Internal or external: that is the question!
Hiring a new executive can be a challenging decision for any company. When considering internal candidates, you have the advantage of someone who already knows the company culture and has established relationships with colleagues. However, promotion from within may also mean that the person is bogged down with previous responsibilities and lacks the external networks necessary to thrive in the new role. It is not easy to progress when you don’t know which questions to ask and who to ask them to.
On the other hand, by hiring somebody external, especially if it's somebody who's a serial executive and who's covered this role many times in other companies, you as a founder will notice that they do have a way of thinking about building their team and structuring the function within the organization—something that you probably don't have right now.
The question is whether or not you as an organization have the time to allow somebody internal to reach that point. These scenarios can vary depending on the individual and the organization, but surely this dilemma rings familiar.
Balancing Short-term Gains with Long-term Goals
The average tenure of employees in growth companies is typically around two years and that of executives is around two and a half - three years. When thinking about executive recruitment, Marius says it helps to think about the fact that there's a high probability that the person carrying you from Series A to Series C is not necessarily the person that will get you to IPO within the same function. They do have a time period that they'll stay with the company, especially if they are a serial executive who's done this before.
As a founder, you have to think about the amount of knowledge you're going to extract from that person over a limited period of time, and whether or not it is justified to make a new hire. When the difference between somebody external and somebody internal is marginal in terms of experience, the rewards you will reap by bringing in somebody external are also marginal, maybe even negative after a while. There isn't one perfect answer, and there isn't one perfect solution.
Investors tend to encourage founders to look outside the organization in order to diversify the sort of people they get exposed to. But investors are not part of your company on a day-to-day basis. What do the current relationships look like? And what is the experience level of the people you already have? Truth be told, it's sometimes difficult for investors to assess all these points within just a few conversations.
Dos and Don'ts of External Recruitment and Internal Growth:
It's important to aim for significant rather than marginal improvement and to define what "great" looks like for the organization. What are the key areas of improvement that the new hire should focus on to take the organization to the next level? This requires a clear understanding of what is missing in terms of critical projects and outcomes, team building, or other important factors.
Don´t wait too long! To overcome the challenge of not knowing everything as a CEO and to define what "great" looks like in a new executive hire, it's important to start a recruitment process and seek knowledge and understanding from experienced individuals and resources, such as executive search firms, fellow founders, and industry professionals.
To make the right decision, it's crucial to not rely solely on the perspective of the current employee in the job. This is due to their natural bias and the difficulty of acknowledging their own shortcomings, so handle the communication of bringing in an additional layer of management with empathy and care.
To look for a top external executive, consider executive search firms and referrals. The most successful hires can come from customers, partners, or suppliers as they already have a relationship with your brand and understand your company's vision. While people may not be inclined to discuss job opportunities, it's important to keep in mind that it is a possibility.
Not hiring the first person you meet is not equal to holding back when you meet somebody exceptional. Be realistic about where your organization is and whether or not you can offer something to that person.
It's important to gather as much data as possible and benchmark potential candidates against each other, even if you've almost made up your mind about a particular person.
Build a continuous feedback loop with your executive recruiters (whether external or internal). Meet candidates face-to-face to offer feedback and determine their ability to fit into the organization. Spend social time with strong candidates and bring finalists to the office to meet stakeholders and get a feel for the organization's vibe.
In conclusion, hiring the right executive for a growth company is a challenging decision that requires careful consideration. By following the dos and don'ts provided by Marius Istrate and seeking knowledge and understanding from experienced referrals and resources, founders can increase their chances of finding the right person to lead their startup to success.
About Marius Istrate
Marius Istrate is the ex-Chief People Officer for UiPath, where he grew the company from 120 to 3000 people in the span of 3 years. He is currently a Business Angel, Venture Partner at 3VC, and advisor to multiple fast-growing start-ups.