested in building versus maintaining. There are big company folks who are always taking on the new thing or the problem teams and enjoy that set of challenges. They can usually handle scale. They’re also open to asking questions and using mentors. For the CEO, looking for leaders whom they can actively turn areas over to and let go is also key (like partner services of hr, finance, legal, ops, etc).

    Way too many leaders don’t invest in a strategic HR/People leader until it’s too late and they also get starstruck by resumes versus really spending time drilling down. I always take senior candidates out to walk around or to get coffee just to get them out of their “interview mode.”

  • mark gelband

    Challenges I’ve seen in organizations from 5 to 5,000+ is the lack of attention payed to emotional maturity and emotional intelligence. In startup culture around Boulder, I’ve seen numerous companies where the void of emotionally mature decision making leads to horrible culture. It drips down from CEOs with good intentions but very little self-effacement about their own many foibles. This happens in corporate structure as well.

    In startups, the huge gap between the talk of people and the policies, practices and hard work it takes to build a culture seems to stem from the same anti-corporate mentality that helps some thrive. Organizationally thought, it often leads to similar disfuntion.

  • I recommend the newest Patrick Lencioni title, The Ideal Team Player. He addresses this issue and either you remind me of him or he reminds me of you.