Superstars are Built, not Bought

David Barrett —  June 24, 2016 — Leave a comment

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There’s an old adage in Silicon Valley:

A people hire other A people, while B people hire C people.

Said another way, great people want to work with other great people, but not-so-great people prefer to work with people worse than themselves.  This is because great people love to be challenged by their peers, while not-so-great people prefer not to be challenged at all.

The Vicious Cycle of Mediocrity

It’s easy to agree with the above in theory.  But building a company that adheres to this in practice is very, very hard.  So hard that extremely few companies actually do it, despite the best of intentions along the way.  You can tell if your company is doing it by seeing if it’s followed this path: 

  1. A visionary founder starts the company and attracts an early team of equally great people.
  2. They do the incredibly hard work of creating something from nothing, willing a product into existence through sheer sweat and tears.
  3. They gain recognition, customers, and investors.
  4. People start talking about how we need to “move faster”, and that requires bringing in “top talent”.
  5. An “executive search” is started, and a host of incredibly qualified people with long resumes full of recognizable names come through the door.
  6. You “score” a “superstar” hire, and they come in celebrating all you’ve accomplished without them, and all that you’re going to do together.
  7. That person is given substantial leeway to hire a team “under” them, and does so with astonishing speed by leveraging their “deep Rolodex” of industry connections and personal relationships.
  8. That person and those they hired begin leading a lot of “new initiatives”, each of which is given a large budget and high priority, sapping resources from the original approach but necessary to “focus on growth”.
  9. There is a major new round of investment, followed by the quick hiring of more “superstars” with C-level titles, who hire more people with VP-level titles.
  10. Inevitably, there’s a “shakeup”.  One of the “old guard” who has been around from the start “isn’t growing with the company” and needs to be replaced “so that we can continue scaling”.
  11. A lot of hiring happens in very short order, in every part of the organization.
  12. Something goes wrong; the company needs to pull back and lay off a lot of the new hires.
  13. The company gets acquired for less than hoped, with most of the compensation in the form of “earn out” — except for the executive team, which quickly leaves to join other companies that are “rocket ships just starting to take off”.
  14. Everyone else sticks around as long as they can stomach, until they quit, forgoing their “golden handcuffs” out of sheer agony of being in a company they no longer recognize, with people they don’t respect, doing work that doesn’t inspire them.

In the 7 years Expensify has been around, I’ve watched that pattern play out, again and again.  One by one, companies that had such promise kept crumbling under the “superstar management” brought in to “ramp growth”… right into the ground, with the superstars grabbing the only parachutes.

Indeed, look closer at those “superstar” resumes and you’ll see a very long list of very short jobs, always coming into a company after it has achieved some degree of success, leaving either right before it craters (so they can deflect blame), or right after it’s acquired (so they can collect credit).  It’s a genius strategy that ensures the maximum compensation for the minimum risk, both for them, and their entourage.

That might all seem incredibly pessimistic — it could be that there were hidden complexities behind each of these failures (or mild successes) that make the correlation between outside executive hiring and quick decline something other than causal.  But consider a different angle:

If you were truly a superstar, with a long string of successes behind you, and a deep network of colleagues willing to come work for you — for what possible reason would you join a tiny startup full of newbs?  If you were that good, where everything you touch becomes gold and everybody on earth is trying to recruit you, why wouldn’t you just start your own company from scratch?

As a CEO of a newly-funded startup, you are intrinsically aware of just how screwed up everything is in your startup.  You know all those numbers you showed investors were fake, that your technology is held together with peanut butter, and that your team is horribly outclassed and ill-equipped for the enormous range of challenges ahead of them.

Who in their right mind would join a company like that?

I’ll tell you — someone who either:

  • Isn’t smart enough to see through your obvious bullshit, or:
  • Has no alternatives.  Someone who has a resume that’s as puffed up as your investor deck.  Someone who is desperately trying to wash off the stink of past failures, cloak themselves in the shadow of others’ success, and find another mark who will pay their massive mortgage for another year.

Either way, there is basically no realistic scenario in which the “superstar” you are hiring (or more likely, feel pressured by others to hire) is the “A person” being promised.  They can only be a “B person” willing to look the other way at your problems in exchange for you looking the other way on their’s.

And consider that “deep Rolodex” — if the so-called superstar is actually a B, what grade are their contacts?  I can almost vaguely imagine some incredible individual carefully analyzing series A startups for the “next big thing”: it’s maybe possible.  Maybe you are named Elon and your idea is truly better than anything they can imagine, or whatever story the tell you.

But the idea that they have a list of “top talent” just sitting around with nothing better to do than join your insanely risky startup working for this guy is just horseshit.  If they’re waiting around for this guy to call them, then they are stuck in some other company even worse than yours.  And how good could they really be if they put up with that?

Building Superstars

Don’t get me wrong: superstars exist.  If you’re starting a company from scratch, odds are you are one of them.  And in the time leading up to your startup, you probably came across a few along the way.  If you’re lucky, you’ll be able to convince a few of them to join based entirely on your pre-existing relationship.

Eventually, however, your connections tap out, and it’s unclear where to find more.  You can delay this reckoning for a bit by hiring specialist mercenaries to execute very specific tasks.  And they can do that really well… for a price (and until they turn on you).  But some jobs need a level of commitment and creativity that mercenaries can’t provide, and that’s where things get tricky.

Most companies bow to pressure and convenience, and go with the dangerous path outlined above.  And sometimes it works out (though 95% of startups fail completely, so the odds are not in your favor no matter what you pick).  At Expensify, we have gone a different path to finding superstars: building them ourselves.  And really, I think it’s the only sustainable proposition to filling a company with A players, based on the following logic:

  • “A” players are going to experience enormous success in their careers.  They will find a way to succeed, with or without you.
  • Success breeds opportunity, and very successful people will get surrounded by so much opportunity, so fast, that the only job they ever “look” for is the first one.
    • There are very, very rare exceptions to this, such as when an A player gets “stuck” in a local-maximum, and needs to actively search around to find a new global-maximum.  If you find someone in this state, act fast, as it won’t last long.
  • Ergo, the most sustainable way to fill your company with A players is to find them at the very start of their career, and then do everything in your power to inspire and retain them as long as you can.

This isn’t controversial stuff: everybody recruits at colleges for this very reason.  But most companies are actively recruiting “bodies” to pack into a dense, factory-style open office, executing upon ideas handed down from the top.

Accordingly, what is controversial is to give these new, zero-experience hires a dash of real authority immediately, pausing to see if that worked, and then keep doing it again and again.  This doesn’t by itself sound hard: empowering new hires is a slogan on many corporate edifices.  But the reality is not every company is equally equipped to do this.  Specifically, you can’t keep promoting from the bottom if you are also stacking the executive team from the top.

The only way to build a superstar factory is to blow the ceiling off the organization and make it clear that everybody starts at “the bottom” and needs to prove themselves to work their way up.  If there is any exception to that rule — even a single role that is filled by fiat based on credentials alone — the whole system crumbles.  This is because nobody you hire at the bottom can ever match the credentials of someone hired into the top, and thus the whole system of upward mobility grinds to a halt.

Rather, you need to create a culture where every role is filled by the person who has proven themselves the most worthy, and who continuously re-proves it every single day.  (This is reinforced by our merit-based compensation review process.)

This method is not fast.  It requires an enormous amount of patience, training, and the stomach to endure a lot of trial and error.  After all, odds are you have no idea what makes you a superstar, and thus no idea how to help someone else become one too.

But building superstars is a skill just like any other.  You’ll never learn it if you don’t start, and you can’t start unless you maintain a clear path for them to grow up in the organization.  So resist the temptation to hire that over-qualified executive into a position of leadership.  Instead, view it as an opportunity for one of your people to step up — and then back their attempt to the hilt.

Frequently Asked Questions

Q: Forcing a coder to manage creates an unhappy coder and shitty manager.

That’s not really a question, but I’ll take it anyway.  First, you can’t force a superstar to do something they don’t want to.  They have all the cards: you are ecstatic that they choose to spend their time with your company, and you work hard to deserve that honor.   If they don’t like what they’re doing, they’ll leave.  (And if they don’t leave or otherwise fix their situation, they’ve got bigger problems to solve — that’ll be my next post…)  So instead of “forcing” someone to do something, just be open about what problems exist in the organization, and wait for someone to offer to solve that problem.  Even better: just pay attention to who is already solving your management problems — probably quietly, without complaint or assistance — and then give them recognition, support, and reward for what they are already doing.

Q: Is it fiscally responsible to trade revenue growth for a happy workplace?

I’ll admit, this approach does sacrifice short-term revenue.  But what it gets is more than just a happy workforce: it gets long-term, profitable revenue growth.  Yes, had we just hired a ton of people, Expensify probably could have gotten to our current level of revenue faster than we did.  But we’d also have had to raise a lot more money, diluting the value of everybody’s shares dramatically.  Additionally, there was no other path that would have gotten us to this level of revenue while being as profitable (yes, true profit… sometimes!) as we are today.  And finally, revenue is only half of the valuation equation — the other side is revenue growth, and there was no other path that gets us to this revenue level while maintaining the pace of revenue growth we currently enjoy.  (We know this because we have a ton of competitors who have tried the alternative strategy, and we’re outpacing them all.)  So building a company of A players isn’t just about enjoying life, getting profitable, OR achieving long-term revenue growth.  It’s about getting ALL of those things, and more.

Q: Doesn’t this create an homogenous, immature, frat-boy, brogrammer culture?

It’s hard to say.  Yes, we get silly.  Yes, many of our employees were in fraternities (or sororities) in college.  But if we’re homogenous, it would be around three traits:

  • Everybody is extremely talented.
  • Everybody has personal ambitions that extend beyond a paycheck.
  • Everybody is incredibly humble.

You might also be a geek, parent, superstar athlete, world traveler, or recent graduate, but you are at least talented, ambitious, and humble — and honestly, I’m ok with that.  To make this a bit more practical, read up who is on our team, and draw your own conclusions.

Q: Are you hiring?

So glad you asked, because yes we are!  If the above hasn’t scared you away, please check out our jobs page, or just skip all that and write jobs@expensify.com.  I can’t wait to hear from you!

David Barrett

Posts

Founder of Expensify, destroyer of expense reports, and savior to frustrated employees worldwide.

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