Thoughts on Hiring:  Working for TBH

One of the most awkward situations in business is trying to recruit someone who will work for to-be-hired (TBH).   For example, say you’ve started a search for a director of product marketing, have a few great candidates in play, only to have your marketing VP suddenly quit the company to take care of a sick parent.   Boom, you’re in a working-for-TBH situation.

These are hard for many reasons:

• Unknown boss effect. While your product marketing candidate may love the company, the market space, the would-be direct reports, and the rest of the marketing team, the fact is (as a good friend says) your boss is the company.  That is, 80% of your work experience is driven by your boss, and only 20% by the company.

• Entourage effect. Your top product marketing candidate is probably worried that the new marketing VP has a favorite product marketing director, and that they’ve worked together through the past 10 years and 3 startups.  In which case, if there is an entourage effect in play, the candidate sees himself as having basically no chance of surviving it.

• False veto effect. You may have tried to reassure product marketing candidates by telling them that they will “be part of the process” in recruiting the new boss, but the smart candidate will know that if everybody else says yes, then the real odds of stopping the train will be zero.

So who takes jobs working for TBH?  Someone who sees the net gain of taking job the job as exceeding the risk imposed by the unknown boss, entourage, and false veto effects.

That net gain might be:

• The rare chance to switch industries. Switching industries is hard as most companies want to hire not only from within their industry (e.g., enterprise software) but ideally from within their category (e.g., BI).

• The rare chance to get a cross-company promotion. Most companies promote from within but when they go outside for talent, they want to hire veterans who have done the job before.  For example, when LinkedIn needed a new CEO they promoted Jeff Weiner from within.  When ServiceNow needed a new CEO and didn’t find anyone internally who fit the bill, they didn’t hire a first-timer, they hired Frank Slootman, who had been CEO at Data Domain for six years and lead a spectacular exit to EMC.

• The rare chance to get promoted into the TBH job. Sometimes this is explicitly pitched as a benefit to person working for TBH.  In reality, while this rarely happens, it’s always possible that the new hire does so well in the job – and it takes so long to hire TBH – that the person gets promoted up into the bigger job.  This is generally not a great sign for the company because it’s a straight-up admission that they viewed the working-for-TBH hire as not heavy enough for the TBH job, but eventually gave up because they were unable to attract someone in line with their original goals.

Who doesn’t take jobs working for TBH?  Veterans — who, by the way — are precisely the kind of people you want building your startup.  So, in general, I advise companies to avoid the working-for-TBH situation stalling the next-level search and hiring the boss first.

Making the working-for-TBH hire is particularly difficult when the CEO slot is open for two reasons:

• E-staff direct reports are among the most sophisticated hires you will make, so they will be keenly aware of the risks associated with the unknown-boss, entourage, and false-veto effects. Thus the “win” for them personally needs to offset some serious downside risk.  And since that win generally means giving them opportunities they might not otherwise have, it means an almost certain downgrading in the talent that you can attract for any given position.

• New CEO hires fail a large percentage of the time, particularly when they are “rock star” hires. For every Frank Slootman who has lined up consecutive major wins, there are about a dozen one-hit wonders, suggesting that CEO success is often as much about circumstance as it is about talent.  You need to look no farther than Carly Fiorina at HP, or any of the last 5 or so CEOs of Yahoo, for some poignant examples.  Enduring a failed new-hire CEO is painful for everyone — the company, the board — but no more group feels the pain more than the e-staff.  Frequently, they are terminated due to the entourage effect, but even if they survive their “prize” for doing so is to pull the slot-machine arm one more time and endure a second, new CEO.