When a startup has enough momentum to raise enough capital ($15–20M in the bank), they eventually reach a phase in their journey where they need to hire and onboard their first executives and build an executive team. That’s usually when they have tens of millions in capital and the founder needs to offload responsibilities to functional experts, such as a VP of Product, Engineering, Operations, Sales, and so on.
The type of business model you have and sector you’re in will ultimately determine the type of executives the company needs most. For example, if you’re building a marketplace startup, you may need to bring on a CRO to build supply and demand. Or if mission-critical infrastructure is needed, such as the real-time services required to support products like Uber and Lyft, it’s essential to have a CTO and VP of Engineering in the executive ranks very early in the life of the company.
As a first-time founder, assuming you’ve recently hired a few key executives, how do you manage those executives effectively? It turns out that managing an executive can be quite different than managing an individual contributor.
An executive’s job is to focus primarily on taking strategic risks. Each year, they should identify 2–3 major initiatives, large enough in impact to shape the direction of the company and enforce great execution against those initiatives. This is in contrast to non-executives, who you want to be focused primarily on tactical execution.
A simple analogy explains it best. An executive’s job is to swing for home runs. An individual contributor’s job is to go for base hits. Because of the fundamental difference in role expectations, managing an executive also requires a specialized approach.
Below, I outline the process and simple tool that can be used to successfully onboard and manage a new executive and an executive team. The tool gives executives a framework for describing what their key strategic initiatives will be (their home runs), why they chose those initiatives, the resources needed to pull them off, and what success will look like as a result. As an added bonus, this tool can be used to aggregate strategic plans from all executives, which will then inform your overall operating and financial plan for your business.
A Preamble on Hiring Executives
But before we jump into the tool, let’s talk about what to look for when hiring an executive.
Rule #1 is that you’re not looking for a consensus candidate. In other words, don’t aim to hire the person that is perfectly agreeable and willing to go along with what everyone else thinks and that everyone else likes. You’re much more likely to pick a great executive when the decision to hire that person is non-consensus.
A consensus hire is someone that everyone finds nice, agreeable, and low risk. Sure, we all like working with people we enjoy being around and that behaves amenably. But the risk with an agreeable executive is that person won’t take the risks required to hit a home run. Instead, you’re looking for someone with non-consensus ideas because they’ll have the appetite for risk that’s required to sometimes change the outcome for your business.
With non-consensus executives, you kind of love and hate the person. Not because they’re a terrible person void of integrity who treats people poorly, but because their approach is risk-seeking and that introduces discomfort. You don’t necessarily like all of their ideas and suggestions. Some you really dislike. But a few open your eyes a bit and make you think “Hmmm… I hadn’t thought about that… but that sounds like a big opportunity.” These are the sorts of executives that you want to hire. They are willing to go against the grain in some situations and move forward in the face of uncertainty because there may be a large payout that comes from taking a calculated risk.
Again, you want them swinging for the fence. They may only be right 3 out of 10 times, but the 3 things they were right about could lead to a step-change improvement in the performance of the company. Perfectly agreeable consensus executives are much less likely to produce the same outsized benefits because they don’t take enough risk.
A Simple Tool for Managing Executives
Assuming you’ve now hired the non-consensus executive that has a tendency for taking intelligent risk, how do you onboard that person and set them up for success? To do so I like to use a straight-forward template that requires the executive to succinctly describe what their operating plan will be.
First off, the executive should do their 30-day review where they reach out across the organization to learn as much as they can. After concluding this 30-day lay-of-the-land exercise, then they come back to the founder/CEO and say, “Here’s my plan.”
Ideally, what they come back with is a strategy that has 2–3 major initiatives that they find are important, along with a list of success metrics and resources they need to get it done. For instance, they may need to hire/fire or make headcount changes. They may need a budget for tools or services to lean on, including agencies or consultants. In summary, they lay out the initiatives they think the company should undertake, the resources they would need to pull it off, and the outcomes they envision if those are successful. Just as important, they need to provide justification as to why those initiatives matter.
From that vision document, they will work with their teams to develop a roadmap to accomplish that strategy.
As the CEO, your job is to make it clear what the mission and vision of the business are so you’re pointing your executives in the right direction. It should be clear to the executive what the business should look like in 2–3 years. As long as they understand that vision and you’re very clear about the overall direction of the company, the executive should be able to put together their strategy.
There’s no better tool for forcing clarity of thought than long-form writing, which is why I’m a fan of the 2 or 3-page memo. The process of writing, editing, and revising are required to arrive at the utmost clarity.
Once they’ve produced that memo, you now have a simple tool that can be used in three different ways:
- The goals, metrics, and resource requests can be run up the flagpole to inform the overall financial and operating plan of the business. For example, if the VP of Marketing indicates she will need $300,000 of annual marketing budget, 2 full-time hires, and $50k for marketing tools, then that information will flow through to the financial plan.
- The executive has a clear strategy that can be shared with the rest of the people in their organization and they can work collaboratively on putting together the roadmap to execute on the strategy.
- As the CEO responsible for managing executives, you have a mutually agreed-upon performance plan. Basically, the executive has described what he/she will accomplish in the next 6–12 months, which gives you a playbook for assessing how well that executive is doing. It’s effectively a mutually agreed upon performance review plan.
- As a founder/CEO, you can do this with any executives on your team. Timing-wise, I recommend once a year for annual planning purposes. If you have your executives on product, marketing, finance, etc., all produce their plans at the same time, you can then review and edit together as a leadership group to understand what each executive is focused on and understand how all of it rolls up to the higher-level plans for the business as a whole. Then, with that data, the head of finance can produce the financial plan that factors in the headcount and cost needs across all those functions in a bottom-up fashion.
Companies can choose a different cadence (quarterly, for instance), but the purpose is to be thinking big and long enough that you produce room for iteration. That’s critical because as a startup, things change all the time. If the window of time is too short, you’re unlikely to be thinking big picture enough.
I’ve seen this process go wrong in a couple of ways. The first happens when the executive does not produce a structured plan and instead jumps immediately into a medley of initiatives without a coherent plan. They start doing 5–10 different things in parallel and have emphasized busy work versus focusing on the largest points of leverage for the company. The rest of the organization sees and feels that lack of clarity and they have a hard time understanding why they are working on certain projects, and how it all fits together in terms of the direction of the company. And they’re definitely wondering why this person is in charge.
The other failure mode is the agreeable hire that isn’t willing to take risk. You’ll have a very clear sense of this as soon as you ask the executive to draft their strategy memo. You may find that all of the initiatives laid out are too incremental in nature. Not enough risk is being taken and as a result, the impact of their stated initiatives is quite small. For this reason, it’s sometimes useful to have an executive candidate write this type of strategy memo as part of the interview process. You can feed them background context on the business and then ask them to produce a memo to assess their clarity of thought, ability to think through execution nuance, and how risk-seeking they may be.
I’m a believer in early and often communication with executives at least once a week. When you do a check-in, it should be rooted against this plan that they produce. For example, if they say they’re going to build three new product lines and they need to hire 20 engineers, 2 PMs, and 2 designers to pull it off, I would know that the biggest bottleneck is hiring. So each week, I would say, “What are you doing on recruiting?” And if it’s 1–2 months in and I don’t see them building out a team, I know I need to be focused on helping them recruit. Or, worse, I may be working with a bad hire that I’ll soon need to replace.
As an early-stage company, you might just have one or two executives. You may only be able to execute one or two initiatives in parallel as a company since the engineering team is 5–10 people But that’s ok. Your strategic plan would be very simple. In this case, the memo format is even more helpful since it is forcing clarity of thought down to one or two initiatives since that’s all the organization can support.
If you have too many initiatives, you’ll spread the team way too thin and be slow to execute with a very small headcount. So it’s ok for an executive strategy to just be focused on one thing for the next six months. If you pick the right targets and dogpile resources into them, that’s when you produce the most output for the business, and with this memo format, you’ll have a simple tool you can use to make it happen.
- An executive’s job is to focus primarily on taking strategic risk. This is in contrast to non-executives, who you want to be focused primarily on tactical execution.
- When hiring executives, look for the non-consensus candidate. Perfectly agreeable consensus executives are much less likely to produce the same outsized benefits because they don’t take enough risk.
- Executives often fail when they don’t produce a structured plan and instead jump immediately into a medley of initiatives without a coherent plan.
- Have your executive staff succinctly describe their vision, operating plan, metrics, roadmap, and resourcing needs using this straight-forward strategy memo.
- Check in regularly with your executive to evaluate progress against the plan that they produce.
- Have executives across all divisions produce their plans at the same time. You can then review and edit together as a leadership group to understand what each executive is focused on and understand how all of it rolls up to the higher-level plans for the business as a whole.