CHAPTER SEVEN

FIELDING A GREAT TEAM

Once you graduate from being a gang of cofounders to being a real company, it's time to start the most important job you'll ever do: hiring. Your company will grow only if you create the best and brightest team you can. And after you hire your team, you immediately have to think about scaling it.

Hiring isn't just your most important job—it's also your hardest.

FROM PROTOZOA TO PANCREAS

Our board member Greg Sands once compared the phenomenon of companies growing out of the startup stage to cell development in small organisms. Amoeba or paramecia consist of one cell, and that cell has to do everything: eat, move, sense its surroundings, and respond accordingly. When the cell divides, the new cells still need to do everything—they're just attached to other cells. But as organisms grow more complex, individual cells need to specialize. And when things get really complex, you need a liver, a spleen, a stomach, and a pancreas.

By and large, startups work the same way. In the early stages, you have to hire generalists who are both willing and able to take on dozens of tasks at once. Your developers will have to speak with potential customers; your accountants will have to give advice on product direction; and the born salesman on your team will need to put the phone down a few hours a day and set up a new employee's computer.

This is the exciting, four-people-and-an-idea stage popularly associated with startups—but it doesn't last very long. For a lot of your employees, growing out of this phase will be a welcome development: programmers don't want to be in accounting meetings, and salespeople don't want to sit in a dark, quiet room with the engineers. People have talents and skills they want to develop, and a healthy degree of specialization allows them to do that.

Not everybody will be happy: one developer left Return Path when we started bursting at the seams with 25 people. (He felt that things were getting “too corporate.” Seriously.) Most of your team members should be prepared for this moment and ready to take on their new roles.

THE BEST AND THE BRIGHTEST

Building your team is critical, and you probably have to do almost all of the heavy lifting yourself in the early days: you don't yet have a recruiter or an HR department, and no one can sell the vision of your company better than you can. Since you probably can't pay a ton of money for talent, selling your vision—and the value of stock options—is a key part of team building. Every chapter in this section will touch on ways that you can build, develop, and lead an effective team. If I had to distill hundreds of best practices to a single piece of advice, it would be this: build the best team you possibly can as early as you possibly can.

This may seem completely obvious, but surrounding yourself with the best and the brightest can be daunting—or even threatening—to some CEOs. You have no choice: this is something you have to do to grow your business, and something you have to keep doing to continue growing.

This is how to do it:

• Pay attention to cultural fit. Finding the best possible employees for your team means finding the best possible employees for your team. The second part of that sentence is too often neglected. The world's greatest Perl developer isn't going to add much value to your company if he can't work with your team.
• Find outstanding specialists. As the CEO, you're probably the best generalist at your company. Very soon, you're going to be surrounded by specialists who are older, wiser, more experienced, and more expensive than you are. That's an important part of building a great team. Unless you happen to be the best coder in the world and the best salesperson and the best accountant, you want to start fielding a great team early.
• Complement your weaknesses. If you hire people who complement your strengths, you'll never grow. Do the opposite: shore up your weaknesses with people who excel where your talents are lacking. Of course, that means you'll have to admit your weaknesses and embrace team members who are strong in those areas. (I'm not a world-class product visionary; my co-founder George Bilbrey is.)
• Don't hire up too much. You want the best people you can find, but that doesn't necessarily mean the biggest corporate guns you can afford. These types of employees are highly likely to fail at a startup. They're used to clearly defined roles and plenty of resources. Startups have neither. At one of the places I worked earlier in my career, another technology company, the new head of marketing, with impeccable experience at Fortune 500 companies, showed up for his first day of work and asked everyone where the typing pool was. That was the first sign of trouble. You might be tempted to break this rule for salespeople. Don't. A Rolodex doesn't matter if salespeople aren't willing to sell a vision on whiteboard—rather than relying on PDF marketing documents produced to support a beta-tested release.
• Check references carefully: Don't get suckered in by resumes. Plenty of successful big-company people don't actually know how to build a business—or really do any work. To validate their claims, you need to dig deep and find some back-channel references.
• Let your team have input on your team. Hiring is the most important part of your job, but you can't do it alone. When you're hiring specialists, you need someone who knows more about that area—an engineer, an accountant, a lawyer—to vet their expertise. And nothing better assures a tight cultural fit than an enthusiastic thumbs up from the rest of your team.

Now for the really intimidating part: you're still the CEO. Even after hiring very experienced and talented people into specialized roles, you still have to manage every functional area on your team—even those experts who are older, wiser, more experienced, and more expensive than you are.

WHAT ABOUT HR?

I'm a big believer in hiring a rock star head of HR early in the company's life. I don't mean someone to handle the transactional aspects of HR—payroll, benefits, that sort of thing. You need a strategic partner to help you craft your organization and be a co-steward of your culture.

It's hard to say exactly when you should make this hire. In theory, the earlier the better. I tried adding this role when we were at 20 people and expecting to reach 100 within a year. If we'd actually grown that quickly, I probably could have used the role at that time, but we stumbled, and then we had to repurpose our HR head into another role. For most companies, hiring a great head of HR is doable at about 50 people; by 100, you're probably too late.

You can't think of this hire as a purely transactional relationship—a salary of “x” for a value of “2x” or “3x” or “4x.” That might work for junior salespeople and account managers, but your HR head is going to be your alter ego on culture, a strategic partner as important as your cofounders, investors, or board members.

WHAT ABOUT SALES AND MARKETING?

One of the most frequent questions I get from fellow entrepreneurs is when they should hire heads of marketing (if they're business-to-consumer [B2C]) or sales (if they're business-to-business [B2B]).

This isn't a technicality, like deciding when to advance from a freelance CPA to an in-house CFO. It's a loaded question: what these CEOs are really asking is, “When do I have to turn outside and start focusing on my customers?”

The answer to this question is probably “yesterday.” In the world of customer development, sales and marketing aren't afterthoughts; they should be baked in from Day 1.

When you hire a head of revenue depends entirely on how reliant your business is on external relationship building (in the case of a B2B media or service business) or online marketing testing and planning (in the case of an e-commerce business). Here are three factors to consider:

1. If your company requires significant customer participation before your initial product is launched, you need to invest in sales months ahead of anticipated revenue. This was the case for us at Return Path. We hired our first head of sales five months before our anticipated launch because we needed to have 10 to 12 beta customers on board in order to have a successful launch.
2. If you are a natural born salesperson yourself, you can afford to wait. However, you can't handle all sales calls yourself. When you find yourself failing to call back high-value prospects within a single business day, it's definitely time to bring someone in. This is especially true if you're in a buzz business where you have prospects calling you to ask if they can try out your product.
3. If you need a head of sales right now, it's too late. Finding a sales head can take a few months. Determine when you will need someone, and start your recruiting efforts two to three months earlier. It's good to spend a lot of time in the early stages of your company's life selling. But it's not good to spend all of your time selling.

SCALING YOUR TEAM OVER TIME

When Return Path reached 100 employees, our board basically told me that management teams never scale intact as you grow the business. “Someone always breaks.” I'm sure that was largely true in their experience. Of course, my team and I took this as a challenge. Ever since then, my senior management team and I have become obsessed with scaling ourselves. Here's what we've done so far.

1. We appreciate the importance of excellent management. Management is a completely different skill set from everything else you've learned in your career. Before you can excel at it, you have to recognize the challenge. Here's how you get there:
   1. Management is important.
   2. Management is a unique skill set.
   3. You might not be great at it.

   If you're an overachiever who likes to excel in everything (I haven't met a startup CEO who isn't), then you are setting the stage for the next item on the list.

2. We consistently work at improving our management skills. We have a strong culture of 360-degree feedback, development plans, and postmortems on major incidents—both as individuals and as a senior team. Over the years, most of us have engaged on and off with an executive coach. (My coach, Marc Maltz from Triad Consulting, contributed to Part Five of this book.) At our quarterly off-site meeting, we hold each other accountable for individual performance against our development plans. Learning from the inside is only part of the process.
3. We learn from the successes and failures of others. My team devotes significant time to researching our competitors and partners to understand how peers at other companies—preferably ones either like us or larger—operate. We methodically pick our benchmarking candidates, ask for their time and get on their calendars. We share knowledge and best practices back with them. We pay this forward to smaller companies when they ask us for help. And we incorporate the relevant learnings back into our day-to-day work.
4. We build the strongest possible second-level management bench we can. Every executive team needs a broad base of leadership and management that complements its own skills. The danger is that you'll accumulate mediocre managers over the years by promoting your top performers into roles that are higher profile and higher comp—though ones for which they're completely unprepared and unsuited. Don't simply rely on external hires to mitigate this risk. Develop your team to be effective managers. Make no mistake about it—this is a huge investment of time and money. (See Chapter 12 for more on development.) But it's well worth the expense. The alternative is a culture without the possibility of advancement—with predictable effects on your team's motivation.
5. We are hawkish about hiring from the outside. That said, sometimes expanding companies require more executives and managers than they can produce internally, even if everyone on the team is scaling well. There are significant perils with hiring from the outside. The biggest risk is allowing ineffective managers to stick around and cause difficulties. Your culture is important. Your people are important. New managers at any level instantly become stewards of both. If they are failing as managers, then they need to leave. Now.