Why is it Hard to Bring Big Company Execs into Little Companies?

Ben Horowitz

You’re a small fry and I’m a Big Ma­­c.
—The Bingo Boys, Borrowed Love

So you’ve achieved product market fit and you are ready to start building the company. The board encourages you to bring in some “been there done that” executives who will provide the right financial, sales and marketing expertise to help you transition from a world-class product to a world-class business. You see a few candidates that you like, but the VC on the board says: “You are under shooting. This is going to be a huge company. We can attract better talent.” So you aim high and bring in a super accomplished head of sales. This guy has run huge organizations with thousands of employees. He has stellar references and even looks the part. Your VC loves him, because he has an awesome resume.

Six Months Later…

Fast-forward six months and everyone in the company is wondering why the sales (or marketing or finance or product) guy who has produced nothing got such a monster stock option package. Meanwhile, the people doing all the work have much fewer options. Even worse than not getting your money’s worth, now the company is in trouble, because you’ve been missing the numbers as your super expensive executive sits on his butt. What the frak just happened?

The most important thing to understand is that the job of a big company executive is very different from the job of a small company executive. When I was managing thousands of people at Hewlett Packard (after the sale of Opsware), there were an incredible number of incoming demands on my time. Everyone wanted a piece of me. Little companies wanted to partner with me or sell themselves to me, people in my organization needed approvals, other business units needed my help, customers wanted my attention, and so forth. As a result, I spent most of my time optimizing and tuning the existing business. Most of the work that I did was “incoming.” In fact, most skilled big company executives will tell you that if you have more than 3 new initiatives in a quarter, you are trying to do too much. As a result, big company executives tend to be interrupt-driven.

In contrast, when you are a startup executive, nothing happens unless you make it happen. In the early days of a company, you have to take 8-10 new initiatives a day or the company will stand still. There is no inertia that’s putting the company in motion. Without massive input from you, the company will stay at rest.

So what happens?

Once you hire one of these big company executives, there are two dangerous mismatches that you will face:

1. Rhythm mismatch—Your executive has been conditioned to wait for the emails to come in, wait for the phone to ring, and wait for the meetings to get scheduled. In your company, he will be waiting a long time. If your new exec waits (as per his training), your other employees will become suspicious. You’ll hear things like “what does that guy do all day long?” and “why did he get so many options?”

2. Skill set mismatch—Running a large organization requires very different skills than creating and building an organization. When you run a large organization, you tend to become very good at tasks such as complex decision-making, prioritization, organizational design, process improvement, and organizational communication. When you are building an organization, there is no organization to design, there are no processes to improve, and communicating with the organization is simple. On the other hand, you have to be very adept at running a high quality hiring process, have terrific domain expertise (you are personally responsible for quality control), know how to create process from scratch, and be extremely creative about initiating new directions and tasks.

How can you stop things from going horribly wrong?

There are two key steps to avoiding disaster:

1. Screen for devastating mismatches in the interview process

2. Take integration as seriously as interviewing

Screen for mismatches

How do you tell if the rhythm mismatch or the skill set mismatch will be too much to overcome? Here are some interview questions that I found very helpful:

What will you do in you first month on the job?

Beware of answers that over emphasize learning. This may indicate that the candidate thinks there is more to learn about your organization than there actually is. More specifically, he may think that your organization is as complex as his current organization.

Beware of any indication that the candidate needs to be interrupt-driven rather than setting the pace personally. The interrupts will never come.

Look for candidates who come in with more new initiatives than you think are possible. This is a good sign.

How will your new job differ from your current job?

Look for self-awareness of the differences here. If they have the experience in what you need, they will be articulate on this point.

Beware of candidates who think that too much of their experience is immediately transferable. It may pay off down the line, but likely not tomorrow.

Why do you want to join a small company?

Beware of equity being the primary motivation. 1% of nothing is nothing. That’s something that big company executives sometimes have a hard time understanding.

It’s much better if they want to be more creative. The most important difference between big and small companies is the amount of time running vs. creating. A desire to do more creating is the right reason to want to join your company.

Aggressively integrate the candidate once on board

Perhaps the most critical step is integration. You should plan to spend a huge amount of time integrating any new executive. Here are some things to keep in mind:

Force them to create—Give them monthly, weekly, and even daily objectives to make sure that they produce immediately. The rest of the company will be watching and this will be critical to their assimilation.

Make sure that they “get it”content-free executives have no value in startups. Every exec must understand the product, the technology, the customers, and the market. Force your newbie to learn these things. Consider scheduling a daily meeting with your new exec. Require them to bring a comprehensive set of questions about every thing they heard that day, but did not completely understand. Answer those questions in depth; start with first principles. Bring them up to speed fast. If they don’t have any questions, consider firing them. If in 30 days, you don’t feel that they are coming up to speed, definitely fire them.

Put them in the mix—Make sure that they initiate contact and interaction with their peers and other key people in the organization. Give them a list of people that they need to know and learn from. Once they’ve done that, require a report from them on what they learned from each person.

Final thoughts

Nothing will accelerate your company’s development like hiring someone who has experience building a very similar company at larger scale. However, doing so can be fraught with peril. Make sure to pay attention to the important leading indicators of success and failure.