Hiring Frustrations: Can Goliath Work in a David-Venture?

In describing their biggest hiring frustrations, founder-CEOs often mention hiring someone out of a big company who was not able to adapt to the challenges of a new venture. One founder-CEO recently described one of his hiring mistakes – a VP-level hire who had worked at Oracle and IBM – as follows: “He didn’t know how to create something from nothing. It’s like if you already have a crank, he can crank, but he can’t actually build the crank.”

Last week, we held our annual IT webcast and annual Life Sciences webcast to unveil this year’s Compensation Reports. The webcasts included a panel discussion of compensation and hiring issues within start-ups. The longest panel segment focused on whether it is a good idea for a new venture to hire someone with big-company experience.

As highlighted by the founder-CEO above, a big challenge with hiring someone out of a big company is what one panelist called “the resource issue” – i.e., that the person is used to operating with a lot of resources. (As depicted in the picture below, “big company” Goliath was used to having a full complement of armor and weapons, while little David had only a slingshot and the ability to improvise.) One of the panel members said, “They have to realize that in a start-up, they are the resource. They have to make everything happen themselves.”

QUESTIONS, PART 1: In your experience, is it hard for people to transition from big companies to new ventures, or is this issue overblown? If it is hard, what are the biggest challenges, and what are the best ways to address those challenges?

However, the panel agreed that some big-company people can work well in new ventures. What indicates which big-company hires will work out? The following characteristics were proposed:

  • Within the big company, the person has succeeded at a variety of very different jobs across many positions and units, which suggests an ability to adapt.
  • The person has had some international assignments, which often demand more entrepreneurial skills than do domestic ones.
  • The person has enough self-knowledge to know if she fits better in big companies or in new ventures, and what stage of a new venture’s life cycle would be the best fit. Relatedly, the person is aware that the situation is “radically different” in a new venture, regarding resources, financing, and the need to wear many hats.
  • The person is comfortable with the fact that the probability of success is a lot lower in the new venture.

QUESTIONS, PART 2: Are there other indications that someone will be able to make the transition from a big company to a new venture? Also, are there functional backgrounds in big companies that are more likely (or, for other functions, less likely) to transfer smoothly to new ventures?

  1. Great topic, Noam! Here are a few thoughts (not in any particular order):(1) Not all “small companies” are a like. I think there is a pretty big difference between a pre-revenue small company and a small company that has a product in the market. Pre-revenue companies often don’t look like a company to someone who has worked in large organziations (at best it looks like a small department). For example, hiring a sales person from a large organization into a pre-revenue startup is like hiring a sales person in the engineering department.(2) I think many entrepreneurs, some unknowningly, use the “big company” excuse when in fact a big part of the problem is their own inexperience and lack of skills in managing others (whether they be from big or small companies).(3) In some ways, startups are like the army (bet you didn’t expect that analogy). Seriously, until you’ve been in a battle, you can’t really know what it is like. The same thing goes for employees…until you’ve worked in a startup, you can’t know for sure whether you’ll like it or not.Great stuff. Can’t wait to see the other comments!

  2. In my experience, hiring new employees into a start-up out of large corporations can work very well, with the caveat that there are some preconditions likely to make the transition easier for some than others. I also agree with the observation that many large company veterans simply don’t have the self-reliance in their DNA that makes for successful entrepreneurs. When we recruit executives from large corporations, an important experience track to look for is whether they have been able to be entrepreneurs within large organizations– some large tech companies in particular do allow for “small, nimble company thinking” inside some of their working groups or divisions. Another key element is tenure and variety of experience. We like to see people who have had a variety of experiences– and the experience of working in a large corporation, understanding the sales channels and the development mentality of large companies, can be very helpful in a start-up. I do think it is important to flag stage of development– some large company execs can do well in a start-up with $20mm in revenues, but could fail miserably when revenues are just beginning. In short– caveat emptor, and check into a candidate’s background in a pretty granular way to understand how they would work in a small team that is always under severe pressure to do more with less.

  3. This is an interesting and thought provoking topic. I too believe the core issue is not the size of the company the candidate comes from but the composition of the candidate’s – DNA – as Pascal termed it. The competing issues that tend to conflict in situations like this are as follows:1) Small unknown companies love the big names that candidates bring on their resumes. I’ve heard startup CEOs ooze about how they have attracted this person from XXX big co to join them – as if this alone is a statement about the potential of their company.2) Many big companies purposefully insulate their employees from the issues that entrepreneurs have to deal with on a day to day basis. Like a great hitter in baseball, if you haven’t been to bat in a while, its hard to get that timing back. Sometimes these candidates even lose sensitivity and certainly the instincts to react.3) Small companies often reject “the new organ” when implanting a big company person in their midst. I can’t tell you how many times I’ve heard a small company tell a new candidate like this that whatever structure they are espousing (like creating a budget for the first time) isn’t necessary in small co. While some times this type of structure is overkill for the smaller company – many times it is necessary – but unwanted!With all that said, I once hired a former big co person as a partner in my early stage entrepreneurial venture. He literally would not sharpen a pencil for himself because he was so used to having a staff handle that. Needless to say, that marriage did not last long.

  4. I think the risk is very large in hiring a “bigco” person into a startup, especially if he has spent a long time there. Classic example — startups who brag that they hired a sales guy with 20+ years of experience at IBM. Every case I’ve seen of this has been an utter disaster.And yet. We love to have folks have been trained in best practices at world class enterprises like IBM or Oracle.Our solution has generally been to risk mitigate by getting someone who is earlier in their career — maybe spent less than 5 years at bigco and are itching to move and show the entrepreneurial spirit. Or better still get someone who was at a startup after bigco — let them learn what it means to be at a startup on someone else’s dollar.

  5. Having come from a larger company to a start-up I would have to agree that looking for someone who was entrepreneurial while at a large company is a big help.The team I worked on at the larger company was a smaller, more entrepreneurial, team that was building a new line of business. I think that really helped my transition into the startup world.Also, you do have to look for people who are willing to do what it takes. In my case I would rather take care of my own schedule, take out the trash, worry about the budget, do my biz dev deals and clean my own dishes. I feel weird when I am being fussed over and when I can’t get something done due to bureaucracy. It is true that a lot of big co folks find it hard to make the leap because they are sheltered from a lot of things while at the big co. One major thing – they never really have to worry about where the next job will come from and how the company is doing cash wise.As they say, you can never know what it is like until you do it. Entrepreneurship is that way, no question.

  6. Interesting topic. We have had very few positive experiences hiring big company executives directly out of their big company positions. Our typical solution, much like Amir describes, is to hire a big company executive once he/she has already done another startup. A plus, ironically, would be if the startup had failed (arguably the executive would learn many lessons from the failed venture).

  7. Adding a new twist to the comments by Scotty and Amir, over the weekend I noticed on Marc Andreessen’s blog < HREF="http://blog.pmarca.com/2007/06/how_to_hire_the.html" REL="nofollow">this comment<> (italicized emphasis added by me): “People used to say, back when IBM owned the industry: never hire someone straight out of IBM. First, <>let them go somewhere else and fail<>. Then, once they’ve realized the real world is not like IBM, hire them and they’ll be great.”

  8. In my experience, (working at more than a few failed startups!) there are a number of problems with bigco (esp. middle managers) people coming into a startup.But the biggest is that most middle managers are insulated from consequences in the bigco. Middle managers can make arbitrary decisions and they usually do not suffer the consequences. Nor are they held responsible for the mess — usually there is enough protection from the herd of middle managers to prevent any direct consequences. In other words, the buck never stops with them, nor does the shit.

  9. Nice topic..
    You have an excellent blog..

  10. People who worked in a large enterprise and make the change to a new company must make the effort to adapt as quickly as possible … thank you for your very good article …

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  12. I think stubborn refusal to respond to new conditions affecting the goal, such as removal or modification of the barrier, sometimes occurs

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