have now encountered two C-level execs who came from big names, were airdropped into our startup, and then proceeded to completely mangle the parts of the company they ran. always takes at least a year for people to realize (i didn't realize it myself for the first one until AFTER he was fired seemingly out of the blue, and then you start to pattern match the subsequent ones. my personal reflection is this is a horrendous waste but is part of the benefit of being an early employee at a startup, that you get to see other pple's costly mistakes while having a lower stake in the cost. I didn't know to trust my instincts then, because org chart = truth when you are new to the game).
First-time founders, CEOs, and even employees should understand the playbook of the Incompetent Leader (IL).
The IL is savvy & charismatic, and excels at 4 things:
1) Feign competence
2) Create confusion
3) Buy time
4) Fail up
The IL playbook & what to do about it
The IL’s most favorite move is simple: Buy Time
The IL’s 2nd most favorite move is: Buy More Time.
After doing this a few times, the IL’s masterstroke is: Fail Up.
The IL will repeat this a few times over a 20-30 year career to reach “spectacular success”
Here’s how it works:
Once upon a time:
IL joins a new company, with much fanfare from the CEO, who really wants this to work out.
Remember, the IL is incapable of making a significant, singular impact.
IL doesn’t want anyone to know this.
So what does IL do?
IL sets the playbook in motion.
Step 1 -
IL:
“I don’t have the right people. Cannot execute without the right team.”
CEO:
“I guess that’s reasonable. Do what you have to.”
Result:
IL has just bought 6-9 months to go hire org leaders, managers, while hiding incompetence behind charisma & confidence.
[after 6-9 months]
Step 2 -
IL:
“Have a better team now. Look how well I’ve hired! But my org doesn’t have the right structure. Not aligned with new strategy, worried execution will suffer.”
CEO:
“Hmmm… fine, go ahead.”
Result:
IL has just bought 3 months to plan re-org, 3 more to let it settle
[after 6-9 months]
Step 3 -
IL:
“Okay, that reorg helped & my people are firing on all cylinders. But I don’t have enough cross-functional alignment. We need a company re-org/Need to bring those functions into my org/Need new cross-func leaders”
CEO (pot committed):
“Fine, let’s do X, Y, Z here”
[after 6 more months]
Step 4 -
IL:
“Some of my key people left because of frustration with all of this. I need to replenish the gaps. Btw, look at these amazing results last quarter!”
CEO to IL:
“OK let me think about it”
CEO (thinking):
Those results are due to market tailwinds & not THAT amazing
[Privately, CEO makes a call to an executive search firm to begin finding a replacement for IL]
[At the next CEO/IL 1:1]
CEO:
“It’s time to part ways”
IL (after expressing some incredulity & outrage):
“I understand. I want to do what's best for the company. Let’s work on a comms plan for my departure”
[IL or CEO send an announcement to the company reflecting, thanking, looking onward/upward, etc]
Step 5 -
(most vital move for IL)
IL (in interview with hot company Foobar):
“Here’s everything I built at previous company. Company grew 70% in my 2 yrs there despite all the challenges I faced”
CEO of Foobar:
“When can you start?”
[and THAT is how our IL fails up]
THE END
---
he continues with a "what you should do about it", which if you are still reading here at this point go give him a "superfollow" ($10/month fo...
Most early CXO hires are for the things that CEO's don't want to do but now have to be done. They want to hire someone who can take stuff completely off their plate and get it done.
Identifying a poor CTO or CPO is pretty straightforward for technical founders. It's harder to identify whether your new CMO is shitty when they are crafting a marketing strategy from scratch.
Someone else might think they're really good. That someone else might themselves be incompetent, but might also have people who think they're good.
This gets less likely as the relationship graph grows, but I don't think people are good at judging competence without widely recognized and respected metrics.
This is why getting friends and connections is a powerful strategy, because many fields are not interested in establishing fair gatekeeping. And for some very difficult roles, it's way easier to make friends than to be competent.
This is made all the more difficult when competence is a quickly moving target. The positive referral is a rarely moving target though.
IME, these folks are hard to filter out; takes a few weeks/months to figure it out. But, because they are already somehow a CxO and you hired for CxO, then they'll still get considered for their next CxO - cause the short stint where their incompetence was detected will be just a blip - their previous gig was the fail-up that fools you (me, and others I know) and will fool those after you as well.
While I agree with a lot of what he says, I also think there is a bit of wishful thinking when it comes to "world class leaders".
Just like you can't hire the top 1% exclusively, your leaders won't be top 1%. Chances are they will be somewhere in the middle. Creating a "culture" that allows for initiative at different parts of the company is going to do a lot more for you than rolling the dice on getting exclusively top quality leadership.
Re: "Culture": I mean this in the group dynamics sense, not the meaningless corporate-speak sense.
The primary benefit of F-off is that if you play the game correctly you can be well compensated for doing so and maybe even get hired back to fix the mess 18 months later.
I worked for a place whose former CEO (before I joined) basically committed the company to sales contracts it had no hope of fulfilling, then gtfo'd before the delivery dates, to pump up his CV with "closed so many millions in sales with company X".
>“I divide my officers into four classes as follows: The clever, the
industrious, the lazy, and the stupid. Each officer always possesses
two of these qualities.
>Those who are clever and industrious I appoint to the General
Staff. Use can under certain circumstances be made of those who are
stupid and lazy. The man who is clever and lazy qualifies for the
highest leadership posts. He has the requisite nerves and the mental
clarity for difficult decisions. But whoever is stupid and industrious
must be got rid of, for he is too dangerous.”
My grandfather used to say "there are two types of people in the world: lifters and leaners."
I was skeptical when I first heard it. I still question the many special cases or situations that fall somewhere in between. That said, the longer I live and work, the more I see (or hear of) the leaners ... and their enablers.
Indeed. And the worst part, leaning is contagious. At some point, good people start wondering why they should lift if everybody else is leaning. They either quit, or start coasting.
... but in the military, it's generally not possible to 'fail up' into a similar role in another organization when things become uncomfortable. A clever lazy Prussian officer can't build out their resume for a couple years and then go work for the French, so they have to actually stick around and make those difficult decisions. Whereas in tech, it's not just possible but normalized to change companies with some frequency, and a lazy clever C-level exec may not stay around long enough to see the outcome of their difficult decisions.
There are more than enough positions in the military for officers to fail up for decades. They don't usually end up at the highest ranks, but it happens. Often the path upwards is to be hired by a defense contractor, oil company, financial company. Usually it's a reward for getting a specific company a nice contract and the promise of good connections/lobbying.
He also put together the Schlieffen plan that led to Germany wagining a 2 front war against superior adversaries that had time tables planned down to the hour that ended up not taking in to account numerous factors that ended up leading to the most horrible experiences in human history.
I work for a YC company called Coinbase and it is absolutely terrible here because of the C level execs. They are terrible at their jobs and from the inside, the org seems to be falling apart. I've noticed that since the layoffs there is no motivation anywhere. People are hardly on slack and it takes forever to get anything done. I hate blind but it's a constant complaint that no one is working anymore.
Seems like Brian was fooled into hiring all these leaders that don't understand people or the space but have great credentials. As for Brian himself, he is the most uninspiring leader I have ever worked under. He is a platitude robot saying nothing more than 'Crypto will lead to economic freedom' and 'now is the time to build'. Before the crypto crash it seems like the only motivator was money, now that that is gone the company is slowly spiraling and no one cares. Mostly because the execs don't care, the CFO and CPO both cashed out all of their shares during IPO. If they don't believe how can we lowly engineers.
A blind comment that really resonated with me and the few others I've shared with: https://imgur.com/a/jrA3oCL
Another thing, if Brian reads this he will probably go on another twitter rant rather than actually address the company.
> He is a platitude robot saying nothing more than 'Crypto will lead to economic freedom' and 'now is the time to build'. Before the crypto crash it seems like the only motivator was money
Yes, that's what it's always been about with coinbase. That's why they sold their equity on a traditional finance platform for USD $ and why Brian bought a $130m mansion. 10 years later what has crypto accomplished besides grifting people out of their savings through 3% commissions and scams? Do you know how useful Google, or like any other company, was after 10 years?
How else could Coinbase have ended up? It's a company for people to speculate on digital tokens. There's no grand mission to the thing, his rhetoric has always struck me as hollow and self-serving. "Create more economic freedom" lol. I have an account, the app didn't even show you your return till fairly recently.
Coinbase will die, even if crypto survives. But he's already taken out his millions.
Seen it all from start ups to public. It's not every C-Level but when one does join it doesn't take long for everyone to know know they've clearly failed their way to the top.
It's striking how one will be hired to a non-traditional C-level title for a department they have no experience in and run it into the ground. I've even witnessed department leads beg not to hire one from the start and be fully ignored. I guess the fact they've been at the top for so long makes them untouchable?
What's outstanding is how often it happens and how both hiring and keeping them around never makes a lick of business sense. Even once exposed as incompetent, founders will dig their heals in and find any excuse to not bear responsibility of their bad hiring decision. They eventually leave on good terms and continue the cycle elsewhere.
But does hiring for merit really makes sense at C level?
Ideally a C level executive should have deep connections with government/large companies.
This is how entire capitalism functions at the moment. Connections make you money, not merit.
Even if you hire the best CEO there is, without connections there is no possible way to make money. How do you think people get good contracts for their companies?
The reason for hiring someone you know is because you presumably know them well enough to know that you can trust them and that they aren't a fake or otherwise incompetent. Even then, you can do an additional vetting for competence to give the decision more credibility. Plenty of vetting is possible, and recommended, even if you eliminate all candidates that you do not know at all.
If that leaves you with no candidates, only then does it become an either/or tradeoff. Don't conflate the plan A with the plan B.
These people need to be publicly named and shamed, enough to show up as a huge black eye in their Google/due diligence results.
I have suffered under a few such C-levels and their incompetence is maddening. It is hard not to see the C-level social network as one big circle-jerk, and they get to walk away scot free. These folks are only worthy of spending the rest of their life as a clerk at a gas station, not (mis)managing million/billion dollar companies.
Because it is too easy to degenerate into evil types using accusations to snipe at competitors, or other fuckery.
As another comment notes, accusations need evidence and solid claims. I have neither... I don't know the super deep internal politics of where I worked, only whispers from overhead conversations. Plus a number of sudden, "cordial" departures, and a bunch of napkin math estimating the costs of this person's antics.
Don't forget these are wealthy folks accustomed to using the legal system for their own ends. Ending up in the crosshairs of these folks could destroy a man, and as far as martyrdoms go you wouldn't even be making a larger impact as it changes nothing about the situation of other bad actors.
So, I'm going to grumble, and if I ever decide to bring her down I would do so in a place far, far from here.
The defamation lawsuits will be overwhelming. They don't even need to win, they can just lawyer you into submission. It's just like when you end up firing a regular employee for cause, the best course is to say nothing so nobody has a reason to get litigious.
Hey let’s not forget the founders who hire a buddy or two and give them C-level titles when they’re woefully unqualified for that role and proceed forever drag the company down.
That happens, but I don't think that's really relevant to pg's tweet. I mean, if a founder is willing to hire a buddy and deliberately overtitle them, that's easily the fault of the founder and, for better or for worse, shouldn't be a mystery if things go south.
That's very different from what pg is referring to, where, even through all the best of intentions and due diligence of a founder, a shitty C level is hired because they excel at bullshitting.
It depends on the stage of the company. Hiring a buddy early in the company's life might make total sense, especially if willing to work for primarily sweat equity compensation.
Are there actual examples of high-ranking engineers transitioning into tech company C-Suites? Maybe these kinds of roles shouldn't be careers, but something you do for a period of time.
it happens with CTOs. At many companies, CTO is less of a management role and more of "the leader of all of the principal engineers and source of innovation for the company". VPE reports to CTO and does the administrative side of things, CTO sets technical vision. Most other c suite type roles are generally bucketed into sales, marketing, operations, and if you are particularly unlucky: product, "Information", and human resources.
I’m just past the year Mark in being a CTO after a career as an engineer / architect. I won’t claim to be an amazing exec, but I still don’t understand how anyone could succeed in this role without having significant engineering experience. I approach this as “my turn” at playing the executive role - because I finally said to myself that there has to be someone who can code in the exec team of my next job. I intend for this to be my one and only time in a role like this - to do it well just requires more time and energy to sustain it for decades.
I've seen extremely sales / marketing oriented CTOs that worked well despite having not much / very outdated tech skills. It usually works pretty well when you have a lot of enterprise sales, and the CTO is often there to help get through procurement, relay technical requirements from sales calls, bizdevvy stuff re: integrations / platform, etc.
Every time I've seen that pattern work though, it's been paired with a very effective VP Eng, and quite a lot of autonomy on teams owing to the lack of a technical vision, or at least a technical vision that can be directly implemented (i.e. the CTO might have vague directional goals, but there's a lot of legwork required to turn that into something real).
Henrique De Castro's hiring and firing at Yahoo is one of my best examples of this. But $60 million for a year and change of work sure is a great way to fail!
They do that in government. You just get different cliques.
You hire executives for different reasons. Sometimes loyalty or incompetence to a degree is valuable as the person isn’t a threat. Other times people are hired to drive a particular agenda and can be relied upon to do that because they are too dumb to do otherwise. And sometimes they are sacrificial lambs.
as a fellow skeptic, this oversteps. your mistake is that smart = value. connections do have value, as does experience and other leadership qualities than domain expertise. your criticisms will be stronger if you recognize this.
I worked at a company that was relatively successful because of the connections the CEO brought to the table.
Objectively, the company would have been far less stressful to work at - and more profitable - if we had a better leader, but it wouldn’t have existed without his connections.
You're lucky the CEO had connections that somewhat panned out. I've experienced the "connections" based C-suite hire that was a complete and total net negative. It took 3 years for the removal to happen. It was a painful 3 years.
Yes, to be clear the CEO was also a founder, so he didn't just parachute in.
I have, unfortunately, also seen something similar to your experience. This is why hiring for a role like that is tricky.
I want to say for the record I also once hired an awesome CEO who was humble, sincere, reasonable - and very effective. We're still friends after 25+ years.
Spoke to the founder / CEO of a wildly successful now-public (former startup) company about his exec-level hires. He confided that 1/3 of executives were net positive (i.e. should retain), 1/3 were net neutral (i.e. should be fired) and 1/3 were net negative (i.e. separate ASAP!).
Gentleman also indicated that his peers on similar trajectories were even less successful at exec hiring. So there's a point of anecdata for you: "Good" at exec hiring might just be a 33% success rate. YMMV.
usually there are lawyers involved when hiring a c-suite and there are negotiations and contingencies. if you fire a c-suite you might have to send them off with a lot of cash and/or legal fees. it might even cause a little stir in the public image and hurt the stock or investor perception. It might be cheaper or less of a headache to just work around them.
one of the better scenarios is to have a candid, open conversation about their offramp and give them a couple quarters to find a good spot somewhere else and then they "resign".
As long as you can identify which are which quickly and action then 33% hit rate can stack your roster pretty quick. Hiring takes time though, in most cases.
Hiring takes time and not having people in roles can be worse than a mediocre performer and sometimes worse than a bad performer who generally gets the job done.
Sounds simple, but C suite executives have a high profile, high turnover at the C suite can spook the board, investors, etc. you don’t want too much turnover.
It also takes time to see results: the higher up the ladder, the more the work is second or third order effects which take time to show up.
If I hire someone to be a JS grunt, I’ll know very quickly if they can make a CRUD form because their job is to produce tangible assets which are immediately usable. In all but the most extreme cases, it takes months to years to tell whether a C-level hire is making good decisions, policies, hires, etc. and repairing the damage can be a substantial amount of work in its own right.
It's like any employee, vitality curve and all. The top 10-20% are responsible for 90-80% of positive results and the bottom vice versa while everyone in betweek keeps the boat afloat.
That seems unsurprising. It reminds me of that bit from one of Ben Horowitz's old articles [1]:
> Things go wrong, because building a multi-faceted human organization to compete and win in a dynamic, highly competitive market turns out to be really hard. If CEOs were graded on a curve, the mean on the test would be 22 out of a 100. This kind of mean can be psychologically challenging for a straight A student. It is particularly challenging, because nobody tells you that the mean is 22.
This reminds me of how one of the most disorienting feelings is when you've taken five steps on a journey of self-improvement. Miles ahead in the distance, you see your inspirations. Looking back, you see that those first five steps already put you in the 99.95th percentile of all humanity.
I would say this is true of almost any position. Ask any manager and they will probably say this is usually how it shakes out. 33 percent of hires are A players, 33 percent are B players, and 33 percent are C/D/F players.
It is grading on the curve. An A player at one company might be a B player at another. If someone is an excellent CxO they are probably a good candidate for a bigger and better company or the CEO job somewhere else and so will leave after some time unless given large incentive to stay or otherwise have reached their career ambitions.
Thing is, in many job positions "A players" add a lot of value, "B players" add reasonable value, and "C players" still do some useful work, it's only D- that are worthless.
However, for CxOs the dynamic is as the grandparent post mentioned, that mediocre CEOs add trivial value and the weak CEOs are actively harmful; so the expected tolerance to B-players should be quite different.
I think a lot of people fall for this kind of fallacy (no offense meant to your acquaintance).
1/ You really cannot grade absolute values on a curve. As others have pointed out, your A players are only in comparison to others in your team. Maybe they are actually C players, who knows? Maybe they are A players only in the environment you created etc, etc..
2/ And a more important point is that a lot of work is being done by people that are not A players. Whom I would call net positive is only in relationship to what I can measure. I know of many people in my team who were not exceptional at software, but got things done due to building relationship with other teams, ability to see things to completion etc. I think Amazon fell into the trap that only type A personalities get things done and I see it in other places too. It is easy to see the extremes, but a lot of times the glue that holds things together is almost invisible.
It is hard to gauge value and I personally am refusing to judge anyone (to the extent possible).
Projecting the exec's effectiveness onto the exec (e.g. "A/B/C Player") is woefully unfair, and my acquaintance & I would never intentionally suggest otherwise. Their effectiveness (positive, neutral, negative) is determined by a great many factors outside the individuals control -- e.g. company's size, growth rate, org structure, personnel, industry, etc.
The exec's success or failure isn't an indictment of their abilities, just that they're (in)effective in this organization at this particular moment in time. It's on the founders / CEO to recognize this, manage expectations, continuously communicate, and ultimately to force a transition if necessary. Luckily, most execs know the score. This is also why exec's have such generous exit packages: both parties can admit they made a mistake & separate amicably.
No doubt. Any number of c-levels I have worked with are prolific climbers whose numero uno skill is Network. Lords of LinkedIn. The kind of people who will say and do literally anything to keep their fingernails dug deep. Their actions appear to align with the needs of a company, so most are tolerated if not celebrated.
Can we turn it around and ask what we actually want from a (good) C-level. Cos I suspect it's not what most of us imagine.
At some point what we want from C-level is putting in place (bespoke) systems that achieve the "strategic" goals -
Is the monthly churn growing? Are you not able to get high touch sales to take off? Is the European product not ready?
All of those are the sort of "strategic" things people tend to hire CxOs for - but any good analyst can get you 80% of the way to identifying the problems, and then you have to pick a solution. At that point you are hiring someone for a very specific job with a clear roadmap. Maybe you can hire internally ?
Edit: on the other hand this article (from the frontpage) is an excellent example of hiring for a job, even though the person doing it is not going to be building the ditches etc. Walt hired for experience and focus on the job he wanted done. And as that job was going to have to be a negotiation with all the other agents building the park, he needed a high level advocate for the job (minimalmmosquitoes) he wanted
From this I suggest that hiring a CxO is hiring a person to act as advocate for the outcome you are hiring them for - very similar to politics
This is sort of the discussion I wanted to hear from this thread. What separates a a product manager paired with a data analyst from say, a CEO or CPO (product)? Surely the PM and DS are better armed to make decisions with data and talking to users, etc.
In big orgs it’s making decisions based on the totality of the business, not if we should spend $X on ads to grow revenue 50%.
If any company is being honest with itself, there are more good ideas than time or money.
A good CEO sets a course for the company, and most importantly gets everyone on board then relentlessly squashes distractions and basically clears the way for everyone to actually do their job.
CEOs need business sense, but as you said, the people who know the details report to the CEO. At the heart of it, the CEO is a salesperson and people manager.
But you need both. You need someone saying "we're going in this direction", then people down the chains making decisions how best to get there.
I've worked at places that had no leadership from the top and it was incredibly frustrating. 10 different teams pulling in 10 different directions usually means no progress at all.
I think there’s all kinds of problems that intersect to create the problems we see with these hires:
- founders, especially first time founders, often have middling experience hiring for any role, and zero experience hiring execs.
- the absolute best execs often have no shortage of offers, and hence it can be quite hard to identify and attract these people
- founders often don’t want to pay what the really good execs are worth. Not that I’m even “really good”, but there’s a number of startups where I’ve been recruited because things are a disaster, can’t figure out how to scale the business, etc etc, and then after speaking with everyone they turn around and offer half a percent of the company, and act like they’re being generous.
- founders want to hire someone who’s the right person for the long haul, because of all of the above pains - except that those people often are accustomed to two stages ahead of where the company is now and may not be prepared for what’s required right now
And then, sure, there are the people who have failed up enough, or gotten lucky enough to win the startup lottery, and then coasted from there.
But look at it this other way - 50% of engineers are in the bottom half in skill and talent. It’s just that you do your best to optimize for the upper half, and since you’re hiring lots of them, you trust in the numbers to pay off for you. When you are hiring one, and just one, head of sales - the margin of error is really thin.
I guess you comment as an exec but this comment does not help make the case. Without being an engineer myself, I would be very frustrated with the last paragraph. It uses a statistically true fact to make a meaningless argument (how is optimising for top 50% different to e.g. optimising for bottom 50%?). Furthermore it demonstrates a view of a team of engineers as a bag of individual contributors. In a team, skill and talent are only one factor in optimising team dynamics. You don’t trust in numbers, you trust in dynamics and collaboration and in people growing within your organisation. I recently hired a PhD and a bored junior admin whose most exciting piece of work was scripting his boring work away at the same day. Also to your core intended argument, you hire an engineer in a couple of interviews, an exec would go through an extensive round of meetings and interviews and therefore you would optimise the process across different dimensions. The margin of error should be pretty similar, given fundamentally organisations have an underlying risk appetite even if it is implicit. The issue is that execs have more experience manipulating your perception of risk and therefore you should go with your eyes open, because this is part of the skillset you are probably looking for anyway.
Be careful of misaligned incentives though. A PE invested in a company (not a software company) I worked with recently, the PE placed execs and those execs proceeded to:
- professionalize the company by switching everything to SAP and outsourcing all IT to India (and from our interaction with that company in India, they didn't chose a very good company)
- increase revenue in the sort term by devaluing the brand
- lower the quality of products through cost saving
As a result after 2 years, the company sold to one of its long term partner for double the price of the valuation the PE invested in. Since the increase of revenue was done though temporarily dumping inferior products, the revenue is now slightly below the levels before the PE investment.
Customers loved the company before and would evangelize for their products. Now it's no longer the case, a lot of customers have turned on it and openly criticize it. And most of the execs the PE brought in were either fired by the new acquirer or resigned to move on to new opportunities.
So, were the execs the PE brought in bad hires? No, they succeeded in the PEs objectives. Were they good for the company? Not in the long term but, in the short term, they helped the founder get a very good exit (although the founder is pissed because it taints his legacy).
Another aspect of this that I observed more than once is the fawning reverence that the managerial class and other middlemen seemed to have towards the c-suite.
I remember the excitement surrounding the arrival of new execs, including details about their house and fancy cars.
There seems to be a belief that if you've made it to SVP or better, your talent and intelligence goes without saying.
My interactions with these folks were limited, but without exception, I was far from impressed with any of them.
1. C-level execs are given massive compensation, with the justification that a good one is well worth the price.
AND
2. There's no good objective way to measure C-level performance.
That alone should make people deeply suspicious about these compensation packages. On top of that, the best person for a given CXO job often just so happens to be a golfing buddy and/or have outside business dealings with half the board.
I'm not surprised by ambitous execs grabbing what they can, it's what they do after all, but I am pretty disturbed by how many people outside of those elite cliques will carry water for them and pretend like the C-level hiring market is some sort of efficient meritocracy.
One measure of a high-quality C-level performer is the quality of their teams. The best C-level people can bring in very high-quality managers and individual contributors underneath them. Below average C-level people really struggle on this front.
Also, for some C-level roles there are good and objective ways to measure performance. For example, for a Chief Revenue Officer you have (obviously) revenue. There are a ton of confounding variables of course but in general CROs who consistently out-perform plan are better than those who consistently under-perform plan.
I've definitely seen CEOs with enormous amounts of success (in the companies they led previously) bring in dogshit teams to their current company. I've also seen dogshit CEOs bring in amazing people.
It’s game theory and asymmetric information at its finest. Throw in a healthy dose of survivorship bias, a pinch of appeal to authority, and you get a perfect recipe for astronomical out of whack compensation packages.
> 2. There's no good objective way to measure C-level performance.
> On top of that, the best person for a given CXO job often just so happens to be a golfing buddy and/or have outside business dealings with half the board.
> C-level hiring market [isn't] some sort of efficient meritocracy
Those 3 things aren't contradictory, they each follow from the other. In absence of an objective way to measure performance, the best thing is "I have experience with this person, and can vouch that they're good." And so it totally makes sense that this sort of network-based hiring is what we see instead of a meritocracy.
I am convinced that we need to move companies from effective hierarchical dictatorships to more democratic institutions. A CxO should be like an elected politician - representing some manifesto that is a coherent (!) package of measures and gets appointed maybe by an election amount employees / shareholders.
As such they need to persuade a majority of people who will supply the (human / financial) capital that their manifesto is the best option. They essential earn their way into the office.
Edit: I am also semi convinced that the hierarchical thing is half the problem. Having a single person make "the hard decisions" is usually a way to have the wrong decision made about 50% of the time. Somehow humanity has found science as good means of improving those odds. But for the sort of decisions we make in business (very little hard science) then I suspect democratic consensus might be a much better way to get a good decision.
I've seen this in a startup that grew to around 500 people, and it wasn't pretty. The office is full enough of politics as is, and it only gets worse when you have to campaign for your job.
Hiring externally side steps all of that, and can bring a fresh perspective.
So, I know my initial comment above was pretty snarky. My follow-up reply here will probably sound a bit argumentative. For what it's worth, I mean to engage genuinely in the below comment, and try to offer a little bit of whatever wisdom I've managed to acquire -- so that maybe your :-( can turn into a :-) as you engage with office politics.
I would put to you that it already is quite transparent -- to folks who know how to speak the language. Look closely at who is speaking, what is being said, and (perhaps most importantly) what isn't being said. Power in a corporation is measured in information and resources. So, a simple definition of office politics could be: the art of influencing the flow of information and resources.
If it doesn't feel transparent, the most obvious causes are (in rough dependency order): not being in the right rooms, not knowing what to listen for, or not knowing how to talk the talk.
Can I ask if this definition or mini-framework resonates for you? What have you tried to make things more transparent for yourself? How has it gone so far?
But that same argument was made in the real world of politics - I expect both Cardinal Richelieu and Talleyrand have quotations on it.
The point is not that there is a framework that advantages certain people (usually just being in the room requires certain advantages from birth) but that we should get rid of the framework and replace it with a new fairer one.
I have been in the rooms - and the people in them are not as smart as inciteful or as informed as many outside. We can do much better.
I will keep my idealism as it warms me during the long dark winter of selfishness
This makes sense in theory, but seems insanely weird in practice.
1. I start a company. It’s just me. Obviously, I lead the company.
2. It’s successful!
3. I hire two more people to help with some of the low-hanging fruit that I don’t have as much time for.
4. Do I need to be careful now so that they don’t just conspire against me, elect one of themselves to “run the company” and just take the assets and run?
Or is this too small of a company for this to make sense? Do we make it law for companies with more than 500 employees? So most companies will stay at 499 employees for as long as possible?
How does make sense in theory? They’ve just reinvented partnerships or cooperatives, which have not exactly outcompeted corporations despite long having had enough time to do so.
You run it like a co-op and get a stake in the company no matter how your position or job changes. And you can leave and sell off your stake when you want.
> 4. Do I need to be careful now so that they don’t just conspire against me, elect one of themselves to “run the company” and just take the assets and run?
If your company was structured as a co-op, yes. Of course you'd probably make them buy in at a certain level, or else their ownership would be lower than yours by enough that they wouldn't be able to vote you down (or at least not until their share vests several years down the line). But fundamentally you should have some skin in the game; they're putting their time and effort into the company too, you owe it to them not to fuck it up and they deserve to be able to replace you if you go off the rails.
> Or is this too small of a company for this to make sense? Do we make it law for companies with more than 500 employees? So most companies will stay at 499 employees for as long as possible?
We don't need to mandate the co-op model, just allow it to compete and let the best model win. Tweaks to antitrust enforcement, tax treatment, and securities laws would be a good way to level the playing field. IMO it's past time to start pulling back on limited liability too (which was meant to be something granted to corporations that promised significant public benefits, not something everyone gets by default).
Frankly we're already starting to see a rise in co-ops; traditionally they found it a lot harder to raise capital than traditional corporations, but nowadays there's a lot of capital sloshing around at the same time that cheaper communication, outsourcing and SAAS means lots of businesses (especially in tech) can be run in a more capital-light fashion than ever before. And who knows, maybe the CEO-as-dictator model will still win out. But we should let them fight on a level playing field so that the best model wins on its merits.
Agreed completely. And perhaps it helps to think of the "invested value" of the company as a form of financial and human capital invested so far - when you hire those two people you have invested maybe a year of work. A year later you have invested two years, and so have they!
If you were all panning for gold (not terrible analogy for searching product market fit) then while you share the gold, you have doubled your chances
> If your company was structured as a co-op, yes. Of course you'd probably make them buy in at a certain level, or else their ownership would be lower than yours by enough that they wouldn't be able to vote you down (or at least not until their share vests several years down the line). But fundamentally you should have some skin in the game; they're putting their time and effort into the company too, you owe it to them not to fuck it up and they deserve to be able to replace you if you go off the rails.
Hang on, this sounds just like a C corp with shares that employees are required to buy. No?
See the other thread about humans taking too long to make decisions between roughly equal options.
Requiring consensus for business decisions is a guarantee of slow decisions. With a good process, you can make the easy decisions in a timely manner, but the hard decisions will still take a long time, and there's going to be a lot more effort spent on coming to decisions.
You kind of said it by accident here:
> I am convinced that we need to move companies from effective hierarchical dictatorships to more democratic institutions.
You want to move from effective leadership to something else. ;p
It's much better, IMHO, to work towards making sure decisions can be made quickly and reconsidered if necessary, than to try to make sure decisions are made correctly at the cost of finding consensus.
Set time limits on decisions and revisit under certain circumstances.
I bet there is / will be a lot of fertile ground for research
Frankly just being transparent about such decision making will almost certainly put that company in the top quartile for good decision making - most large companies make many decisions - and anecdotally make them badly
The org chart is hierarchical but large companies don’t run on the org chart in practice. Executives do need to sell their vision into the org, even their own direct reporting division. There are millions of ways for staff to subtly or not so subtly sabotage executive plans.
The ability to succeed at aligning and motivating staff is one of the big differentiators between an effective C-level leader and an over-promoted manager. An effective C leader does need public leadership skills similar to a politician’s.
As does Putin or Xi. And they are good at it. But that does not mean the people under them are free or able to influence resource allocation in a fair equal manner.
This is a bit of a weird take IMO -- CEOs already need to persuade most employees (human capital) and most investors (financial capital) that their manifesto is the best option, or the employees will quit and the investors will take their money elsewhere.
With some exceptions, no one is really forced to invest / remain employed as they might be in an actual dictatorship.
Observe the benevolent-dictator-for-life phenomenon in open source software -- I fully support democracy but it's not obvious to me that its benefits scale down (or perhaps transfer sideways) to corporations; if they did, wouldn't we see a lot more organizations structure this way? Most of government is already not organized around democratic norms, with one extreme being the military.
I'm curious -- what convinces you of the need for this shift?
Maybe being a golfing buddy does qualify for being a good CXO. To be a "golfing buddy", you need money and connections. Connections are important for that job, and wealth correlates with success and good finances, again important. Some of them are just born in wealthy families, but this is a positive, not a negative: wealthy family often give their kids good education, have lots of connections, and are used to being leaders. Golfing buddies also need to make good conversation, including on business topics, otherwise they won't stay buddies for long, again a valuable skill.
Being a golfing buddy certainly isn't an objective criteria, but it is not completely worthless, and it is easier to detect fakers when you spend a lot of time with them, or at least, it requires more effort from the faker. Objective criteria typically include past work, and CXOs usually have that too.
Maybe a good solution for CEOs in that situation is to be pretty clear about that - make the CxO role a purely "public face" role, and leave day to day operations to VP / SVPs.
In my experience that rarely happens, the "golfing buddy" types may be good at the golfing buddy stuff but also exert a lot of influence (often quite forcefully) on the overall org where their actions tend to be mostly negative.
In theory a good leader does exactly this. I once heard leadership defined as creating consensus. It is only when two VPs can’t make a decision does the good CxO step in to make a judgement call based on the arguments of all sides.
Even Steve Jobs talked about losing arguments at Apple and not getting his way. He hated it, but he recognized he maybe didn’t always know best and trusted people to make the right call if they could defend their rationale.
Too many leaders think their job is to be a decider, when it is really their job is to hire people they trust to make most decisions and then they make a few critical ones.
A unrelated item from the department of bad ideas that might be good ideas:
(Horns on)
Maybe voter ID laws aren't such a bad idea. Getting an ID and presenting it is like a "bare minimum" litmus test for whether or not you can comprehend and navigate government bureaucracy. If you can't comprehend and navigate the simplest form of it, how could you be qualified to make decisions on it?
(Horns off)
An unfortunate side effect of both these is that they keep one group in and everyone else locked out.
> If you can't comprehend and navigate the simplest form of it, how could you be qualified to make decisions on it?
Surely it's the reverse? People who are poorly served by existing government bureaucracy are those who most need to have input into the running of that bureaucracy.
There is a history into the 2020s of blacks excluded from golf country clubs (most private clubs are exempt from discrimination laws). I believe the PGA didn't stop holding events at whites-only country clubs until 1990.
If a CEO or other C-level sets some targets, then you’d think they would be held accountable for missing them. But from what I’ve seen, this is very rare. So the board is just as responsible for what happens as the CEO.
I have seen cases where the board holds executives accountable, and that results in a better company lead by competent executives. But that kind of accountability is unusual in small companies because the board and executives are often one and the same group.
If there’s anything I’ve learned over my career it’s that the theoretical structure of a company has no inherent relationship to reality. If the CEO, chairman and board members are all mates then they will pat each other on the back until well after the iceberg has ripped a hole in the side of the ship.
This also makes it so that they care less about any one particular company failing when they decide to hand out a leadership position to an incompetent buddy
C suite comp is largely stock, so they are held accountable financially, their compensation literally rises or falls directly with the company's value.
- If I recommend this guy and he's at least acceptable, my network grows
- If the guy I recommend is not that good, all three will make excuses: my mate who hired him (will blame chemistry/randomness or me), the dude himself (will blame chemistry/randomness or me), and me (will blame chemistry/randomness). Since we're all adults, you can't blame someone else for your lack of due diligence, so it's a shame their styles were so different and the market turned against their brilliant plan.
- Nobody ever gets blacklisted for bad recommendations
- Everyone is complacent about who they will recommend
- My network grows, and I don't need to grill everyone. So my network grows.
Of course what this also means is if you don't happen to be in one of these networks of mediocre people, you are totally out of luck because those networks are big enough that someone will be found, just not you.
Your compensation is determined by your power within an organization, not your contribution to it.
What blows my mind is the degree to which people believe that perfect competition exists everywhere and “the market” will fix all inefficiencies.
Edit: I want to make clear that I am not denigrating the value of markets, I’m only looking to point out the idealization that exists in many people’s minds, especially as I have encountered on this exact forum.
That is not the end game because small companies, startups, etc. are more efficient than big ones and have no ingrained culture that prevents innovation.
Eventually some of those small companies become inefficient big companies. We see this struggle recently in the news, with the CEOs of Facebook and Google talking about how they need to become more efficient, maybe certain people shouldn't be there, etc. -- they got big when times were good and now they struggle with the inevitable consequences of bigness.
This has happened many times. Nobody saw Microsoft coming in the 1970s to dethrone IBM. Microsoft didn't see Google coming and still can't beat them on search, they didn't see AWS coming and is catching up on cloud years later, etc. Most of the automotive industry thought Tesla could not scale and would go out of business years ago.
That happens sometimes. Many times, the variance in launching a small company is so high that the risk premium and payoff for challenging the inefficiencies has a negative expected value.
I would dispute that claim. Business and organizations have never been larger, more powerful, more wealthy, or more politically connected. Small business has been shrinking drastically for generations now all across the globe. Especially outside of tech. But even in the tech world how many of the workers are operating primarily under the direct employment or contract of some 50,000+ employee company along with thousands of other contractors? And how many 20 person tech businesses have been operating consistently for 15 years?
> Small business has been shrinking drastically for generations now all across the globe. Especially outside of tech.
I am not saying it is not true but it would be good to have some data about this.
Cafes, bakeries, small restaurants, lawyer offices, flower shops are all small businesses, a lot of them run by 1 or 2 people.
I guess it depends what we consider a small business.
Market theories don't claim everyone makes efficient decisions just that over time, people tend to pay for their inefficiencies. In contrast, systems based on status, family lineage, etc, provide little to no natural force against similar inefficiencies.
The gap between the actual theories and the popular conception is what I’m commenting on.
Note that these theories are actually generally descriptive, no one wholesale invented capitalism. For the entirety of human history we have had systems based on a combination of markets, status, family lineage, etc. this applies both to the past and to today.
What I’m taking issue with is the degree to which all of that is glossed over and people assume that the market will evolve naturally if left unspoiled/untouched.
There are plenty of market theories that claim that in the long run decisions will converge towards an optimum.
In practice, this is a tautology. People pay for inefficiencies, but inefficiencies are defined as what lose money. You didn't say anything, you just diluted a (wrong) theory to make it correct and as a result don't have a theory anymore, just a rhetorical trick.
> There are plenty of market theories that claim that in the long run decisions will converge towards an optimum.
Do you have an example of an economist making that argument, outside of theoretical modeling?
I don't see the tautology. One person in a leadership position may value certain things and be willing to lose money on them. The cost gives their peers and supervisors at least one reason to question that practice.
The tautology is that business inefficiencies are costs, either future, current, or comparative. Saying that inefficiencies will be punished in the long term is tautological, you're just restating the definition business inefficiencies.
As far as economists making that argument, take a look at the strong and semi-strong EMH. Plenty of economists agree with the semi-strong version.
1. The board is constantly dealing with the CEO, and CEOs are very good at taking credit for things regardless of their actual impact. So they create a subjective impression of being very important.
2. The CEO is only one person, so throwing (say) 1% of the company's profits at them seems like a great investment for all that stuff they're "doing".
If enough boards play this game, CEO pay is driven through the roof.
I think it's about risk aversion and social proof. The CEO can usually persuade the board that they're important, and the board can easily pay them a lot, so why not do so, rather than risk them leaving? Once enough boards do that, it becomes the "going rate for CEOs" i.e. social proof / herding takes over.
Also, the aforementioned difficulty of measuring CEO performance perversely becomes an asset. When people don't know the quality of what they're buying, but they feel that quality is very important, they'll turn to any proxy (Harvard on resume, butt was in chair while previous company was doing well) and pay top dollar for that. You can't pay for quality, but it's extremely easy to pay for scarcity if you really want to.
It just comes back to... if you have a lot of money to spend, and the purchase might matter, you'll often be willing to spend a lot for the "best", even if there's no evidence or reason to believe the "best" is really of great value. I've seen this in my own behavior and that of my spouse (what if the most expensive preschool actually is the best one?)
It's also pretty hard to measure the performance of software engineers at the senior level. When hiring, I don't feel like it's wrong to encourage good software engineers to refer former colleagues they think are good.
I don't see why that would be wrong for C-level executive jobs either. It's really the same thing -- trusting the opinion of people you know and think are good is a better bet than drinking from a fire hose of job applicants of widely varying quality.
At any job where your purpose is "leadership" and "impact" it is difficult to quantify success. People have tried to measure with things like OKRs, but ultimately a lot of what successful senior people bring to the table is hard to measure.
I wonder if this is also true for founders, but by virtue of selection bias "good" founders hiring "bad" executives is more common than good executives joining bad founders (because good founders' companies last longer and hire more people than bad founders)
Ive always wondered why executives get such generous compensation packages. Are most people unwilling to take these roles at "pretty damn good" incentives packages, so companies are forced to give "crazy lucrative" incentive packages? Are there really VPs that would pass up a CEO position if it didn't come with a 25 million golden parachute clause? If it was only 5 million, they walk?
A lot of anger in the comments here. Not exactly sure who it's directed at: the existence of connected people? The founder who makes the bad hiring decision? The fact that their compensation is so high? All of the above?
Unless you're advocating for capped compensation or removing autonomy in who a founder is allowed to hire, if you're angry, it's probably a form of jealousy. It's somewhat natural to feel jealous at people who don't "work hard enough" (by your standards) and yet reap larger rewards than you. Or who have seemingly casual lives (by your standards), yet get more opportunities. It's also easy to pretend that jealousy is actually selfless outrage and claim offense against everyone else (for whom your outrage represents).
But the same could likely be said about you, if you talked to the right people. Where I used to live, "Go home, tech bro" was common graffiti to see. I knew a woman in the beauty industry whose partner was in the tech industry. She resented how much money that he made because, her words, "she worked harder than he did." As if her idea of work was how value should be calculated.
Jealously would imply wanting to be that guy? By that definition I for one would be jealous of a Mega Millions winner (although I probably shouldn't be) but would not be jealous of a good-for-nothing exec who accomplished nothing other than collecting huge paycheck while letting a bunch of people down who all put their trust in them.
While your point about jealousy is a good one, MBA-ification is real and has real consequences, many of which might reasonably provoke frustration
I do agree the anger is ideally channeled into some attempt to productively frame, understand and solve the problem, but dismissing it all as sour grapes doesn't seem very helpful either
I saw the issue pithily summarized recently:
> Salesmen, in any field other than sales, are like an invasive species who outcompete the natives with their superior social polish, but who struggle to actually do anything, which leads to systemic underperformance and the erosion of trust, which only makes the competitive necessity of salesmanship even greater
We need to build social systems which don't select preferentially for relentless salespeople and smooth talking charlatans if we want to live in a prosperous, harmonious society. The optimal proportion of these is in all likelihood not zero, but does anyone believe it's as high as we see now?
>We need to build social systems which don't select for relentless salespeople and smooth talking charlatans if we want to live in a prosperous, harmonious society. The optimal proportion of these is in all likelihood not zero, but does anyone believe it's as high as we see now?
I see the good intentions here, but I don't really support it. Would I like people to lie and cheat less? Yes. Would I like a society where nobody can lie and cheat? No, because of what that enforcement would entail.
Agreed, it's better to tolerate some amount of abuse than eliminate every potential for it by force. I just think it's possible to find a better balance than we have now, if not imperative if we want to survive civilizational adolescence
At a startup the most common failure mode I've seen is hiring someone who, even if they were good at there last job at BiggerCo, is terrible at what the startup (in a different business development stage) needs.
Hiring a person who's been running a thousand-person org to take over a 1-10 person org is often insanity, but it can look smart because "wow, they were doing so much at such a successful place and have so many great stories to share." Run a 1000-person org and after all, even if you suck, some of your sub-departments are likely to hit on some great results that you can share in future interviews!
I think there's justified anger on the part of people who have seen companies they enjoy working at be damaged, either in culture or in more direct results by a poor C-level hire, and most people have experienced situations where this has been abundantly clear from the outset.
It's completely reasonable to want to see a company you work for succeed, and it's completely reasonable to be frustrated when those companies make obviously bad decisions that put your job in jeopardy or make the company a worse place to work for. Particularly with startups, a lot of your career success is fairly closely tied to the success of the companies you work for (no one cares about hiring a eng or other role from a startup who crashed and burned).
We live in a society ... where humans do human things. Cronyism, nepotism, and tribalism are normal human behaviors, regardless of how some people think humans should behave. Our fellow humans are under no obligation to surpass humanity and behave altruistically. I think a more useful question is how do we utilize or exploit our human behavior to improve ourselves and our societies.
As a worker, I create wealth. There is also a parasitic class of heirs who are LPs for VCs, or who get dividend, rent and interest checks - rentiers expropriating surplus labor time of those who work. Yes, my attitude towards them is about what Lenin's were for the tsar and his parasitical family.
I can care less what those who are parasites off my labor think of me, and their cadre who somehow benefit off this paraditism. Workers work, create wealth and have no need of these parasites. Yes we resent them, and will eventually eliminate this parasitism.
Is the management of workers and capital not work? Where can I see workers who have self-organized (without management) to the size of a thousand-person corporation?
I doubt that most people here are angry about this. For me, at least, my anger arises from the opportunity cost.
First, if you spend a lot of money (and time) supporting a dud executive then you you’ve lost a bunch of runway. These people are often in a position to put startups into a death spiral from which they will never recover.
So it follows that as a founder that idea is dead - it’s almost impossible to restart. If you’ve put your heart and soul into a business, spent a year raising funds and putting a team together, and then some bozo is parachuted into a position of authority and proceeds to throws all your hard work out the window as they miss their own targets and crash into the terrain, yeah that’s gonna make you pretty pissed off because you won’t get that opportunity ever again.
It’s not about jealousy. It’s about the destruction of value.
If growing a startup into a successful business was a solved problem, then there wouldn't be as many failures. My point is: why does their appear to be an assumption that only a "dud" exec fails? Where is the allowance for the fact that there are a lot of random variables?
Don't get me wrong, I know executives make poor decisions (and have seen a few myself first hand), but also I've seen decisions that nobody knew were right or not (or at least they didn't say so, at the time). Yet if it failed, of course the armchair quarterbacks come out with the "I told you so."
I don't think that's the assumption at all. Failure can - and does - happen to everyone, and doesn't on its own imply incompetence. We all make bad assumptions and bad projections, and that's part of the game.
But an incompetent executive will avoid making decisions altogether, and will pretend to lead by setting goals that are entirely detached from reality.
In my experience, the lack of decision making and inappropriate goal setting is quite obvious to those of us "in the trenches". You can't, for example, expect to triple your sales in the next quarter unless you're doing something to support that goal, like increasing the size of the sales team or doing more marketing. But I have worked for people who have set sales targets thinking that this is all that's needed to make sales. These people are good at talking about the "what" but no good at working out the "how".
There is strategic thinking, tactical thinking and wishful thinking. Incompetent executives generally operate using the latter framework.
Without fail, there is always one comment on HN that is faux-insightful but really just being contrarian towards the general tone of other comments without much substance.
You don't need to advocate for capped compensation or removing autonomy to be righteously angry over inept leadership. You should be angry over inept leadership, it's essentially corruption, and hurts everyone else in the organization. I don't even know what the point of this comment is.
You responded to my point about about capped compensation or removing autonomy, so I think you understand what my point is: the anger people are expressing, including so-called "righteous anger," is totally hypocritical unless you are advocating for measures that would also apply to you. If you're not willing to commit to those measures, then you're just expressing jealousy that it's not you in that situation.
But why does capped compensation help? The issue is not that people are highly paid, but that undeserving, corrupt, and even fraudulent people are highly paid. Capped compensation may well be a good idea (not sure), but it doesn't really help with corruption and incompetence. The point is that there are already double standards that apply to the average worker, but less so to the C-suite (particularly in startups).
I don't think it would be accurate to consider my anger over the CEO who awarded themselves a $25M bonus while laying off hundreds of my colleagues and tanking the company to be "jealousy".
Edit: I apologize for the aggressive tone in the original reply, though I disagree with your take it wasn't necessary.
Thanks for keeping it civil, I appreciate it! The capped compensation is for the "they're paid too much" angle. Removing autonomy in hiring is for the "they're undeserving/corrupt" angle. That way there's a different process for hiring that isn't corrupted by nepotism/cronyism.
I'm not trying to sound like I'm discrediting your experience or feelings, but I only really have your side of what happened, so of course your experience will sound justified from your perspective. There's a lot of possibilities for why that could have happened, not including ones that nobody could know about except upper management.
I may be wrong about my assessment of the leadership's competence in this case (I'm not, but I can see how you may not be able to know) but that doesn't mean jealousy is the motive. Your skepticism should be equally applied to the psychological motives of the commenters, in my opinion.
I'd absolutely commit to measures like more transparency and objectivity in hiring criteria, and of course that would apply to me as well. I've got nothing but contempt for the "senior developers" of HN who think writing fizzbuzz or coding on a whiteboard is beneath them; I have zero problem with being asked to demonstrate the concrete skills that I'm bringing to a position (and if that means I get beaten to the punch by someone with a less impressive degree/CV who happens to be better at the actual work, well, them's the breaks). I just wish the same applied at the top as well.
Even though I think some people are jealous there are plenty of legitimate reasons to be mad. Often highly paid people are where they are due to nepotistic inertia. It's extra infuriating because they all pretend it's merit, and those that admit there's a broken system that enables their wealth ignore any personal responsibility for it's existence. Everyone else is working the system after all, don't want to be left behind. In general many (most?) highly paid people are in that position because of a system of exploitation that they're tacitly involved in and turn a blind eye to. So yeah, plenty of reasons to be mad.
Takeovers and special circumstances aside, "promote, don't hire externally" should be way more common and the prefered approach (imo).
I think there's a three question protocol that should work reasonably well.
Q1: Do we actually need this CxO role?
Q2: Who will report to this CxO?
Q3: Why can't we promote from the pool from the answer to Q2 instead of hireing externally?
Anecdotally, I've observed that man CxO roles are created at the behest of the board or to acquire prestige for some purpose. It would not surprise me that it's easy to find highly successful people who will trade Prestige for money and WLB after a certain point in their career.
Promoting internally won't buy your firm more prestige/credibility.
I must disagree. What I have seen is what you are saying enables bad internal culture, decision making and technical habits to become more ingrained into the very soul of the company.
I see well meaning senior technical people disregard my advice on technical matters because that's just not how things are done there ever, some things are so far out of the box they can't even conceive of it as a possibility. Manager after manager telling you the same answer because that's what whoever they ask about tells them because everyone at that dept/company is 15+yr tenured.
If you want to keep things as they are but maybe slightly better or to make different internal people happy you promote from within. If you want fresh thinking and new directions you gotta hire from the outside.
I can't emphasize this enough. The only analogy that comes to mind is eskimos that have to traverse a desert but only want other eskimos in their team.
If we are going to go to extremes to illustrate the disadvantages then let me point out what happens with the opposite.
When you choose to hire outside for every single leadership position especially senior ones you send the message to the people that their effort and sacrifice is not appreciated and you don't trust and that they won't be growing with the company.
The people who built the company then get disaffected and leave, eventually no one is committed and things go to hell because there is no loyalty or personal interest.
You are right, extremes are bad and balance is good. But if you have a startup and nobody in the 10 person company has managed people let along other managers for more than 5 years, yeah, hire from outside and create more management roles internally so your people can get promoted and gain experience. There is no substitution for experience, especially political experience for a political role.
If someone is already handling the functions of the CxO role internally and doing it well, they should be considered as a forerunner for the position.
Anyone hired externally must be expected to meet a substantially higher bar than the existing employees. Bringing in an external CxO who is less qualified than internal candidates will destroy morale and lead to attrition.
However, there’s a lot to be said for bringing in an external CxO who can take the team and the company to the next level.
A CxO role is quite different than a traditional manager role. You can’t expect good managers to automatically be good C-level executives because the work is just too different. It’s the same story as promoting ICs to managers - Different responsibilities and different skill sets.
But internal employees should always at least be considered and given a fair shot.
Eric Schmidt was a great example of bringing in outside help to take the company to the next level.
Sheryl Sandberg is another example, probably more famous mostly because I think Schmidt almost seemed like he was a founder whereas Sheryl’s story is always about coming in as the Adult to be #2.
Where the CxO role interfaces a lot with external parties is where an external hire often is better suited because they have prior experience dealing with external facets of their roles. An internal person in Finance may not have the requisite experience regarding dealing with public company reporting requirements, for example.
You’re very right on the bar. They have to be so clearly better (in reality as well as resume) that they can move skeptics from the bias of “I could do the job better” to “I can learn from them.”
Well one of the problems is that you're often hiring a CxO to bring characteristics of a bigger company to your smaller company as it grows. For example, if you have a haphazardly grown sales team doing about $10 million in revenue, you might want to bring in someone who has been a Director in a $100m sales org to be your Chief Revenue Officer to bring some of the sales force management and compensation practices that you need to develop as your sales team gets bigger. There's nobody in your organization who really knows that.
> Q3: Why can't we promote from the pool from the answer to Q2 instead of hiring externally?
To offer a few potential answers:
* Because the existing company culture is not conducive to taking a step forward, and you intentionally want to bring in outside ideas (e.g., bigger-company experience).
* Because the people who are the answer to Q2 don't get along all that well, or are worried about their individual career paths, and promoting one of them above the others will make them upset in the short term.
* Along the same lines - because you don't trust the people from Q2 to level up and handle the full scope, and will instead always favor "their" organization.
As an employer, I have seen low-performing employees resign because they found a senior/management/VP-level title elsewhere, and I think “well, good for you, I suppose”… I imagine people like this just fail their way up, learning enough jargon along the way to impress the next employer.
I dealt enough with C-Level (was one myself some 20+ years ago). They come in all kind of shapes. One was very entertaining. Whenever I try to schedule something with him he would look into his book and start reciting - in 3 days I am of to Hawaii for vacation, in 5 days I am driving my kid to XYZ championship, in 7 days I am driving my other kid to art classes, I am off to my pilot's classes etc. etc. I just prayed - please, please do not tell me that you've scheduled sex tomorrow at 3PM. I've had enough details of you private life to last me lifetime and when the fuck do you actually work?
332 comments
[ 3.1 ms ] story [ 386 ms ] threadShreyas Doshi calls this the Incompetent Leader (https://twitter.com/shreyas/status/1339997380335128576), which i will quote below for the twitter allergic (it is a better framing than I can ever come up with):
---
First-time founders, CEOs, and even employees should understand the playbook of the Incompetent Leader (IL).
The IL is savvy & charismatic, and excels at 4 things: 1) Feign competence 2) Create confusion 3) Buy time 4) Fail up
The IL playbook & what to do about it
The IL’s most favorite move is simple: Buy Time
The IL’s 2nd most favorite move is: Buy More Time.
After doing this a few times, the IL’s masterstroke is: Fail Up.
The IL will repeat this a few times over a 20-30 year career to reach “spectacular success”
Here’s how it works:
Once upon a time:
IL joins a new company, with much fanfare from the CEO, who really wants this to work out.
Remember, the IL is incapable of making a significant, singular impact.
IL doesn’t want anyone to know this.
So what does IL do?
IL sets the playbook in motion.
Step 1 -
IL: “I don’t have the right people. Cannot execute without the right team.”
CEO: “I guess that’s reasonable. Do what you have to.”
Result: IL has just bought 6-9 months to go hire org leaders, managers, while hiding incompetence behind charisma & confidence.
[after 6-9 months]
Step 2 -
IL: “Have a better team now. Look how well I’ve hired! But my org doesn’t have the right structure. Not aligned with new strategy, worried execution will suffer.”
CEO: “Hmmm… fine, go ahead.”
Result: IL has just bought 3 months to plan re-org, 3 more to let it settle
[after 6-9 months]
Step 3 -
IL: “Okay, that reorg helped & my people are firing on all cylinders. But I don’t have enough cross-functional alignment. We need a company re-org/Need to bring those functions into my org/Need new cross-func leaders”
CEO (pot committed): “Fine, let’s do X, Y, Z here”
[after 6 more months]
Step 4 -
IL: “Some of my key people left because of frustration with all of this. I need to replenish the gaps. Btw, look at these amazing results last quarter!”
CEO to IL: “OK let me think about it”
CEO (thinking): Those results are due to market tailwinds & not THAT amazing
[Privately, CEO makes a call to an executive search firm to begin finding a replacement for IL]
[At the next CEO/IL 1:1]
CEO: “It’s time to part ways”
IL (after expressing some incredulity & outrage): “I understand. I want to do what's best for the company. Let’s work on a comms plan for my departure”
[IL or CEO send an announcement to the company reflecting, thanking, looking onward/upward, etc]
Step 5 - (most vital move for IL)
IL (in interview with hot company Foobar): “Here’s everything I built at previous company. Company grew 70% in my 2 yrs there despite all the challenges I faced”
CEO of Foobar: “When can you start?”
[and THAT is how our IL fails up]
THE END
---
he continues with a "what you should do about it", which if you are still reading here at this point go give him a "superfollow" ($10/month fo...
Most early CXO hires are for the things that CEO's don't want to do but now have to be done. They want to hire someone who can take stuff completely off their plate and get it done.
Identifying a poor CTO or CPO is pretty straightforward for technical founders. It's harder to identify whether your new CMO is shitty when they are crafting a marketing strategy from scratch.
This gets less likely as the relationship graph grows, but I don't think people are good at judging competence without widely recognized and respected metrics.
This is why getting friends and connections is a powerful strategy, because many fields are not interested in establishing fair gatekeeping. And for some very difficult roles, it's way easier to make friends than to be competent.
This is made all the more difficult when competence is a quickly moving target. The positive referral is a rarely moving target though.
Just like you can't hire the top 1% exclusively, your leaders won't be top 1%. Chances are they will be somewhere in the middle. Creating a "culture" that allows for initiative at different parts of the company is going to do a lot more for you than rolling the dice on getting exclusively top quality leadership.
Re: "Culture": I mean this in the group dynamics sense, not the meaningless corporate-speak sense.
* Fit in
* F-off
* Fight
The primary benefit of F-off is that if you play the game correctly you can be well compensated for doing so and maybe even get hired back to fix the mess 18 months later.
I worked for a place whose former CEO (before I joined) basically committed the company to sales contracts it had no hope of fulfilling, then gtfo'd before the delivery dates, to pump up his CV with "closed so many millions in sales with company X".
>Those who are clever and industrious I appoint to the General Staff. Use can under certain circumstances be made of those who are stupid and lazy. The man who is clever and lazy qualifies for the highest leadership posts. He has the requisite nerves and the mental clarity for difficult decisions. But whoever is stupid and industrious must be got rid of, for he is too dangerous.”
– Helmuth von Moltke the Elder
I was skeptical when I first heard it. I still question the many special cases or situations that fall somewhere in between. That said, the longer I live and work, the more I see (or hear of) the leaners ... and their enablers.
This is why bad leadership is so important to defend against. The degradation of productivity is viral.
Helmuth von Moltke the Elder (1800-1891) and Helmuth von Moltke the Younger (1848-1916)
Seems like Brian was fooled into hiring all these leaders that don't understand people or the space but have great credentials. As for Brian himself, he is the most uninspiring leader I have ever worked under. He is a platitude robot saying nothing more than 'Crypto will lead to economic freedom' and 'now is the time to build'. Before the crypto crash it seems like the only motivator was money, now that that is gone the company is slowly spiraling and no one cares. Mostly because the execs don't care, the CFO and CPO both cashed out all of their shares during IPO. If they don't believe how can we lowly engineers.
A blind comment that really resonated with me and the few others I've shared with: https://imgur.com/a/jrA3oCL
Another thing, if Brian reads this he will probably go on another twitter rant rather than actually address the company.
Yes, that's what it's always been about with coinbase. That's why they sold their equity on a traditional finance platform for USD $ and why Brian bought a $130m mansion. 10 years later what has crypto accomplished besides grifting people out of their savings through 3% commissions and scams? Do you know how useful Google, or like any other company, was after 10 years?
Coinbase will die, even if crypto survives. But he's already taken out his millions.
It's striking how one will be hired to a non-traditional C-level title for a department they have no experience in and run it into the ground. I've even witnessed department leads beg not to hire one from the start and be fully ignored. I guess the fact they've been at the top for so long makes them untouchable?
What's outstanding is how often it happens and how both hiring and keeping them around never makes a lick of business sense. Even once exposed as incompetent, founders will dig their heals in and find any excuse to not bear responsibility of their bad hiring decision. They eventually leave on good terms and continue the cycle elsewhere.
Ideally a C level executive should have deep connections with government/large companies.
This is how entire capitalism functions at the moment. Connections make you money, not merit.
Even if you hire the best CEO there is, without connections there is no possible way to make money. How do you think people get good contracts for their companies?
If that leaves you with no candidates, only then does it become an either/or tradeoff. Don't conflate the plan A with the plan B.
Aren't these the people running the company? So, yes?
I have suffered under a few such C-levels and their incompetence is maddening. It is hard not to see the C-level social network as one big circle-jerk, and they get to walk away scot free. These folks are only worthy of spending the rest of their life as a clerk at a gas station, not (mis)managing million/billion dollar companies.
Preceded by:
These people need to be publicly named and shamed
You first.
As another comment notes, accusations need evidence and solid claims. I have neither... I don't know the super deep internal politics of where I worked, only whispers from overhead conversations. Plus a number of sudden, "cordial" departures, and a bunch of napkin math estimating the costs of this person's antics.
Don't forget these are wealthy folks accustomed to using the legal system for their own ends. Ending up in the crosshairs of these folks could destroy a man, and as far as martyrdoms go you wouldn't even be making a larger impact as it changes nothing about the situation of other bad actors.
So, I'm going to grumble, and if I ever decide to bring her down I would do so in a place far, far from here.
The defamation lawsuits will be overwhelming. They don't even need to win, they can just lawyer you into submission. It's just like when you end up firing a regular employee for cause, the best course is to say nothing so nobody has a reason to get litigious.
The safest thing to do is not hire anyone
The second safest thing to do is hire your homies
Unfortunately for companies aspiring to become megacorps, hiring your homies doesn't scale
https://en.wikipedia.org/wiki/Nepotism
https://en.wikipedia.org/wiki/Cronyism
That's very different from what pg is referring to, where, even through all the best of intentions and due diligence of a founder, a shitty C level is hired because they excel at bullshitting.
An early joiner will get a grandiose title.
Every time I've seen that pattern work though, it's been paired with a very effective VP Eng, and quite a lot of autonomy on teams owing to the lack of a technical vision, or at least a technical vision that can be directly implemented (i.e. the CTO might have vague directional goals, but there's a lot of legwork required to turn that into something real).
https://www.businessinsider.com/yahoo-coo-henrique-de-castro...
You hire executives for different reasons. Sometimes loyalty or incompetence to a degree is valuable as the person isn’t a threat. Other times people are hired to drive a particular agenda and can be relied upon to do that because they are too dumb to do otherwise. And sometimes they are sacrificial lambs.
Unfortunately you can’t discover the strength of either until you’re in quite deep. That’s the risk.
I worked at a company that was relatively successful because of the connections the CEO brought to the table.
Objectively, the company would have been far less stressful to work at - and more profitable - if we had a better leader, but it wouldn’t have existed without his connections.
I have, unfortunately, also seen something similar to your experience. This is why hiring for a role like that is tricky.
I want to say for the record I also once hired an awesome CEO who was humble, sincere, reasonable - and very effective. We're still friends after 25+ years.
At the core, C-level roles are often sales roles. They need to sell their ideas both up (to the CEO and board) and down (to their org).
Gentleman also indicated that his peers on similar trajectories were even less successful at exec hiring. So there's a point of anecdata for you: "Good" at exec hiring might just be a 33% success rate. YMMV.
one of the better scenarios is to have a candid, open conversation about their offramp and give them a couple quarters to find a good spot somewhere else and then they "resign".
If I hire someone to be a JS grunt, I’ll know very quickly if they can make a CRUD form because their job is to produce tangible assets which are immediately usable. In all but the most extreme cases, it takes months to years to tell whether a C-level hire is making good decisions, policies, hires, etc. and repairing the damage can be a substantial amount of work in its own right.
> Things go wrong, because building a multi-faceted human organization to compete and win in a dynamic, highly competitive market turns out to be really hard. If CEOs were graded on a curve, the mean on the test would be 22 out of a 100. This kind of mean can be psychologically challenging for a straight A student. It is particularly challenging, because nobody tells you that the mean is 22.
[1]: https://techcrunch.com/2011/03/31/what%e2%80%99s-the-most-di...
It is grading on the curve. An A player at one company might be a B player at another. If someone is an excellent CxO they are probably a good candidate for a bigger and better company or the CEO job somewhere else and so will leave after some time unless given large incentive to stay or otherwise have reached their career ambitions.
However, for CxOs the dynamic is as the grandparent post mentioned, that mediocre CEOs add trivial value and the weak CEOs are actively harmful; so the expected tolerance to B-players should be quite different.
1/ You really cannot grade absolute values on a curve. As others have pointed out, your A players are only in comparison to others in your team. Maybe they are actually C players, who knows? Maybe they are A players only in the environment you created etc, etc..
2/ And a more important point is that a lot of work is being done by people that are not A players. Whom I would call net positive is only in relationship to what I can measure. I know of many people in my team who were not exceptional at software, but got things done due to building relationship with other teams, ability to see things to completion etc. I think Amazon fell into the trap that only type A personalities get things done and I see it in other places too. It is easy to see the extremes, but a lot of times the glue that holds things together is almost invisible.
It is hard to gauge value and I personally am refusing to judge anyone (to the extent possible).
The exec's success or failure isn't an indictment of their abilities, just that they're (in)effective in this organization at this particular moment in time. It's on the founders / CEO to recognize this, manage expectations, continuously communicate, and ultimately to force a transition if necessary. Luckily, most execs know the score. This is also why exec's have such generous exit packages: both parties can admit they made a mistake & separate amicably.
At some point what we want from C-level is putting in place (bespoke) systems that achieve the "strategic" goals -
Is the monthly churn growing? Are you not able to get high touch sales to take off? Is the European product not ready?
All of those are the sort of "strategic" things people tend to hire CxOs for - but any good analyst can get you 80% of the way to identifying the problems, and then you have to pick a solution. At that point you are hiring someone for a very specific job with a clear roadmap. Maybe you can hire internally ?
Edit: on the other hand this article (from the frontpage) is an excellent example of hiring for a job, even though the person doing it is not going to be building the ditches etc. Walt hired for experience and focus on the job he wanted done. And as that job was going to have to be a negotiation with all the other agents building the park, he needed a high level advocate for the job (minimalmmosquitoes) he wanted
From this I suggest that hiring a CxO is hiring a person to act as advocate for the outcome you are hiring them for - very similar to politics
https://mousetrack.co.uk/blog/mosquitoes-at-disney-why-do-yo...
If any company is being honest with itself, there are more good ideas than time or money.
A good CEO sets a course for the company, and most importantly gets everyone on board then relentlessly squashes distractions and basically clears the way for everyone to actually do their job.
CEOs need business sense, but as you said, the people who know the details report to the CEO. At the heart of it, the CEO is a salesperson and people manager.
But you need both. You need someone saying "we're going in this direction", then people down the chains making decisions how best to get there.
I've worked at places that had no leadership from the top and it was incredibly frustrating. 10 different teams pulling in 10 different directions usually means no progress at all.
- founders, especially first time founders, often have middling experience hiring for any role, and zero experience hiring execs.
- the absolute best execs often have no shortage of offers, and hence it can be quite hard to identify and attract these people
- founders often don’t want to pay what the really good execs are worth. Not that I’m even “really good”, but there’s a number of startups where I’ve been recruited because things are a disaster, can’t figure out how to scale the business, etc etc, and then after speaking with everyone they turn around and offer half a percent of the company, and act like they’re being generous.
- founders want to hire someone who’s the right person for the long haul, because of all of the above pains - except that those people often are accustomed to two stages ahead of where the company is now and may not be prepared for what’s required right now
And then, sure, there are the people who have failed up enough, or gotten lucky enough to win the startup lottery, and then coasted from there.
But look at it this other way - 50% of engineers are in the bottom half in skill and talent. It’s just that you do your best to optimize for the upper half, and since you’re hiring lots of them, you trust in the numbers to pay off for you. When you are hiring one, and just one, head of sales - the margin of error is really thin.
These seem like (and this one especially) exactly the sort of problems a VC would be positioned to help solve.
So I wish PG would give advice instead of just complaining about bad execs here.
As a result after 2 years, the company sold to one of its long term partner for double the price of the valuation the PE invested in. Since the increase of revenue was done though temporarily dumping inferior products, the revenue is now slightly below the levels before the PE investment.
Customers loved the company before and would evangelize for their products. Now it's no longer the case, a lot of customers have turned on it and openly criticize it. And most of the execs the PE brought in were either fired by the new acquirer or resigned to move on to new opportunities.
So, were the execs the PE brought in bad hires? No, they succeeded in the PEs objectives. Were they good for the company? Not in the long term but, in the short term, they helped the founder get a very good exit (although the founder is pissed because it taints his legacy).
I remember the excitement surrounding the arrival of new execs, including details about their house and fancy cars.
There seems to be a belief that if you've made it to SVP or better, your talent and intelligence goes without saying.
My interactions with these folks were limited, but without exception, I was far from impressed with any of them.
1. C-level execs are given massive compensation, with the justification that a good one is well worth the price.
AND
2. There's no good objective way to measure C-level performance.
That alone should make people deeply suspicious about these compensation packages. On top of that, the best person for a given CXO job often just so happens to be a golfing buddy and/or have outside business dealings with half the board.
I'm not surprised by ambitous execs grabbing what they can, it's what they do after all, but I am pretty disturbed by how many people outside of those elite cliques will carry water for them and pretend like the C-level hiring market is some sort of efficient meritocracy.
Also, for some C-level roles there are good and objective ways to measure performance. For example, for a Chief Revenue Officer you have (obviously) revenue. There are a ton of confounding variables of course but in general CROs who consistently out-perform plan are better than those who consistently under-perform plan.
> On top of that, the best person for a given CXO job often just so happens to be a golfing buddy and/or have outside business dealings with half the board.
> C-level hiring market [isn't] some sort of efficient meritocracy
Those 3 things aren't contradictory, they each follow from the other. In absence of an objective way to measure performance, the best thing is "I have experience with this person, and can vouch that they're good." And so it totally makes sense that this sort of network-based hiring is what we see instead of a meritocracy.
As such they need to persuade a majority of people who will supply the (human / financial) capital that their manifesto is the best option. They essential earn their way into the office.
Edit: I am also semi convinced that the hierarchical thing is half the problem. Having a single person make "the hard decisions" is usually a way to have the wrong decision made about 50% of the time. Somehow humanity has found science as good means of improving those odds. But for the sort of decisions we make in business (very little hard science) then I suspect democratic consensus might be a much better way to get a good decision.
(no this is not about decision by committee.)
Hiring externally side steps all of that, and can bring a fresh perspective.
I would put to you that it already is quite transparent -- to folks who know how to speak the language. Look closely at who is speaking, what is being said, and (perhaps most importantly) what isn't being said. Power in a corporation is measured in information and resources. So, a simple definition of office politics could be: the art of influencing the flow of information and resources.
If it doesn't feel transparent, the most obvious causes are (in rough dependency order): not being in the right rooms, not knowing what to listen for, or not knowing how to talk the talk.
Can I ask if this definition or mini-framework resonates for you? What have you tried to make things more transparent for yourself? How has it gone so far?
The point is not that there is a framework that advantages certain people (usually just being in the room requires certain advantages from birth) but that we should get rid of the framework and replace it with a new fairer one.
I have been in the rooms - and the people in them are not as smart as inciteful or as informed as many outside. We can do much better.
I will keep my idealism as it warms me during the long dark winter of selfishness
1. I start a company. It’s just me. Obviously, I lead the company.
2. It’s successful!
3. I hire two more people to help with some of the low-hanging fruit that I don’t have as much time for.
4. Do I need to be careful now so that they don’t just conspire against me, elect one of themselves to “run the company” and just take the assets and run?
Or is this too small of a company for this to make sense? Do we make it law for companies with more than 500 employees? So most companies will stay at 499 employees for as long as possible?
If your company was structured as a co-op, yes. Of course you'd probably make them buy in at a certain level, or else their ownership would be lower than yours by enough that they wouldn't be able to vote you down (or at least not until their share vests several years down the line). But fundamentally you should have some skin in the game; they're putting their time and effort into the company too, you owe it to them not to fuck it up and they deserve to be able to replace you if you go off the rails.
> Or is this too small of a company for this to make sense? Do we make it law for companies with more than 500 employees? So most companies will stay at 499 employees for as long as possible?
We don't need to mandate the co-op model, just allow it to compete and let the best model win. Tweaks to antitrust enforcement, tax treatment, and securities laws would be a good way to level the playing field. IMO it's past time to start pulling back on limited liability too (which was meant to be something granted to corporations that promised significant public benefits, not something everyone gets by default).
Frankly we're already starting to see a rise in co-ops; traditionally they found it a lot harder to raise capital than traditional corporations, but nowadays there's a lot of capital sloshing around at the same time that cheaper communication, outsourcing and SAAS means lots of businesses (especially in tech) can be run in a more capital-light fashion than ever before. And who knows, maybe the CEO-as-dictator model will still win out. But we should let them fight on a level playing field so that the best model wins on its merits.
If you were all panning for gold (not terrible analogy for searching product market fit) then while you share the gold, you have doubled your chances
Hang on, this sounds just like a C corp with shares that employees are required to buy. No?
Requiring consensus for business decisions is a guarantee of slow decisions. With a good process, you can make the easy decisions in a timely manner, but the hard decisions will still take a long time, and there's going to be a lot more effort spent on coming to decisions.
You kind of said it by accident here:
> I am convinced that we need to move companies from effective hierarchical dictatorships to more democratic institutions.
You want to move from effective leadership to something else. ;p
It's much better, IMHO, to work towards making sure decisions can be made quickly and reconsidered if necessary, than to try to make sure decisions are made correctly at the cost of finding consensus.
Set time limits on decisions and revisit under certain circumstances.
I bet there is / will be a lot of fertile ground for research
Frankly just being transparent about such decision making will almost certainly put that company in the top quartile for good decision making - most large companies make many decisions - and anecdotally make them badly
The ability to succeed at aligning and motivating staff is one of the big differentiators between an effective C-level leader and an over-promoted manager. An effective C leader does need public leadership skills similar to a politician’s.
With some exceptions, no one is really forced to invest / remain employed as they might be in an actual dictatorship.
Observe the benevolent-dictator-for-life phenomenon in open source software -- I fully support democracy but it's not obvious to me that its benefits scale down (or perhaps transfer sideways) to corporations; if they did, wouldn't we see a lot more organizations structure this way? Most of government is already not organized around democratic norms, with one extreme being the military.
I'm curious -- what convinces you of the need for this shift?
Maybe being a golfing buddy does qualify for being a good CXO. To be a "golfing buddy", you need money and connections. Connections are important for that job, and wealth correlates with success and good finances, again important. Some of them are just born in wealthy families, but this is a positive, not a negative: wealthy family often give their kids good education, have lots of connections, and are used to being leaders. Golfing buddies also need to make good conversation, including on business topics, otherwise they won't stay buddies for long, again a valuable skill.
Being a golfing buddy certainly isn't an objective criteria, but it is not completely worthless, and it is easier to detect fakers when you spend a lot of time with them, or at least, it requires more effort from the faker. Objective criteria typically include past work, and CXOs usually have that too.
In my experience that rarely happens, the "golfing buddy" types may be good at the golfing buddy stuff but also exert a lot of influence (often quite forcefully) on the overall org where their actions tend to be mostly negative.
Even Steve Jobs talked about losing arguments at Apple and not getting his way. He hated it, but he recognized he maybe didn’t always know best and trusted people to make the right call if they could defend their rationale.
Too many leaders think their job is to be a decider, when it is really their job is to hire people they trust to make most decisions and then they make a few critical ones.
(Horns on)
Maybe voter ID laws aren't such a bad idea. Getting an ID and presenting it is like a "bare minimum" litmus test for whether or not you can comprehend and navigate government bureaucracy. If you can't comprehend and navigate the simplest form of it, how could you be qualified to make decisions on it?
(Horns off)
An unfortunate side effect of both these is that they keep one group in and everyone else locked out.
Surely it's the reverse? People who are poorly served by existing government bureaucracy are those who most need to have input into the running of that bureaucracy.
I have seen cases where the board holds executives accountable, and that results in a better company lead by competent executives. But that kind of accountability is unusual in small companies because the board and executives are often one and the same group.
If there’s anything I’ve learned over my career it’s that the theoretical structure of a company has no inherent relationship to reality. If the CEO, chairman and board members are all mates then they will pat each other on the back until well after the iceberg has ripped a hole in the side of the ship.
https://en.m.wikipedia.org/wiki/Interlocking_directorate
This also makes it so that they care less about any one particular company failing when they decide to hand out a leadership position to an incompetent buddy
- My friends will tell me who they know
- People are responsible for their own hiring
- If I recommend this guy and he's at least acceptable, my network grows
- If the guy I recommend is not that good, all three will make excuses: my mate who hired him (will blame chemistry/randomness or me), the dude himself (will blame chemistry/randomness or me), and me (will blame chemistry/randomness). Since we're all adults, you can't blame someone else for your lack of due diligence, so it's a shame their styles were so different and the market turned against their brilliant plan.
- Nobody ever gets blacklisted for bad recommendations
- Everyone is complacent about who they will recommend
- My network grows, and I don't need to grill everyone. So my network grows.
Of course what this also means is if you don't happen to be in one of these networks of mediocre people, you are totally out of luck because those networks are big enough that someone will be found, just not you.
What blows my mind is the degree to which people believe that perfect competition exists everywhere and “the market” will fix all inefficiencies.
Edit: I want to make clear that I am not denigrating the value of markets, I’m only looking to point out the idealization that exists in many people’s minds, especially as I have encountered on this exact forum.
The market does fix many such inefficiences - just not in the way which most people imagine.
It is rather that the market fix is that in the long term [!] such companies will go bust or at least become shadows of their former selves.
(I mean, if powerful execs get lots of money everywhere? almost)
Keep in mind that there also exists competition from companies from other countries, such as China.
Eventually some of those small companies become inefficient big companies. We see this struggle recently in the news, with the CEOs of Facebook and Google talking about how they need to become more efficient, maybe certain people shouldn't be there, etc. -- they got big when times were good and now they struggle with the inevitable consequences of bigness.
This has happened many times. Nobody saw Microsoft coming in the 1970s to dethrone IBM. Microsoft didn't see Google coming and still can't beat them on search, they didn't see AWS coming and is catching up on cloud years later, etc. Most of the automotive industry thought Tesla could not scale and would go out of business years ago.
I am not saying it is not true but it would be good to have some data about this. Cafes, bakeries, small restaurants, lawyer offices, flower shops are all small businesses, a lot of them run by 1 or 2 people.
I guess it depends what we consider a small business.
It's just that everything else is worse...
> the justification that a good one is well worth the price.
that's just what they (the execs in bigger corps) say to fool the employees, make them shut up. Or to look good in the press?
Note that these theories are actually generally descriptive, no one wholesale invented capitalism. For the entirety of human history we have had systems based on a combination of markets, status, family lineage, etc. this applies both to the past and to today.
What I’m taking issue with is the degree to which all of that is glossed over and people assume that the market will evolve naturally if left unspoiled/untouched.
In practice, this is a tautology. People pay for inefficiencies, but inefficiencies are defined as what lose money. You didn't say anything, you just diluted a (wrong) theory to make it correct and as a result don't have a theory anymore, just a rhetorical trick.
Do you have an example of an economist making that argument, outside of theoretical modeling?
I don't see the tautology. One person in a leadership position may value certain things and be willing to lose money on them. The cost gives their peers and supervisors at least one reason to question that practice.
As far as economists making that argument, take a look at the strong and semi-strong EMH. Plenty of economists agree with the semi-strong version.
1. The board is constantly dealing with the CEO, and CEOs are very good at taking credit for things regardless of their actual impact. So they create a subjective impression of being very important.
2. The CEO is only one person, so throwing (say) 1% of the company's profits at them seems like a great investment for all that stuff they're "doing".
If enough boards play this game, CEO pay is driven through the roof.
Also, the aforementioned difficulty of measuring CEO performance perversely becomes an asset. When people don't know the quality of what they're buying, but they feel that quality is very important, they'll turn to any proxy (Harvard on resume, butt was in chair while previous company was doing well) and pay top dollar for that. You can't pay for quality, but it's extremely easy to pay for scarcity if you really want to.
It just comes back to... if you have a lot of money to spend, and the purchase might matter, you'll often be willing to spend a lot for the "best", even if there's no evidence or reason to believe the "best" is really of great value. I've seen this in my own behavior and that of my spouse (what if the most expensive preschool actually is the best one?)
"You will take the blame for all my failures. I will take credit for all your success."
Needless to say, I didn't get the job.
I don't see why that would be wrong for C-level executive jobs either. It's really the same thing -- trusting the opinion of people you know and think are good is a better bet than drinking from a fire hose of job applicants of widely varying quality.
At any job where your purpose is "leadership" and "impact" it is difficult to quantify success. People have tried to measure with things like OKRs, but ultimately a lot of what successful senior people bring to the table is hard to measure.
If you look at Pfizer’s CEO who had a total comp of $24.3M of which his salary was $1.6M.
Unless you're advocating for capped compensation or removing autonomy in who a founder is allowed to hire, if you're angry, it's probably a form of jealousy. It's somewhat natural to feel jealous at people who don't "work hard enough" (by your standards) and yet reap larger rewards than you. Or who have seemingly casual lives (by your standards), yet get more opportunities. It's also easy to pretend that jealousy is actually selfless outrage and claim offense against everyone else (for whom your outrage represents).
But the same could likely be said about you, if you talked to the right people. Where I used to live, "Go home, tech bro" was common graffiti to see. I knew a woman in the beauty industry whose partner was in the tech industry. She resented how much money that he made because, her words, "she worked harder than he did." As if her idea of work was how value should be calculated.
I do agree the anger is ideally channeled into some attempt to productively frame, understand and solve the problem, but dismissing it all as sour grapes doesn't seem very helpful either
I saw the issue pithily summarized recently:
> Salesmen, in any field other than sales, are like an invasive species who outcompete the natives with their superior social polish, but who struggle to actually do anything, which leads to systemic underperformance and the erosion of trust, which only makes the competitive necessity of salesmanship even greater
We need to build social systems which don't select preferentially for relentless salespeople and smooth talking charlatans if we want to live in a prosperous, harmonious society. The optimal proportion of these is in all likelihood not zero, but does anyone believe it's as high as we see now?
I see the good intentions here, but I don't really support it. Would I like people to lie and cheat less? Yes. Would I like a society where nobody can lie and cheat? No, because of what that enforcement would entail.
Hiring a person who's been running a thousand-person org to take over a 1-10 person org is often insanity, but it can look smart because "wow, they were doing so much at such a successful place and have so many great stories to share." Run a 1000-person org and after all, even if you suck, some of your sub-departments are likely to hit on some great results that you can share in future interviews!
It's completely reasonable to want to see a company you work for succeed, and it's completely reasonable to be frustrated when those companies make obviously bad decisions that put your job in jeopardy or make the company a worse place to work for. Particularly with startups, a lot of your career success is fairly closely tied to the success of the companies you work for (no one cares about hiring a eng or other role from a startup who crashed and burned).
I can care less what those who are parasites off my labor think of me, and their cadre who somehow benefit off this paraditism. Workers work, create wealth and have no need of these parasites. Yes we resent them, and will eventually eliminate this parasitism.
First, if you spend a lot of money (and time) supporting a dud executive then you you’ve lost a bunch of runway. These people are often in a position to put startups into a death spiral from which they will never recover.
So it follows that as a founder that idea is dead - it’s almost impossible to restart. If you’ve put your heart and soul into a business, spent a year raising funds and putting a team together, and then some bozo is parachuted into a position of authority and proceeds to throws all your hard work out the window as they miss their own targets and crash into the terrain, yeah that’s gonna make you pretty pissed off because you won’t get that opportunity ever again.
It’s not about jealousy. It’s about the destruction of value.
Don't get me wrong, I know executives make poor decisions (and have seen a few myself first hand), but also I've seen decisions that nobody knew were right or not (or at least they didn't say so, at the time). Yet if it failed, of course the armchair quarterbacks come out with the "I told you so."
But an incompetent executive will avoid making decisions altogether, and will pretend to lead by setting goals that are entirely detached from reality.
In my experience, the lack of decision making and inappropriate goal setting is quite obvious to those of us "in the trenches". You can't, for example, expect to triple your sales in the next quarter unless you're doing something to support that goal, like increasing the size of the sales team or doing more marketing. But I have worked for people who have set sales targets thinking that this is all that's needed to make sales. These people are good at talking about the "what" but no good at working out the "how".
There is strategic thinking, tactical thinking and wishful thinking. Incompetent executives generally operate using the latter framework.
You don't need to advocate for capped compensation or removing autonomy to be righteously angry over inept leadership. You should be angry over inept leadership, it's essentially corruption, and hurts everyone else in the organization. I don't even know what the point of this comment is.
I don't think it would be accurate to consider my anger over the CEO who awarded themselves a $25M bonus while laying off hundreds of my colleagues and tanking the company to be "jealousy".
Edit: I apologize for the aggressive tone in the original reply, though I disagree with your take it wasn't necessary.
I'm not trying to sound like I'm discrediting your experience or feelings, but I only really have your side of what happened, so of course your experience will sound justified from your perspective. There's a lot of possibilities for why that could have happened, not including ones that nobody could know about except upper management.
Q1: Do we actually need this CxO role?
Q2: Who will report to this CxO?
Q3: Why can't we promote from the pool from the answer to Q2 instead of hireing externally?
Promoting internally won't buy your firm more prestige/credibility.
I see well meaning senior technical people disregard my advice on technical matters because that's just not how things are done there ever, some things are so far out of the box they can't even conceive of it as a possibility. Manager after manager telling you the same answer because that's what whoever they ask about tells them because everyone at that dept/company is 15+yr tenured.
If you want to keep things as they are but maybe slightly better or to make different internal people happy you promote from within. If you want fresh thinking and new directions you gotta hire from the outside.
I can't emphasize this enough. The only analogy that comes to mind is eskimos that have to traverse a desert but only want other eskimos in their team.
When you choose to hire outside for every single leadership position especially senior ones you send the message to the people that their effort and sacrifice is not appreciated and you don't trust and that they won't be growing with the company.
The people who built the company then get disaffected and leave, eventually no one is committed and things go to hell because there is no loyalty or personal interest.
I suspect Eskimos would be extremely adept at traversing some desert environments! https://en.wikipedia.org/wiki/Polar_desert
(I kid, please don't hunt me down)
Another analogy is Eskimos crossing the tundra and the flashy new external-hire exec insisting on camels because that's missing off his resume...
Anyone hired externally must be expected to meet a substantially higher bar than the existing employees. Bringing in an external CxO who is less qualified than internal candidates will destroy morale and lead to attrition.
However, there’s a lot to be said for bringing in an external CxO who can take the team and the company to the next level.
A CxO role is quite different than a traditional manager role. You can’t expect good managers to automatically be good C-level executives because the work is just too different. It’s the same story as promoting ICs to managers - Different responsibilities and different skill sets.
But internal employees should always at least be considered and given a fair shot.
Sheryl Sandberg is another example, probably more famous mostly because I think Schmidt almost seemed like he was a founder whereas Sheryl’s story is always about coming in as the Adult to be #2.
To offer a few potential answers:
* Because the existing company culture is not conducive to taking a step forward, and you intentionally want to bring in outside ideas (e.g., bigger-company experience).
* Because the people who are the answer to Q2 don't get along all that well, or are worried about their individual career paths, and promoting one of them above the others will make them upset in the short term.
* Along the same lines - because you don't trust the people from Q2 to level up and handle the full scope, and will instead always favor "their" organization.