Category Archives: Recruiting

The More Cons than Pros of the Backdoor Search

Posted on August 19, 2022 | 5 comments

You’ve decided you need to replace one of your executives.  Hopefully, the executive already knows things aren’t going great and that you’ve already had several conversations about performance.  Hopefully, you’ve also already had several conversations with the board and they either are pushing for, or at least generally agree with, your decision.

So the question is how to do you execute?  You have two primary options:

  • Terminate and start search.  Arguably, the normal order of operations.
  • Start search and then terminate.  This is commonly known as a backdoor search, I guess because you’re sneaking out the back door to interview candidates.  More formally, it’s known as a confidential search.

Yes, there are a lot of sub-cases.  “Search” can mean anything from networking with replacement CXOs referred by your network up to writing a $100K+ check to Daversa, True, and the like.  “Terminate” can mean anything from walking the CXO out the door with a security escort to quietly making an agreement to separate in 60 days.

As someone who’s recruited candiates, been recruited as a candidate, and even once hired via a backdoor search, let me say that I don’t like them.  Why?

  • They make a bad impression on candidates.  Think:  so, this company is shooting their CMO and that person doesn’t even know it yet?  (Sure, I’d love to work for them.)
  • They tie the recruiter’s hands behind their back.  Think:  I have this great opportunity with a high-growth data workbench company — but I can’t tell you who it is.  (Call me when you can.)
  • They erode trust in the company culture.  The first rule of confidential search is there are no confidential searches.  Eventually, you get busted; the question is when, not if.  And when you do, it’s invariably a bad look for everyone involved.
  • They are super top-down.  Peers and employees are typically excluded from the process, so you neither build consensus around the final candidate nor let them meet their team.
  • You bypass your normal quality assurance (QA) process.  By involving fewer people you disregard a process that, among other things, helps vet the quality of candidates.  If the candidate turns out a mishire you are going to feel awfully alone.
  • If you somehow manage to pull one off, the candidate gets off to a rough start, typically never having had met with anyone on their team.

That said, the advantages of confidential searches are generally seen as:

  • No vacant seat.  There’s no awkward period where the CXO’s seat is empty and/or temporarily filled by one of their direct reports.
  • Short transition period.  You elminate the possibility of an extended period of ambiguity for the CXO’s team.  Colloquially, you rip off the band-aid.
  • One transition, not two.  Some positions (e.g., CFO, CMO) have active fractional (or rent-a-CXO) markets.  If you terminate first, hire an interim replacement, and then search for a permanent replacement, you end up putting the team through two transitions.

I’d argue that for conflict-averse CEOs, there’s one bad “advantage” as well — they get to put off an unpleasant conversation until it’s effectively irreversible.  Such avoidance is unhealthy, but I nevertheless believe it’s a key reason why some CEOs do backdoor searches.

All things considered, I remain generally against backdoor searches because the cost of breaking trust is too high.  Lady Gaga puts it well:

“Trust is like a mirror, you can fix it if it’s broken, but you can still see the crack in that mother f*cker’s reflection.”

So what can you do instead of a backdoor search?  You have three options:

  1. Run the standard play, appointing an interim from the CXO’s directs or doing it yourself.  (If you have the background, it’s relatively easy and sometimes it’s even better when you don’t —  because it helps you learn the discipline.  I’ve run sales for 18 months across two startups in this mode and I learned a ton.)
  2. Run with an interim.  In markets where you can do this, it’s often a great solution.  Turns out, interim CXOs are typically not only good at the job, but they’re also good at being interim.  Another option I like:  try-and-buy.  Hire an interim, but slow starting your search.  This de-risks the hire for both sides if you end up hiring the interim as permanent.  (Beware onerous fees that interim agencies will charge you and negotiate them up front.)
  3. Agree to a future separation.  This is risky, but a play that I think best follows the golden rule is to tell the CXO the following:  “you go look for a job, and I’ll go look for a new CXO.”  A lot can go wrong (e.g., undermining, hasty departure, mind changing) and you can’t really nail it all down legally (I’ve tried several times), so you can only do this option with someone you really trust.  But it allows you to treat the outgoing CXO with respect and enables them to not have to ask you for a reference (as they’re still working for you).  You’re basically starting a search that is “quiet” (i.e., unannounced internally), but not backdoor because the CXO knows it’s happening.

Hat tip to Lance Walter for prompting me to write on this topic.

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Posted in Management, People, Recruiting, Silicon Valley, Startups

Will Your CEO Search Produce the Best Candidate or the Least Objectionable?

Posted on May 4, 2020 | 1 comment

I was talking to a founder friend of mine the other day, and she made a comment about her startup’s search for its first non-founder (aka, “professional”) CEO.  She said the following about the nearly one-year recruiting process:

“Because every person in the search process had veto power, the process was inadvertently designed to go slowly and not produce the best candidate.  We passed on plenty of candidates superior to the person we eventually hired because someone had a problem with them and we assumed we’d find someone better in the future.  Eventually, the combination of search fatigue with dwindling cash compelled us to act so we locked in to the best person we had in-process at the time.  In effect, the process wasn’t designed to hire the most qualified candidate, but the least objectionable one.”

Character Ceo Talking From Tribune Set Vector

In this case the failed process was catastrophic.  The candidate they selected took the company in a different direction and my friend the founder was pushed out a few months later.

Here are some thoughts on how to create a CEO search process that produces the best, as opposed to the least objectionable, candidate:

  • Set up a search committee that does not include the whole board, so you are not creating a process with a large number of people who have veto power.
  • Write down what you want in a candidate in the form of a must-have, nice-to-have list.  Don’t delegate writing the core of the job spec for your new CEO to an associate at your search firm, cutting and pasting from the last spec.
  • Be mindful about the sequencing and timing of candidates.  Ask to see calibration candidates first to get people warmed up.  Try to cluster candidates.  Try to have sure candidates see the search committee in a different orders.  Slow down highly-qualified early candidates and speed up highly-qualified late entrants.  Like it or not, timing matters enormously.
  • Check some references before passing candidates beyond the committee.  Do some blind reference checking before moving candidates to the next step in the process.  There’s no point in having the group falling in love with a candidate only to discover they have poor reputation or dubious claims on their resume.
  • Let candidates ask for additional interviews beyond a relatively small core team  instead of defining a process where every candidate automatically sees every board member and executive staffer.  You can learn a ton about candidates by who they ask, and don’t ask, to see.
  • Ask candidates to present their plans for the company.  While all of them should include 90 days of learning and assessment (think:  “seek first to understand”) before taking action, virtually any qualified and engaged candidate has an 80% developed plan in their mind, so ask them to share it with you.

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Posted in Boards, CEO, Recruiting, Startups, Uncategorized

On Recruiting: The Must-Have / Nice-to-Have List

Posted on March 17, 2020 | 6 comments

I’m amazed by the number of times I see companies performing searches, even for key positions, without a clear idea of what they’re looking for.  Rephrasing Lewis Carroll, “if you don’t know what you’re recruiting for, any candidate looks great.”

lewis

I liken executive recruiters to Realtors.  If you don’t give a Realtor specific guidance on what you want to see, they’ll show you whatever’s on the market.  Moreover, even if you do tell a Realtor that you want a 4-bedroom on a cul de sac with great schools, you are likely to end up visiting a 3-bedroom “charmer” on a main thoroughfare that they just had to show you because it has a certain “je ne sais quoi.”  That know-not-what, by the way, is that it’s for sale.

This is a moment of truth for your relationship with your Realtor because if you do not say “if you show me another house that doesn’t meet my must-have criteria I’ll be working with another Realtor,” then three years hence you’ll be wondering, to the sound of passing traffic, why you live in a 3-bedroom and the kids are in private school.

Let’s stick with the house metaphor.  It’s actually fairly easy to make a list of criteria.  Make a two-column list, with one column titled “Must Have” and the other “Nice to Have.”  (One way things go wrong is when you mix up the two.)

Must Have Nice to Have
4 bedrooms Hot tub
3 baths Ranch (one level)
Quarter-acre lot Half-acre lot
Great schools (K-12) Less than 20 years old
No swimming pool Walk to downtown
$1.0 to $1.5M price

This process has a number of advantages:

  • It forces you and your spouse to discuss what you really want.  What’s truly a must-have vs. a nice-to-have criteria?  You might be surprised.
  • It provides a crystal-clear basis of communication with your Realtor.
  • If you provide the list before engaging with Realtor, they have the chance to refuse the business if they think your criteria are unrealistic, e.g., given your price point.
  • Once engaged, it gives you the basis for holding the Realtor accountable for showing you only what you want to see.

Let’s switch to executive recruiting.  What do we typically find in an executive job specification?  This is excerpted from a real CEO spec:

The ideal candidate will be or have:

  • A track record in building and leading high-performance teams
  • Confidence to interact with and inspire belief from present and future investors
  • The ability to articulate and define relevant methodology
  • An excellent communicator, effective in front of Customers, Employees, Analysts
  • Sound judgment and maturity
  • A leader who recognizes and respects talent outside of his/her own and recruits that talent to work close to and complement him/her within the company
  • Unquestionable integrity
  • Organizational tolerance:  ability to work with fluidity and ambiguity

That ambiguity tolerance starts right with this spec.  Think for a minute:

  • Are these as clear as our house spec?  A track record for how long, two quarters or ten years?
  • Are they measurable in any way?   How do I know if they respect talent outside their own or have sound judgement?
  • Are they well thought out?  (“There, I just questioned your integrity. We’re done.”)
  • Are they specific?  Which relevant methodology should they be able to define?

Compared to our house criteria, this is a mess.  And there are 17 more bullets.

How does this happen?  It’s just a tradition in executive recruiting; these sorts of specs get created. These bullets were probably selectively copied and pasted from other specs by an associate at the search firm.  While the selection was likely based a conversation with the company about what they want, it’s clear that nobody did any hard thinking about what they really needed.

A big clue that they have no must-have criteria is this “ideal candidate” nonsense.  Our house spec didn’t say “the ideal house will have” and then describe some fantasy house we can never afford.  We decided what the house must have, and then added some things that would be nice to have as well.

Let’s make an example of what an must-have / nice-to-have list could look like for an EVP of Sales at $50M startup.  This list makes a lot of assumptions about company needs and is far from perfect.  But it’s a heck of a lot better than the bullets above.

Must Have Nice to Have
Previously led all sales at an enterprise SaaS startup as it grew from $50M to $100M in ARR Knowledge of the CRM space
Has previously established detailed operational metrics and processes to run a velocity sales model Ability to quickly recruit a strong VP of salesops
A network including top reps and regional managers that can be  immediately recruited Prior experience creating and growing a sales enablement  function with onboarding and certification
At least 3 years’ experience managing international sales Prior experience selling or managing outside of North America
At least 5 years’ experience managing a three-level sales organization with at least 50 sellers Early-career experience in a technical or pre-sales role
Demonstrated compatibility with the organization’s culture and values Technical undergraduate degree plus MBA

What’s most important is that the process of making this list — writing it down, talking to peers about it, sharing it with the board, discussing it with prospective search firms — will clarify your own thinking and help you build consensus around precisely who is needed to do the job.

Otherwise, you’ll just get an “athlete” that the recruiter had in inventory.

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Posted in Management, Recruiting, Uncategorized

The Red Badge of Courage: Managing and Processing Failure in Silicon Valley

Posted on November 9, 2019 | Leave a comment

When I lived in France for five years I was often asked to compare it to Silicon Valley in an attempt to explain why — in the land of Descartes, Fourier, and Laplace, in a country where the nation’s top university is a military engineering school that wraps together MIT and West Point, in a place which naturally reveres engineers and scientists, why was there not a stronger tech startup ecosystem?

My decade-old answer is here: Is Silicon Valley Reproducible? [1]

My answer to the question was, “no” and the first reason I listed was, “cultural attitudes towards failure.” In France, failure was a death sentence. In Silicon Valley, failure was a red badge of courage, a medal of valor for service in the startup wars.

In this post, I want to explore two different aspects of that red badge of courage. First, from a career development perspective, how one should manage the presence of such badges on your resume. And second, from an emotional perspective, how thinking of startup failure as a red badge of courage can help startup founders and employees process what was happened.

Managing Failure: Avoiding Too Many Consecutive Red Badges

In Silicon Valley, you’ll often hear adages like, “failure is a better teacher than success,” but don’t believe everything you hear. While failure is not a scarlet letter in Silicon Valley, companies nevertheless hire for a track record of success. In the scores of C-level position specifications that I’ve collected over the years, I cannot recall a single one that ever listed any sort of failure as required experience.

We talk as if we love all-weather sailors, but when it comes to hiring — which requires building consensus around one candidate [2] — we consistently prefer the fair-weather ones. Back in the day, we’d all love a candidate who went from Stanford to Oracle to Siebel to Salesforce [3].

In some ways, Silicon Valley is like a diving competition that forgot the degree of difficulty rating. Put a new CEO in charge of $100M, 70% growth company, with the right to burn $10M to $15M per quarter, and it will likely go public in a few years, scoring the company a perfect 10:  for executing a swan dive, degree of difficulty 1.2.

As an investor, I’ll put money into such swan dives whenever I can. But, as an operator, remember that the charmed life of driving (or even riding on) such a bus doesn’t particularly prepare you for the shocks of the regular world.

Consider ServiceMax who was left at the altar by Salesforce with a product built on the Salesforce platform and business plan most thought predicated on an acquisition by Salesforce. That team survived that devastating shock and later sold the company for $900M. That’s a reverse 4½ somersault in pike position, degree of difficulty 4.8. Those folks are my heroes.

If Silicon Valley believes that failure is a better teacher than success, I’d say that it wants you to have been educated long ago — and certainly not in your most recent job. Thus, we need to look at startup failure as a branding issue and the simple rule is don’t get too many consecutive red badges on your LinkedIn or CV.

Using Grateful Dead setlist notation, if your CV looks like Berkeley > Salesforce > failure > Looker, then you’re fine. You’ve got one red badge of courage that you can successful argue was a character-building experience. However, if it looks like Berkeley > Salesforce > failure > failure > failure, then you’ve got a major positioning problem. You’ve accidentally re-positioned yourself from being the “Berkeley, Salesforce” person to the “failed startup person.” [4]

How many consecutive red badges is too many? I’d say three for sure, maybe even two. A lot of it depends on timing [5].

Practically, it means that after one failed startup, you should reduce your risk tolerance by upping the quality bar on your next gig. After two failed startups, you should probably cleanse and re-brand yourself via duty at a large successful vendor. After a year or two, you’ll be re-positioned as a Brand-X person and in a much better position to again take some career risk in the startup world [6].

Processing Failure: Internalizing the Red Badge Metaphor

This second part of this post deals with the emotional side of startup failure, which I’m going to define quite broadly as materially failing to obtain your goals in creating or working at a startup. Failure can range from laying off the entire staff and selling the furniture to getting an exit that doesn’t clear the preference stack [7] to simply getting a highly disappointing result after putting 10 years of your life into building your company [8]. Failure, like success, takes many forms.

But failures also have several common elements:

  • Shock and disappointment. Despite knowing that 90% of startups fail, people are invariably shocked when it happens to them. Remember, startup founders and employees are often overachievers who’ve never experienced a material setback before [9].
  • Anger and conflict. In failed startups there are often core conflicts about which products to build, markets to target, when to take financing, and whether to accept buy-out offers.
  • Economic loss. Sometimes personal savings are lost along with seed and early-round investors’ money. With companies that fail-slow (as opposed to failing-fast), the opportunity cost of time spent becomes a significant woe [10].

For the people running one, a failed startup feels Janis Joplin singing:

Come on. Come on. Come on. Come on. And take it! Take another little piece of my heart now, baby! Oh, oh, break it! Break another little bit of my heart now Darling yeah, yeah, yeah, yeah.

I was reminded of this the other day when I had a coffee with a founder who, after more than four years of work, had laid off his entire team and literally sold the furniture the week before.

During the meeting I realized that there are three things that people fresh from failed startups should focus on when pursuing their next opportunity:

  • You need to convince yourself that it was positive learning experience that earned you a red badge of courage. If you don’t believe it, no one else will — and that’s going to make pursuing a new opportunity more difficult. People will try to figure out if you’re “broken” from the experience. Convincing them you’re not broken starts out with convincing you. (Don’t be, by the way. Startups are hard, cut yourself some slack.)
  • You need to suppress your natural desire to tell the story. I’m sure it’s a great story, full of drama and conflict, but does telling it help you one iota in pursuing a new opportunity? No. After leaving MarkLogic — which was a solid operational success but without an exit — I was so bad at this that once a VC stopped me during a CEO interview and said, “wow, this is an amazing story, let me get two of my partners to hear it and can you start over?” While I’m sure they enjoyed the colorful tale, I can assure you that the process didn’t result in a dynamite CEO offer. Tell your story this way: “I [founded | worked at] a startup for [X] years and [shut it | sold it] when [thing happened] and we realized it wasn’t going to work. It was a great experience and I learned a lot.” And then you move on. The longer you talk about it, the worse it’s going to go.
  • You need to convince prospective employers that, despite the experience, you can still fit in a round hole. If you were VP of product management (PM) before starting your company, was a founder/CEO for two years, and are now pursuing a VP of PM role, the company is going to wonder about two things: (1) as per the above, are you broken as a result of the experience and (2) can you successfully go back into a VP of PM role. You’ll need to convince them that PM has always been your passion, that you can easily go back and do it again, and in fact, that you’re quite looking forward to it. Only once that’s been accomplished, you can try to convince them that you can do PM even better than before as a result of the experience. While your natural tendency will probably be to make this argument, remember that it is wholly irrelevant if the company doesn’t believe you can return to the role. So make sure you’ve won the first argument before even entertaining the second.

# # #

Notes

[1] A lot has presumably changed since then and while I sit on the board of a French startup (Nuxeo), I no longer feel qualified, nor is the purpose of this essay, to explore the state of tech entrepreneurship in France.

[2] And ergo presumably reduces risk-taking in the process.

[3] And not without good reason. They’ve probably learned a lot of best practices, a lot about scaling, and have built out a strong network of talented coworkers.

[4] Think of how people at a prospective employer might describe you in discussing the candidates. (“Did you prefer the Stanford/Tableau woman; the CMU/Salesforce man; or the poor dude who did all those failed startups?”)

[5] Ten years of impressive growth at Salesforce followed by two one-year failures looks quite different than three years at Salesforce followed by two three-year failures. One common question about failures is: why did you stay so long?

[6] And see higher quality opportunities as a result.

[7] Meaning investors get back all or part of what they are entitled to, but there is nothing leftover for founders and employees.

[8] And, by extrapolation, expected that they never world.

[9] For example, selling the company for $30M, and getting a small payout via an executive staff carve-out.

[10] Think: “with my PhD in AI/ML, I could have worked at Facebook for $1M per year for the past six years, so in addition to the money I’ve lost this thing has cost me $6M in foregone opportunity.”

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Posted in Career, Management, Recruiting, Startups, VC

My Appearance on the Private Equity Funcast

Posted on August 23, 2019 | Leave a comment

Who else but my old friend Jim Milbery, a founding partner at ParkerGale, could come up with a podcast called the Private Equity Funcast, complete with its own jingle and with a Thunderbirds-inspired opening?

Jim and I worked together at Ingres back in the — well “pre-Chernobyl” as Jim likes to put it.   When we met, he was a pre-sales engineer and I was a technical support rep.  We’ve each spent over 25 years in enterprise software, in mixed roles that involve both technology and sales & marketing (S&M).  Jim went on to write a great book, Making the Technical Sale.  I went on to create Kellblog.  He’s spent most of his recent career in private equity (PE) land; I’ve spent most of mine in venture capital (VC) land.

With a little more time on my hands these days, I had the chance to re-connect with Jim so when I was in Chicago recently we sat down at ParkerGale’s “intergalactic headquarters” for a pretty broad-ranging conversation about a recent blog post I wrote (Things to Avoid in Selecting an Executive Job at a Startup) along with a lot of banter about the differences between PE-land and VC-land.

Unlike most podcasts, which tend to be either lectures or interviews, this was a real conversation and a fun one. While I’m not sure I like the misparsing potential of their chosen title, Things To Avoid in Selecting an Executive Job with Dave Kellogg, I’ll assume the best.  Topics we covered during the fifty-minute conversation:

  • The pros and cons of CEOs who want to get the band back together.
  • Pros and cons of hiring people who have only worked at big, successful companies and/or who have only sailed in fair weather.
  • The downsides of joining a company that immediately needs to raise money.
  • How CMOs should avoid the tendency to measure their importance by the size of their budget.
  • Should companies hire those who “stretch down” or those who “punch above their weight”?
  • The importance of key internal customer relationships (e.g., the number-one cause of death for the CMO is the CRO) and how that should affect the order of your hires when building a team.
  • Feature-addicted founders and product managers (PMs), technical debt, and the importance of “Trust Releases.”
  • Pivoting vs. “traveling” when it comes to startup strategy.
  • The concept of Bowling Alleys within Bowling Alleys, which we both seem to have invented in parallel.  (Freaky.)
  • The difference between knocking down adjacent markets (i.e., “bowling pins”) and pivots.
  • Corporate amnesia as companies grow and surprisingly fail at things they used to know how to do (e.g., they forget how to launch new products).
  • My concept of reps opening new markets with only a telephone, a machete, and a low quota.
  • My pet peeve #7: salespeople who say it’s impossible to sell into an industry where the founders managed already to land 3-5 customers.
  • The difference between, in Geoffrey Moore terms, gorillas and chimps.
  • How there are riches in the niches when it comes market focus.
  • How feature differentiation can end up a painful axe battle between vendors.
  • Thoughts on working for first-time, non-founder CEOs in both the PE and VC context.
  • The difference between approval and accountability, both in formulating and executing the plan.

Here are some other episodes of the Private Equity Funcast that I found interesting:

So my two favorite podcasts are now The Twenty Minute VC on the venture side and The Private Equity Funcast on the PE side.  Check them both out!

Thanks for having me on the show, Jim, and it was a pleasure speaking with you.

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Posted in Entrepreneurship, Leadership, Management, Private Equity, Recruiting, Startups, VC

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