It’s uncanny how often talented, brilliant founding CEOs seem to make bad executive hires for their startup.
Great founders are compelling evangelists for their company and naturally excel at channeling that passion and vision into attracting candidates and ultimately closing hires after an offer has been made. However, natural enthusiasm and even instincts meet their match in the all-important middle of the hiring funnel: Selecting the right candidate for the job.
There are two specific hiring pitfalls that I’ve seen founders fall into again and again despite their best intentions; what I call the Brand Name Trap and the Expertise Trap.
Both of these traps come down to a basic lack of experience that causes founders to struggle to know what “great” looks like for a particular role. This is where seasoned investors and advisors with operating experience can get involved and really provide value to one of their portfolio companies.
The Brand Name Trap
This one is our fault as investors.
Founders love to consistently impress their investors by sending them a stream of good news, whether it be a sexy new product release, key account win, or game-changing new hire.
And the easiest shorthand for the latter is to tell investors that the company landed a candidate from a top school who worked at a blue chip company. It’s a nearly guaranteed way to avoid questions and receive short-term adulation. We’ve all seen pitch decks, board decks, and e-mail updates that literally flaunt logos from these brands next to executive pictures.
I’m not going to tell you that you shouldn’t be impressed when a candidate went to a great school or worked at a marquee company. Those shortcuts are important and usually directionally helpful.
But it’s critical to not get overly seduced by name brands, particularly when considering work experience. It’s imperative to look past an impressive name and title and understand what the person actually did and whether or not that fits what the company really needs.
Early on in my career when I was running strategy and business development for HomeAdvisor / ANGI Homeservices, I was hiring someone for my team to help source and sign new partnerships. At that point, our brand wasn’t on TV and nobody knew who we were.
In order to land meaningful deals, we had to be resourceful and tenacious. I remember getting a resume from a candidate that jumped out of the stack – an Ivy League pedigree and a job working in business development at Google.
The candidate’s resume listed a bunch of partnerships with big brand names that she had been a part of. I couldn’t believe my luck – this was the perfect candidate.
When I interviewed the candidate, however, it became clear that business development at Google required a vastly different skill set than we needed. In order to compare their experience to our needs, I presented the candidate with very specific examples of the type of problems we needed to solve and asked them for examples of similar work during their time at Google.
It turned out that business development at Google – at least this part of Google – didn’t mean hustling and convincing brands that they should take a chance and work with an unknown new company.
Business development at Google meant filtering through the multitude of inbound inquiries from companies that were begging to work with you and essentially dictating terms to them. While the job title was the same on paper, this candidate had done a completely different job requiring a vastly different skillset.
Even once this became clear to me, I still had a hard time letting go of the candidate. As a relatively inexperienced and ambitious young exec, I envisioned the immediate praise that making this hire with a golden pedigree would garner from our CEO.
Although I hemmed and hawed, I ultimately made the right call and went with another candidate with a less distinguished resume that ended up being a fantastic performer.
The Expertise Trap
Just as big brand names like Google stand out, so too does experience, especially when founders are hiring for roles outside their expertise.
It’s not too hard for a VP of Sales to identify a great sales manager or sales rep. They live and breathe sales so they know exactly what a “great” version of those roles looks like. In fact, they probably used to do those jobs themselves, and they were pretty darn good at them in order to move up to VP.
At some point, that former VP of Sales decides to start a company and needs to make key hires for other functions, such as engineering, HR, legal, etc.
Is that person really well-equipped on their own to hire and ultimately evaluate a great VP of Finance, for example?
I remember one founder I worked with who had a brilliant product and marketing mind but finance was not his forte.
As the company began to grow, we had a conversation and agreed that he quickly needed to hire a head of finance. This was the first time he had ever hired a finance exec and he agreed that I could interview any finalist before he ultimately made the hire.
He posted a job and interviewed a few candidates, eventually selecting one finalist.
“This candidate is amazing,” he gushed. “He’s been a CFO for three other companies and is a total finance whiz. He even showed me some of the financial models he prepared for other companies and they were incredible. I think we should hire him.”
I was excited and expected that I’d probably just be a rubber stamp interview and planned to move into “sell mode” halfway through the conversation. This founder was incredibly smart and had high expectations for his people. No doubt he had found the amazing finance hire that we desperately needed!
Ten minutes into the interview it was clear that we had to go back to the drawing board.
Yes, the candidate had loads of finance experience on paper. He knew how to build a model. And he comfortably and even gratuitously threw around lots of fancy-sounding finance terms like “pro forma”, “EBITDA”, and “terminal value”.
But he had poor answers to questions that really required deeper strategic thinking on topics such as forecasting, budgeting, capital allocation, and team management.
It was abundantly clear that we could do a lot better, but I didn’t come to this realization based on crazy smarts or some amazing instinct for talent evaluation.
No, I only knew what “great” looked like in this case because I have had the good fortune of working with and hiring some outstanding finance leaders over the years. I wasn’t wowed by experience, Excel wizardry, and comfort with financial jargon. I knew that those attributes were just table stakes for any reasonable candidate and that we had to look deeper.
Successful hiring isn’t easy, and it’s one of the areas where founders can and should leverage the help of experienced advisors and investors for key roles. Advisors can draw upon their experience to pressure test hires and get involved in the interview process wherever possible.
Being able to know what “great” really looks like could be the difference between a game-changing hire who takes the company to the next level and a costly mistake.
Adam Burrows is an active angel investor and startup advisor based in Denver, Colorado. He was most recently Chief Business Officer at Guild Education, a fast-growing edtech startup in that has raised over $70 million in financing from top venture investors. Prior to joining Guild, Adam was part of the senior executive team that transformed the stalled ServiceMagic brand from a $100 million company into HomeAdvisor / ANGI Homeservices, the #1 online home improvement marketplace which went public in October of 2017 and reached a peak valuation of $11 billion. Adam began his career as a strategy consultant with the Boston Consulting Group. He holds a J.D. from Harvard Law School and a B.A. from the University of Michigan.