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Bargain basement leadership talent

Posted by Chad O'Connor  November 22, 2013 11:00 AM

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Now that I’m a grizzled startup veteran (at the ripe old age of 38), first-time CEOs occasionally seek me out for advice. I’ve met with some truly brilliant people and have even had the pleasure of playing advisor to a few great companies and CEOs. But there’s one mistake that I made myself and I see a lot of first-time CEOs make: they routinely foul up with leadership talent.

Even when cash is stockpiled to the ceiling, customers are lining up outside the door and PR is buzzing, first-time CEOs are almost universally pennywise and pound-foolish in their approach to building their leadership teams.

Thriftiness is a wonderful trait in CEOs. Capital preservation is critical when you’re trying to take a business from concept to reality. Before there’s real momentum in a business, the best CEOs are careful with cash, keep teams small and are intimate with every aspect of their business. But once customers begin to line up, the game changes very quickly. Without a great team behind him or her, the CEO will quickly be spread way too thin and the thriftiness that had served so well will be a huge liability.

As they cling to their thrifty ways, first-time CEOs often say things like:

I can’t afford a VP-level exec. We just need a player-coach right now.
If you have customers lining up, you need real execs. Customers aren’t the only ones who’ve noticed your success. The competition is headed your way. If you don’t get real pros in the seats running sales, marketing, and product development, you’ll watch someone else eat your lunch in 12 months.

We already have awesome customer service.
You have great service today because YOU are in charge of customer service. You are probably involved with every important customer interaction. If a customer complains, they escalate the issue to a founder and “poof,” problem solved. Even just the mere prospect of the CEO seeing a customer interaction makes service reps bring their A-game. As you grow, without an experienced executive waking up in the middle of the night worrying about staffing levels, training, and hold times, your wonderful customer service can deteriorate in a very short period of time. Once that happens, your competition will pounce on it and it will take a long time to change perception.

I’ll play head of Sales/Marketing/Development/etc.
During the recession of 2009, I suggested to our Board of Directors that I should run sales for six months to save cash. Bob Davis of Highland Capital Partners asked me a great question: “OK, Art, but who’s going to be CEO while you’re running sales?” You simply cannot do the job of two executives without sacrificing quality. Every business needs both a CEO AND a head of sales. The same holds for every other department in your organization.

I can’t afford to pay a search firm.
Full disclosure: Bullhorn provides software to 5,000 recruiting firms. Although I know hundreds and hundreds of fantastic recruiting firms, I was reluctant to use them for my most critical executive searches until a few years ago. I was scared of paying retained search fees because I felt that the company’s cash was too valuable to shareholders. This notion couldn’t be more misguided.

Every minute that a key executive vacancy is open, the company pays dearly in opportunity cost.

It won’t really be obvious to you until the right person is on board, but you’ll find yourself imagining all the amazing things you could have accomplished had you filled the role 6 months ago. And, if you don’t hire someone to conduct the search for you while you’re running the business, that means you’re either a) doing an incredibly poor and cursory job at filling an important gap, or b) neglecting everything else in the business while you scour the market for the right candidate (see the previous section).

We aren’t ready for a real CFO.
Your successful sales and marketing staff need to be balanced by a CFO who’s focused on financial success – not just topline growth. Success has a way of making people bend the rules – deals with special product promises, massive discounts, and big marketing commitments that can’t be unwound. Even the best teams need a CFO to help bring order to the chaos.

The CFO is the CEO’s most critical partner. While you press down on the accelerator, they’re watching the road for hazards. I could write an entire post on the importance of this person in your life.

When we were building Bullhorn, I had a “thriftiness is next to godliness” mindset. It was a great mindset while we were a fledgling business. Without that approach, we would have run out of cash too early. But it became a huge problem as we grew. We were constantly struggling to bring in the right people and we were always 6-12 months late in hiring executives. Our growth stalled a few times as a result. We eventually figured it out and have built an incredible company as a result, but these were very costly lessons that I didn’t have to learn had I just listened to my board.

Art Papas is the CEO & Founder of Bullhorn.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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