Recruiting talent is probably one of the most important jobs of a management team. Unfortunately it is a pain. Deciding who to hire takes time and requires a lot of thought. The consequences of the decision are great, which causes risk adverse executives to procrastinate and delegate the decision making to a committee.
Hiring a senior team member is even more complicated. Frequently there is a contract that needs to be negotiated, options, bonuses, other perq’s and job responsibilities to be decided. A new member of the senior management team has to work within their functional group (e.g. marketing or finance) and within a senior management group. So a lot of executives have say about the process.
I won’t rehash a bunch of techniques for getting the right person. I recommend “Who: The A Method for Hiring” by Smart & Street. There are a lot of books on how to hire although relatively few about hiring a senior executive.
The root problem is simple. We are all trying to hire someone who can do the job and and fit in with the culture. There is a lot of focus on limiting the risk of hiring which perversely can increase the chance you won’t find the right candidate.
The Downside of Minimizing Hiring Risk
There are several pitfalls in this risk oriented approach. A common way to minimize risk is to find someone who has already done the task in the same industry for another larger and hopefully smarter company. This approach has big drawbacks. First, you can’t assume that the challenges you have today will be the same in two years. Hiring a CIO with experience handling a crumbling systems infrastructure makes sense when you have a crumbling infrastructure. But are they the right candidate after it’s fixed?
Secondly, hiring from bigger, hopefully smarter firms doesn’t guarantee that the candidate knows how to succeed in your environment. A firm I was with wanted to jump start their internet initiatives and hired a head of the internet division 
from a big company that had a successful web site . The candidate interviewed well, was smart and knew the technology. However after joining, we found they were a caretaker manager, focused on maintaining a well functioning department that they’d inherited. The new hire didn’t know how to grow a business and left after six months having made very little progress. I see this all the time, growth firms hiring the executives from industry leaders such as Intel, Microsoft, Home Depot or Wal-Mart and being surprised to find out they’ve never actually dealt with much growth.
Another risk management technique is to hire someone you’ve worked with in the past. This is pretty common in Silicon Valley and it does limit some risks. However, the chance that someone you’ve worked for in the past is perfect for a position is remote. The risk of not getting along declines but the risk of not getting the right skills and competence increases.
In addition, most executives don’t want to repeat their same experience over and over. A lot of CFO’s get tired of the numbers and seek to move into operations roles. Any work relationship you enter where the employer is hiring one thing and the employee wants to do something else is bound to be a problem. This in some ways explains the relatively short tenure for CIO, CFO positions. After a couple of years these executives are bored and are ready to move on.
The best way to minimize risk is to follow a good hiring process. Hire people that fit and have the skills you need.
Determining Fit
Fit is a function of shared values. Defining a firm’s values takes some time and the result isn’t a black or white. I’ve successfully hired formal executives into relatively informal firms. Sometimes you can open up the values of the organization by hiring someone on the edge of the company’s comfort zone. This can be difficult for the executive (and the company) if it is too far a stretch.
I recently worked with a senior executive who lasted six months on a new position. The company is very loose, with no procedures, budgets, plans or structure. The senior management team wears jeans or shorts and the decision process is very consensus oriented. The new executive was a much more formal, process oriented executive, who worked more “top-down”. The fit issues were an issue early and they only got resolved when the new executive was ejected from the business. Failures like this are both costly and painful for the participants.
Identifying values in senior executives is a lot about understanding the stories that make up their lives. How they tell that story will help the interviewer identify the values of the candidate.
The CTO of Looker, Lloyd Tabb, commented in a recent interview on his secret question for hiring. Lloyd says he looks for “we” rather than “I” in the interview conversation. This is good advice as word choice often reflects values (although be careful, word choice can also be driven by culture and social groups). The culture at Looker is very customer and team focused and “we” oriented.
Interviews don’t often include much time for free ranging values discussions but they should. The interview process should include a meal, time away from the office and be a sufficiently long process to allow the candidate to open up about goals, plans and dreams. This is sometimes called the “open kimono” approach and it requires an equal amount of sharing from the company.
Executives searching for positions can similarly learn about the company by focusing on the process, people and surroundings as they go through the interview cycle.
Skills and Competence
Senior executives have the dual role of functional head and senior executive group member. As I noted earlier, we try to minimize risk by choosing executives from the industry. This avoids functional risk but the real risk of failure is outside the functional area.
Executives fail because they can’t effect change. It isn’t functional knowledge but the ability to get things done within the organization that makes a difference. Actual industry expertise isn’t all that helpful, as is expertise in the particular software or the particular systems the firm uses. If you are planning on turning over your management team every two years, it makes sense to hire from the industry. If you are looking to build a management team for five to ten years, then look for executives who have experience getting things done successfully.
One of the most effective firms I have worked with have the majority of senior executives from outside the industry. The new perspectives have allowed them to move a lot faster and smarter than hiring from bigger, slower moving competitors. Viewpoint diversity is valuable and new perspectives bring new ideas and fresh approaches.
Some of the worst hires are candidates with industry experience in weak firms with “it was someone else’s fault” stories. Every career has a clunker or two in it, but senior executives have to be responsible for where they go to work. If an executive has been forced out of three or four firms and can’t give a reference from any of them, it’s a red flag.
A senior executive has to be open to new approaches, but have standards they will always keep. Hiring a senior executive that won’t say no to the CEO is a waste of company resources and a disservice to the firm and the shareholders. As a hedge fund analyst, if I saw a CEO that dominated the management team, it was usually an excellent short.
A rule of thumb is that every senior executive should have the skills and abilities that could result in them serving as a CEO, either with this company or with another company. If I don’t see that ability, I pass. I am sure most of these executives will not serve as CEO’s, the opportunities may not come up, they won’t want to put in the time and effort or it isn’t a good fit personally. But having the communication skills, the curiosity, the optimism and the leadership that CEO’s have will make them better members of the senior management team. And that is the best way to minimize risk.
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Dr. John Zott is the CFO for Carlson Wireless Technologies, and Principal consultant at Bates Creek Consulting. John is the chair of the Careers Committee at FEI Silicon Valley, a senior adjunct professor at Golden Gate University and comments regularly on issues that affect consumer businesses. If you are a former student, colleague or would just like to connect – reach out.