Non entrepreneurial hires are a bad bet. Before making such a wager, entrepreneurs should consider a proven, horse racing aphorism: Horses for courses. This saying describes how horses run best at a certain track or on a particular racing surface. Translated for the startup world, it means: Performance at a large, publicly traded, corporate “racetrack” is no guarantee of success on a smaller, poorly funded, startup oval.
I’ll admit, it’s tempting. Who could fault you for hiring that former Google, Coke or Kraft Heinz executive? After all, angel groups openly state that they look for teams of high-quality entrepreneurs with a track record of leadership and performance. Candidates like this one certainly seem to satisfy this requirement:
Finance Director (ex-ConAgra)
– Increased revenue by $4M via ensuring optimal volume growth within key customers
– Increased ROI through reducing inventories by $1M
– Saved $100K by implementing a freight monitoring process
– Reduced labor cost by $100K/year through an overtime reduction process
– Expertise in: Just about everything
Better still, this candidate actually worked for a startup twenty years ago! He/she would make an ideal CFO. What could go wrong?
A great deal. I’ve seen many a new company hire such individuals. The results have been, almost without exception, regrettable. Permit me to offer some generalized examples:
No Support Staff
Startups have limited resources. There are no assistants and outsourced alternatives are expensive. New hires can find themselves handling A/R collections, or making cold calls. After years of delegating such work, few former corporate executives enjoy, or excel at, such mundane tasks. Beware.
Equity in Lieu of Market Rate Salary
Taking a large pay cut and working for a future equity appreciation sounds great on Day One. That trade-off often loses its appeal six to twelve months later, when one can no longer afford to live as before and the realization finally dawns that a significant, near-term, salary increase is unlikely. Escape back to the corporate world often follows.
Dated Startup Experience
Just because someone hitchhiked, parachuted, or bungy jumped twenty years ago doesn’t mean he or she is prepared to take similar risks today. Years spent managing large budgets, using state-of-the-art systems, and hiring the best consultants tend to dull the memories of wearing many hats, worrying about delayed product introductions, and struggling to meet payroll.
No Return Calls
“Gee, Fred always returned my calls when I was at Pepsi.” Yes, he did. You’re not calling from Pepsi anymore.
Consider, finally, how an ineffective, discontented, senior manager will affect your small, dedicated team. Companies risk losing much more than the time and money invested in such hires. So, proceed with caution and remember: Horses for courses is more than just sound, handicapping advice.
Mr. Dragone has spent the past twenty years as an acting/consulting CFO for a number of start-ups in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He was a co-founder of Keurig.