The Start-Up Corner: Startups Need Startup CEOs
It's never fun realizing you have a late-stage mismatch in a committed relationship.
It's messy. It's unnecessarily challenging. It takes far more time to resolve than ever imagined, leaving a wince-worthy wake of legacy that lives on for years.
Now try surviving your startup years when you (or your investors) have selected a brilliant yet mismatched executive to launch and lead as the Startup CEO. Often this comes in the form and shape of plucking talent from a larger company to lead the startup. Sometimes it's someone who is part of your funding team selected on the basis of a competency. Sometimes it's you, the Founder.
For the purpose of this article, we're focused on the trend where a Startup CEO comes from a bigger established company who may or may not be associated to your funding structure.
On paper it makes a lot of sense because of previous wins, industry reputation, and network of talent and partnerships-- all incredibly valuable to a startup, and all elements any startup would be lucky and grateful to have.
However, in practice, these choices can come with a host of issues, starting with the most obvious one: a lack of startup or business-building experience. In these cases, we recommend early CEO coaching to support the success of your Startup CEO.
But how do you tell if you have a mismatch and what can you do to avoid it?
When a Startup CEO Isn't in Kansas Anymore
From a Founder's perspective, landing a known executive or beloved CEO type feels amazing, and it should. Gaining wisdom from this kind of talent in your formative stages is essential-- but not everyone can ride the usual startup uncertainty and keep the boat steady while creating a strong business foundation, and that is a critical part of the Startup CEO's role.
Your Startup CEO's responsibility is to build a solid, fiercely efficient business structure and team so that revenue, operational effectiveness, talent management, competitiveness, product commercialization, and business valuation are as integrated, and therefore as optimized, as possible.
Many Startup CEOs coming from established companies have always, and often savvily, leveraged pre-existing strategies, culture, tactics, tools, techniques, capabilities and competencies long established in a process-driven environment. Work is done and not done because of those various dynamics, so if your Startup CEO has never had an opportunity to build those aspects of a business-- be it as an Intrapreneur in an existing organization or as part of a startup-- how will you support and prepare your Startup CEO for building your business?
For example, when things shake and rattle in startupland, will your CEO:
Calmly lead the team to safer ground without skipping a work-beat until the rumbles stop, or [quietly / not-so-quietly] panic?
Appropriately shift work load to enable more efficiency and focus during a swampy time, or give the team more assignments in hopes to control that usual and natural startup disruption that often goes away on its own?
Know the difference between usual startup crisis [ignore the noise, it will go away on its own] vs the need-action startup crisis [let's regroup as a team and attack]?
Even more importantly, how will anyone know when there is a mismatch or when the CEO needs help ("is not in Kansas anymore")?
Your Answer: First look to the team. The team will signal a mismatched startup CEO, asking deep, quiet questions within themselves and figuring ways to drop hints elsewhere if they become concerned:
I keep getting more and more assignments with no end in sight-- are we focusing on the right work?
Why am I getting half-baked ideas in emails at 3am, and why do we keep switching tactics?
How is it things feel so complicated in our simple startup?
I know we're doing well, but it doesn't feel that way...
Why do we have so many meetings?
These are all potential signs that your Startup CEO is ill-equipped to lead in Startupland, and it's more prevalent than anyone would like to admit. Often it's a very coachable situation, but we still see instances where startups are looked upon as business children who don't know better (and sometimes that is true, but not always) and as such a Startup CEO hailing from a larger company expects or is expected to have all the answers, without realizing that building a business is a very different situation than running a business.
To complicate things further, those very CEOs may be associated with the VC that is funding your start-up (boy is that fun) or you may find it difficult to find a successor because you've blown a perceived good-judgment call if you selected a CEO and it was the wrong match. ("what kind of vetting process do you have and how do I know you won't do the same to me?" asks the prospective new CEO on the inside)
So what do you do? How to you keep from selecting a mismatch?
Startups need Startup Leadership. Period. They may not be entrepreneurs by trade, and that's OK-- my point is they must be comfortable establishing a brand new business (not a brand new product... a brand new business).
We advise our startup clients on two items:
Step 1: Change the Mindset.
Startups are Not Established Businesses Yet--
A Startup CEO's Job is to Establish It.
Look at that picture above. How do you feel? Do you want to clean it up? Do you see it as rubble? Do you wonder why someone's block tower fell? Do you think the person should immediately start over and try to build this up again?
You see, for "Startupland people," we look at the picture and get excited. We see it as a starting point and imagine all the opportunities ahead of us to build what makes sense. When nothing is built yet and we get to build, we're eager to do so with a capable team under various constraints and timelines. We wake up energized knowing we are preparing a new wall that will meet or exceed expectations on promised returns.
And, by the way, we're grateful that the table underneath the pile seems someone flat-- that makes the build a little easier. After all, some of us have built block towers on uneven ground, with only half the funding (or blocks) promised and expected.
And think about this other difference with Startup CEOs: after the wall is built and in good shape, ready to expand and value at an even higher level, the Startup CEO looks forward to packaging it up to sell to a larger company for growth or preparing the company for hand-off to the next CEO (the "Growth CEO"), who is usually more of the established-company type. (the best Startup CEOs know they are builders and early growers)
Bottom line: Startup-company people think differently from established-company people. Just as a startup executive would need coaching and support to become a successful CEO for a larger established company, your larger established company executive probably needs coaching and support to become a successful CEO for a small un-established startup company.
Step 2: Change the Startup CEO Profile.
Seek Flexible, Collaborative Leadership with an Effective Risk-Handling Style
Startupland has a different atmospheric pressure than Established-businessland. The oxygen in Startupland is not as rich, the minerals in the ground are hardly developed, the food is less fancy, the way of working is non-existent until you get started, and you are (by definition) taking some risks every day.
Yes. Risks. Every. Day.
Startups live in a land of flexible commitments, soft early numbers, fast decisions and bare essential processes. Startups have a different urgency, and when the urgency is placed on the wrong priorities it will instantly kill the innovative thinking that perpetuates the first few years of growth for startups.
These truths are uncomfortable for many, but they are the natural law of Startupland and when embraced appropriately they will excite and empower the CEO and startup team to do wonders with the capital provided.
For Startup CEOs, the name of the game is an essential resourcefulness to promote innovation, creative problem solving, and scrappiness with working style. There are storm clouds, there are uncertainties, and you do not have the full staff and resources available to you as you might in a larger established company. Still, you must drive on.
Your Startup CEO Profile must align to these natural truths, and part of that is related to your Startup CEOs character for unknowns and risk-handling. Some questions to ask:
How comfortable are you with things that are half-baked before you have to claim "good enough" and move on? For example: Have you ever seen the fifth iteration of the first-ever forecast? (hint: some can't stomach the simplicity of it, much less the number of assumptions attached to it)
Do you have the mental and emotional fortitude to require yourself and your team the white space to solve problems through actual thinking (vs doing)?
Do you have a communication style where you actively listen? Are you OK with not having all the answers all the time and relying on your small expert team to drive solutions?
Do you have the discipline to refrain from emailing your staff at all hours of the night simply because you had an "exciting" idea?
Bottom line: Startup CEOs must, at their core, be disciplined team players who can thrive amidst uncertainty while inspiring the team to perform at the right levels AND at the right time. What works well in larger established companies can be very damaging (or excessively slow down) small startup environments.
(Oh and considering the close quarters the startup CEO will work in with her or his new team, be sure that person is likable too.)
FINAL NOTE: Those Who Are Used to Established Companies May See Startups as Messy and Chaotic... Startup CEOs See Them As Glorious Opportunities
The Startup CEO will see how orderly the cars are in the picture above. Why? Startup CEOs inherently and immediately see that the only reason the cars look unorganized is because of the damage, lack of wheels, and random colors.
To many, the damage, lack of wheels and random colors make the pile messy. To Startup CEOs, there's nothing to look at or talk about here. Move on.
Selection of your Startup CEO will remain one of the most critical-- if not the most critical-- organizational decision you make. Take care not to assume that an executive from a larger established company can automatically and successfully transition from an established company environment to a must-create-a-company environment. For example:
We have all witnessed some of the best [American] College Football head coaches get to the big NFL and fizzle out in the first season. Same game, different sized field. Same feel, different rules. Same type of team, different player types. Similar scoring structure, different budget drivers. Those little differences ended up making THE difference, and not all leaders can flex to those differences.
It's the same with business, especially startups: same game, different sized field. Same feel, different rules. Same type of team, different player types. Similar scoring structure, different budget drivers. (Not always easy to fill up those stands, either.)
Focus on Startup CEOs who are used to building companies (their own or other's), comfortable with and encourage a culture of responsible risk tolerance, requires a resourceful and "scrappy" way of working, and crazy-passionate about birthing a business.
We know that launching or transforming an organization isn't simple, but it can be easier with the right advisors. If you are a Startup looking for perspective on CEO selection or curious about learning more, Contact us. Let's see what we can do for you.
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