Another year almost in the books and in tech, we’re all still living on the edge of greatness or self destruction. Most successful people in this space love living on that edge.

Why developing your talent is more effective than stealing it

Published on September 8, 2016

September 8, 2016 • 66 Likes • 11 Comments

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Another year almost in the books and in tech, we’re all still living on the edge of greatness or self destruction. Most successful people in this space love living on that edge. The precipice. The places that boring people and companies don’t dare to explore. The rush of it all is just intoxicating. And it seems that excitement is in the air again, the only place to be is in tech, rest of the world sucks, nowhere else to put money, on and on. Tech is in full bloom again and 2017 will very likely be an incredible year, regardless of this bizarre election and whoever ends up in that horrible job.

Now that I’ve expanded my daily routine more actively into venture investing and human capital consulting for some of my favorite clients, I’m spending all of my time in the field with companies, CEOs/entrepreneurs and investors. What I’m seeing is fascinating. It’s mind numbing, the complexity of what leadership teams face out there. How do you make sense of anything at this pace? Do you centralize decision making or de-centralize? Who do you trust? Should the CEO be the nerve center or someone who empowers key people to make decisions that can make or break the company’s fortunes? CEO’s/Founders…I feel for you people more than ever!

I don’t know if I see the greatest wave of wealth creation and the emergence of the next crop of institutional, epic companies in the making, or a massive train wreck, but I think it’s the former. There are simply too many cool companies growing at absurd rates and unchallenged by larger players who seem to be getting dumber by the day, or even the minute. Legendary venture investor Doug Leone from Sequoia called it years ago. There are hundreds of billions of market cap up for grabs from dying, bigger companies who cannot adapt, and startups are gonna feast on them. GAME ON. And yet, there’s this unsettling feeling I can’t shake. What is the other shoe and when’s it gonna drop? Or will tech languish and promising companies die on the vine because they couldn’t scale or because they couldn’t cope with a world in which startups cannibalized other startups too quickly and WWIII broke out among private companies, leaving few clear winners in the end? In a nutshell, I’m becoming more terrified at the age-old theme of the ever-growing chasm between talent needs and talent supply. It’s always been an irritant, it’s always been “a thing,” but is it now “THE thing?”

So you see a bunch of race cars redlining it, adrenaline everywhere, blinding speed, and the question now is how many of these race cars are winners and how many of them are pile-ups, and is there a central theme that they can adapt that gives more of them a chance to win, or at least finish the race. Do we have to re-think this whole thing at the most basic level….Is the driver the point of failure, or the machine? Can an average driver win the race if the machine is well built? Should that be the goal?

Let’s dive into the environment a little deeper. Some of the issues:

Too much capital, too many companies and too few people to lead them properly. Old news? Yes. We know this. It’s always been the case in tech. Too many companies and too few competent leaders to scale them. But what’s interesting now is that software’s complete domination of the innovation landscape has changed the rules forever. It’s too easy to replicate, there are too many engineers around the world, millions more coming of age in high schools, grammar schools, Africa, Eastern Europe, Pakistan, Jordan, Saudi Arabia, of course India/China/Russia, code academy, Khan Academy, everywhere. The magic and differentiation of engineering is disappearing slowly, and it’s all about product and execution. Yes, in some situations, architecture helps and counts. No question, there’s still plenty of room for core innovation that can be defended…for awhile….But engineering will not be the choke point much longer, for most companies that have a shot. It’s gonna be more and more about how clever your people are, at every level and in every function. Can they pivot? Can they stay close to changing customer tastes and needs? Can they spot emerging opportunities and threats and pounce or avoid land mines? It will absolutely be all about the team over the next 5 years and beyond. The winners and losers will more than ever be defined by this truth and by the time most companies figure this out, it will be too late.

Specific pain points: GTM help on B2C and B2B sides. You’re now accountable for sales/marketing, CAC spend metrics as much as any other metric in the company. VERY few people are good at this past $50M, 100M, 200M. And every single company out there seems to want the 20 odd people who are good. What to do? Maybe read a future post on this. That’s a whole different story.

CMO. Why is Uber still looking for a CMO after all this time? Because most of them don’t have “scale plus 21st century”, whatever that is. And no one cares about basic leadership skills here. I digress.

Engineering leaders=way easier to find than in the past, because the industry is maturing. Finance execs? Way easier. Product exec’s who’ve actually designed amazing products more than once in their lives and don’t look like one hit wonders 80s bands like A-Ha? 50/50 proposition. CEO’s? Easier. Not WAY easier, but easier. If your expectations are sane…

So why is everyone struggling? Because we all woke up one day with millions of killer companies with real traction and delicious products and acute customer pain, plenty of capital supplied them and now demand for scale exec’s is orders of magnitude higher than supply. Orders. Of magnitude. My search firm is constantly sold out, all our competitors are sold out (the good ones who have the integrity to say no when they’re overloaded), every mid level recruiting firm is slammed. It’s pure chaos for recruiting firms out there. That’s not a good thing. Where’s the planning? Where’s the strategy? Where is the foresight?

More potentially annoying preamble here, bear with me. Startups are eating last year’s hot startups for lunch. No one is safe.

So is your best chance at survival, the honing of your talent acquisition machine?

Damn right it is. If you didn’t hire enough of the right people just ahead of the needs, but behind your access to capital and at the right moment in your valuation maturity curve, you might be screwed and not even know it. So let’s say you nailed this part. And about 1% of companies appear to have nailed this. Maybe. But let’s say every startup reads this blog and urgently goes and fixes its talent acquisition machine, invests heavily into it and really crushes the formula. Do you stop there?

What do you do next? Three things

:

1) You better know how to

DEVELOP that talent

. Did you spend too much money on recruiters, get all this talent in the boat and then watch them languish like stale bananas? Why not set aside meaningful budget for adequate training? In this era, the best talent are intellectually curious and you better feed that curiosity and develop people’s skills. You’ll be surprised by what happens. Are you training them for the competition or yourself? Depends on you. The leadership team. INVEST in your team once they’re on board.

2) You better know how to

KEEP

that talent. Plenty of material out there on this topic. And you know what? Your kitchen and free food isn’t what they’re after. That’s old news. Way old. People wanna move UP. They want to strive. The minute they don’t see development in their future, they’re history. Spend the time mapping out for them where this all leads in their careers. Young people understand communities more than ever and are inclined to be part of them, but they’re also very me-first oriented, and if you don’t understand this nuance of the young, emerging work force, it’s time to go fishing permanently.

3) But here’s a kicker. You better also know how to do

SUCCESSION PLANNING

, even if your “leaders” are insecure about it. Because in this era, if you’re still reading this, you probably agree that your technology isn’t that special. So your people better be, and the machine around the people ops aspect of your company has to be the most well-oiled machine in the enterprise. Or you are screwed. It’s just a matter of when you hit the wall, lose your people and lose your momentum. Way too few tech companies get this…Even if it means succeeding your top leaders

out of the company

(humanely) when they’ve exhausted their usefulness to the company, you simply must offer an upward path to your people. This is the brutal truth of every successful sports team out there. Most have proven that a good draft program and great coaching are the keys, vs constantly acquiring gaudy looking, expensive free agents who’ve flamed out on other teams, but make for great press release hires.

Obsess about succession planning in every function, regularly. Assume you’ll need the number two to step in, in a pinch. Someone gets divorced and their life gets squirrely and they have to leave to go deal with personal issues. Someone gets sick or hurt or killed. They get poached. They get bitter or disconnected from other key leaders. They don’t share your vision or the company’s goals or value system. Whatever–could be a million things putting your key leaders at risk every day. Can you afford to have on one in their socket? For how long? You’re probably worrying about way too many things that are less important than this. Take a chance on your up and coming people. Throw them touchdown passes with well designed plays. They’re gonna catch them a lot more often than someone from the outside, who doesn’t know your playbook and may not even know your game at all, will.

Let’s get specific for a minute. Where do you load up on talent development? The Director level. This is where the rubber meets the road and serious work gets done. This is your connective tissue between your work force and your leadership team. Nail it and the Directors will train the managers, and so on. Blow it here, and you’re gonna have serious problems. This is your bench, and good benches help teams win championships. This is where you turn when exec’s flee or flame out. Because just calling up a headhunter and going out to search to replace your third VP Sales or your purple squirrel unicorn demand gen, messiah, cape wearing, tall building leaping CMO or your IPO-ready CFO, or whatever, will take you months and months, a bunch of pain and you’ll be rushed to hire someone even if you’re not sure. You’ll take chances you shouldn’t have had to take. If your Director bench is solid, you have time to make the right decision, be thoughtful, consider going within, or take the time to hire the right outside recruiter and explore the talent population available to you in a disciplined, thoughtful way where you end up with the right result, vs just another body. Which, by the way, if it’s the wrong body, can put your company in reverse in a hurry, cost you a year of company development and be an indirect hit on the cap table, valuation, morale, performance, and fundamental outcome potential of the company. For the love of god, pay more attention to this level of people in your company. Please.

What the startup ecosystem needs the most is to develop a network of A+ service providers around talent acquisition at reasonable cost, training, succession planning and development. They need a low-calorie, high impact version of what the truly great companies in America have done for literally decades. And I’m not pointing to tech companies. They’re still making it up as they go along, for the most part. Look to the Gillette’s, the GE’s, the P&G’s, the Kraft’s of the world. Goldman Sachs. Places that have seemingly endless benches of talent that rise to the top and come out of…nowhere? No, they come from within. More than half of exec hiring in the Fortune 500 are coming from within and that’s growing fast. Startups should pay attention to this and learn from it. And please don’t look to Big Tech. Most are disasters, they continue to miss every mega-trend imaginable and most are gonna be a lot smaller in 5 years (what’s left at HP, for example? But at least they were smart enough to exit businesses that had no chance and may reinvent itself finally–we’ll see). Some new face shows up on their management teams every five minutes. Leaving one dull, dying company to join another one. The change agent has arrived! So and so managed a huge P&L at so and so silly, 100 year old, permanently shrinking company, Inc.! Amazing! We must be a great company to get someone like that! Back slapping. Back stabbing. End of days.

So the new person is most often a no-op. Gone in a year. Took that long to find the bathroom and had no institutional knowledge, no agility, couldn’t adapt to the cult. The team rejects them, bye. Happens all the time. Every single day, even in killer companies. Startups are even worse. The turnover is out of control. It’s like an orgy of nerdy people flopping around each other most of the time. It’s a gross metaphor, yes, but more gross to behold. Let’s stop being so gross…Time to address these basic issues. Really soon. Because startups are worse than big tech in executive turnover. Way worse. And we have to do a lot better than big tech.

Look at Microsoft for contrast and just focus on one, very special, and very important player, the CEO. They developed Satya over more than a decade and he’s the best CEO in tech. There, I said it. #1. At least among bigger companies. No one else is even in the same LEAGUE. Look at Yahoo for the an example of what not to do. Hired continuously from the outside, didn’t do any meaningful references or analysis on the multiple CEOs they hired. One lied on his resume, most people I know at GOOG thought Mayer was overrated there, Carol did’t know digital media at all. WTF were these people thinking? Meanwhile, they watched A+ people like Brad Garlinghouse and a million technical exec’s give up in frustration, walk out and join Google, Facebook, etc. Rest is history. So many examples of what is fundamentally wrong with tech and where the companies go sideways. It comes down to the philosophy of eyeing the other guy’s people, when you should be channeling all that energy on your own people. You owe it to them for giving you their daily lives. Think of them like your family. Would you neglect your own kids’ development? Do you want to raise someone else’s kids??

So no, people are not shiny new objects to be fruitlessly chased. They’re precious assets that need to be polished like rare diamonds. Break out the chisel and get to work. Good luck!

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talent, executives, hiring