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Wednesday, October 17, 2007

Too many chiefs or too many Indians ?

I picked this blog article up from my feed from Ask the Wizard's blog,

http://www.burningdoor.com/, it vindicates my thought and teaching process with regards to how new companies need to be structured in the early days and moving forward, in any company you need to get things done!!! that takes an operations guy to set up and manage. The following article by Dick Costolo who fires up his virtual pen and lets the words flow, it is an excellent treatise on who to hire early in the life of your company.

Too Many Chiefs or Too Many Indians
By Dick Costolo
A wizard follower (I call them followers now; this is how one builds one’s own cult) writes to ask: We’re growing the business from four people to twenty, and in our current structure, everybody reports to me. That’s obviously untenable long-term. What’s the best way to grow organizationally so that the company is structurally prepared for 20/30/40 employees?
It’s hard enough to find great people, and hoping that you will find both great people and a consistenly smooth balance of experience across departments is almost impossible. What’s the right way to address this and how do you attack the problem?
I once heard serial entrepreneur Mike Cassidy (most recently founder/CEO of Xfire) tell a large group of CEO’s that given a choice in the early days between hiring very experienced senior people or extremely enthusiastic and energetic junior people, he always looks to hire experience. I agree with this, and I’ll discuss why. First of all, in the first year to eighteen months of the business, everybody is generally heads down and go, go, go. By bringing in experienced people who understand the industry, their roles, and what needs to get done, you as entrepreneur are less likely to have to play grown-up and deal with the management issues that can frequently pop-up among a largely junior staff. It’s critical in the first 12-18 months to run as fast as possible, and by bringing in experienced players that can hit the ground running, you give yourself an opportunity to get a lot accomplished quickly. Secondly, as the organization grows from 4 to 20, if your first few people are senior, you can be confident that the future leaders of your organization are do-ers, people who rolled up their sleeves in the early life of the business and know how things operate ‘under the hood’. We never liked to bring in people to run a part of the organization if we were unsure of how hands-on they could be. You don’t have this problem if the senior people are doing all the heavy lifting themselves in the early life of the business. Finally, once you’re at 4 or 5 people and you need to start ramping staff more quickly, if your first few people were experienced people, you can feel comfortable hiring either experienced or junior people as employees 5-10, but if your first few hires are inexperienced juniors that look to you for lots of management help, your next several hires have to start including a couple key senior people with great experience, just when you’re in the mode where you need to hire more aggressively and it’s going to be harder to find those key people quickly without some serendipity.
Ok, so if you’re at a couple people right now and you’re just getting ready to grow, you’ve got my advice….your next hires should include a couple experienced players who can fill key roles as you grow. They have to be do-ers, not people who are just waiting to manage the next people that come in. What if, on the other hand, you’ve already hired your first five people, they’re all junior engineers or designers or customer service, and everybody reports to you? Now what? Here’s what I think I’d do if I were in that position (warning: conjecture ahead!). I’d try to hire somebody with significant experience in your product or service area that can play an operations executive role as the company grows. Even if this person will report to you and everybody else will still initially report to you, as you grow to 20 people, an operations executive that could ultimately grow into a senior management role will give you some flexibility in your next set of hires. For example, as you grow, you’ll obviously need to start offloading some of the tasks you’ve been handling as founding entrepreneur. If you’re growing and your first experienced hire is CTO, you’ve got no room to move on the finance, business development, legal, HR side of the house and you will still have to manage all of that yourself. You probably shouldn’t expect the CTO to be able to handle payroll while you’re out visiting that customer next week. Same thing for vp finance or the like. You can’t expect them to facilitate a product development meeting with the junior team members while you go meet with VC’s. What do I mean by an “operations executive”? I’m not saying you should try to recruit the COO of Dell. I’m speaking more about somebody who’s run a large product or service team and had to deal with things like budgets and forecasts, project management, product development, etc. If they've got actual operations executive experience, swell. By positioning the potential role as providing a path toward senior management in the company, you will hopefully attract well qualified experienced people who are looking for an opportunity to take a big step forward to the next level in their careers.
In fact, the first senior hire start-ups usually bring in is a VP, Business Development. You are eager to get out there and do business, you’ve got revenue projections and big plans, you need somebody who can start business developing. I think you’re better suited to get an operations executive in place that can start laying the groundwork for future organization growth, and then start to bring in additional staff opportunistically with this core role in place. The BD person, like the finance or technology executive, doesn’t provide you with the flexibility you may want depending on how the next set of hires line up…..if you end up finding three great junior engineers next, the operations exec can play product/project manager to that group, whereas you’re going to have to play that role (or worse, try to hire a technology team lead too quickly) if your first experienced hire is the BD executive. Finally, it’s also the case that if you don’t bring in the operations exec early, you probably don’t end up bringing them in until too late, because the needs of specific teams within the organization will quickly start to demand very specific functional leads, and pretty soon you’ve got an org with no structural core and no approach or processes for growth.
Notice how this kind of approach also fits in with my Best Available Athlete thinking about hiring. You want your more experienced early hires to be as much like stem cells as possible….able to take on differing roles in the organism depending on where they’re needed if the business or market or hiring experience shifts from expectations.
All of these issues are less critical if you’ve got a group of cofounders that can wear multiple hats, but of course, most entrepreneurs don’t find themselves in this situation.
NB: it’s also worth pointing out that lots of founders don’t particularly want to be CEO after the company gets to a certain size. Having an operating executive on board early allows you to also evaluate this person as a potential CEO should that opportunity or necessity arise. More on the transition from founder to senior management in a future post.



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