Guide to Startups, Part 8: Hiring, managing, promoting, and firing executives

Key highlight

Andy Grove on firing executives: 'You always fire a bad executive too late. If you're really good, you'll fire her about three months too late. But you'll always do it too late.' If you did it fast enough that it wasn't too late, you wouldn't have enough data, and you'd be seen as arbitrary and capricious by the rest of the organization. It's a permanent paradox with no solution.

Highlights (8)

Hire the best person for the next nine months, not the next three years. Founders who hire someone from a 400-person org to scale a team from 4 to 30 are usually buying death. If you hear yourself saying 'this person will be great when we get bigger,' you're hiring someone who at best isn't interested in working at your actual scale, and at worst doesn't know how.

On the danger of overshooting executive hires.

Beware hiring an executive from an incredibly successful big company. People who have been at IBM in the 80s, Microsoft in the 90s, or Google today often cannot function in a real competitive situation where they don't start every day with 80% market share. Old saying: 'never hire anyone straight out of IBM—first, let them go somewhere else and fail, and then hire them.'

The Michael Eisner Memorial Weak Executive Problem: founders unconsciously hire weak executives into their former specialty so they can keep being 'the man.' The product-manager CEO with a weak product exec, the sales CEO with a weak sales exec. Make sure the person you hire into that role is way better than you used to be.

If you want to give an executive full latitude, but you're reluctant to do so because you're not sure she can make it happen, then it's probably time to fire her. That gut-level discomfort about handing over the ball is itself the signal.

Ruthlessly violate the chain of command in order to gather data. You never want the bulk of your information about a function coming from the executive running that function—that's the best way to be completely surprised when everything blows up. A great executive loves it when the CEO talks to her team, because she just hears more great things about herself.

Watch for red flags in the comp discussion. You want someone focused on the option package—on building a company. Candidates who fixate on cash, bonuses, restricted stock, perks, or—worst of all—guaranteed severance are not ready to do a startup.

Don't disqualify someone based on ego or cockiness—as long as she's not insane. If a VC's ideal investment is a company that will succeed without him, then your ideal executive hire is someone who will succeed without you.

Avoid the two classic punch-pulling mistakes when firing: long transition periods (confusing, demoralizing, weird) and demotion as an alternative to firing ('we'll hire her a boss!'). Great people don't deal well with getting demoted. Make a clean break and move on.