MBA Mondays: Turning Your Team

A serial entrepreneur I know tells me "you will turn your team three times on the way from startup to a business of scale." What he means is that the initial team will depart, replaced by another team, which in turn will be replaced by yet another team.

I have been closely involved with over 150 startups in my career and since roughly 1/3 of the startups we back get to real scale, that means I've seen the "startup to scale movie" over fifty times in my career and I can tell you this – my friend is right.

The people you need at your side when you are just getting started are generally not the people you will need at your side when you have five hundred or a thousand employees. Your technical co-founder who built much of your first product is not likely to be your VP Engineering when you have a couple hundred engineers. Your first salesperson who brings in your first customer is not likely to be your VP Sales. And your first community person is not likely to be your VP Marketing. 

Likewise, the first VP Engineering who figured out how to manage the unwieldy team left by your technical co-founder is not likely your VP Engineering when you have five hundred engineers. Your first VP Sales who built your first sales team is not likely the person who can manage a couple hundred million dollar quota. Companies scale and the team needs to scale with it. That often means turning the team.

The "turning your team" thing probably makes sense to most people. But executing it is where things get tricky and hard. How are you going to push out the person who built the first product almost all by themselves? How are you going to push out the person who brought in the first customer? How are you going to tell the person who managed your first user community so deftly that their services are no longer needed by your company?

And when do you need to do this and in what order? It's not like you tell your entire senior team to leave on the same day. So the execution of all of this is hard and getting the timing right is harder.

This is where serial entrepreneurs have a real leg up on first time entrepreneurs. They have seen the movie too and they played the starring role. So they know what the next scene is before it even starts. They know the tell tale signs of the company scaling faster than their team. And so they move more quickly to move the early leaders out and new leaders in. One of the signature faults of a first time founder is they are too loyal to their founding team and stick too long with them. 

If it is any consolation, the founding team makes most of the money when a company becomes successful. That technical co-founder who built the first product will likely end up with tens of millions of dollars, if not a lot more, if a business they helped start gets to five hundred or a thousand people. The VP Engineering of a five hundred person company will not likely have an equity package that is worth anywhere near that much.

So I generally advise entrepreneurs to be open and honest about all of this. Tell your early team that they may not make it all the way to the finish line but they will be handsomely compensated with equity and if you are successful, they will be too. And when it is time for them to go, think about how much they brought to the company and consider vesting some or all of their unvested stock on the way out. Also think about compensating them to stick around during the transition. And always make sure they leave the company with their head high feeling like the hero that they are. 

Here's the thing. Turning a team is not the same as firing someone for weak performance. You are firing someone for doing their job too well. They killed it and in the process got your company off to a great start and growing to a scale that they themselves aren't a great fit for. They may not be right for the job at hand, but they are a big part of the reason that the company is successful. That's the narrative that you need to have in your mind when you turn your team.

All of this is very hard, particularly if you are doing it for the first time. So get some mentors, advisors, and board members who have lived through this before. And listen to them about this. You may not want to listen to them too much about product and market stuff. Maybe you understand that better than they do. But when it comes to scaling a management team, those who have had to do it before will generally be right about the issues you are facing with your team. So their advice and counsel is worth a lot and you should pay close attention to it.

#MBA Mondays

Comments (Archived):

  1. awaldstein

    Last para hit it.No one really knows the spark of where you are going better than you do. But the dynamics of people and orgs is something that has patterns that repeat themselves.Great advisors bring that perspective and sharing to the table.

    1. fredwilson

      that’s right. the patterns are very repeatable. i am reading Isaacson’s Jobs book and Woz is the quintessential technical cofounder. he designed the apple II pretty much all by himself. but he was mostly gone by the time the Mac came along.

      1. LE

        I think of Woz as “the good wife” (don’t watch the show so I’m thinking just as the words imply).At the start you needed someone with a cute playful easy to mow over personality like Woz in order to get somewhere. Someone with more of a backbone might have given Jobs enough grief that Jobs couldn’t be Jobs. Or gotten all upset being screwed and taken advantage of. Later of course it didn’t matter as much since he perfected the reality distortion field.Imagine for a second if a Kid Mercury personality was the “Woz”. How far would Jobs have gotten?This happens in relationships also. Really hard to get somewhere when you are battling everyday with a personality that doesn’t let you do what you think is right. Sometimes “yes men” have benefits.

  2. William Mougayar

    Yes, a startup will have many lives throughout its evolution, but I’m not sure if you meant to tell them upfront “that they may not make it all the way to the finish line.”Reality is you don’t know who will be able to make it or not, so why cast a spell & be negative about it early on? That would be demotivating.I think as a founder/CEO, you want to be an optimist, until it’s time to be a realist.

    1. fredwilson

      I think you want to set some expectations

      1. William Mougayar

        I agree, but maybe not too early…Generally, the cracks reveal themselves when it’s time to scale, but if you’re stable and still trying to figure out the market fit for your product, you want everybody focused on that, and not worried about other things. The star performers will emerge out of difficult situations you’re in, and some others will not step-up and be overwhelmed by the challenges, so these are all signals you’ll collect.

        1. Eric Brooke

          Most excellent thread. I think at the beginning of the journey the team will need to dream, they will need to be passionate, they will need to see it as a long term marriage , rather then a short term fling.

          1. William Mougayar

            yes, I agree. that was my point about the timing, even for setting expectations.

  3. falicon

    I’m looking forward to the day this kind of problem is the main thing keeping me up at night…

  4. Daniel So

    I just want to be a part of a startup, turn me plz I don’t care but I want to be a part of one.Which is why I’m taking startup engineering on coursera! πŸ˜€

    1. Aaron Klein

      That’s not going to work.Figure out what you’re REALLY passionate about and go stalk the startups doing that. Offer to be their unpaid intern or work for them way cheap.Just saying you want to be part of a startup gives any founder the idea that you’ll quickly flame out, get bored and jump over to something else.You’ve got to have an obsession about what you’re doing.

  5. Tom Labus

    A good cycling team has 4 or 5 riders whose role it is to get the team a win. They give it their all and then peel off when the time is right.They may not be anywhere near the finish line when the race is won but without their total buy in and effort there is no team win. They know their role upfront and execute.

    1. jason wright

      they know what they’re good at and are honest about their own abilities and limitations.

      1. John Saddington

        very rare indeed, but necessary!

    2. John Saddington

      good analogy.

  6. jason wright

    “firing” for doing the job too well doesn’t seem to be the right word.i don’t know what the right word is.

    1. John Best

      Rationalising? Making sure the right resource is utilised at the right time.

      1. jason wright

        the sausage machine process :-)there’s possibly a term that could be borrowed from biology.

        1. John Best

          Well, some days you’re the butcher, some days you’re the sausage.

  7. William Mougayar

    At the end if the day, the CEO’s job is to manage people, and that includes their development, coaching & growth. If people don’t grow at the same pace or ahead of the growth of the company, then they are holding it down.That said, the sales & marketing are the ones that will probably evolve and change the most. The kind of sales manager you need to get to $1 mil is very different than going to $5mil, then $10M, then $20M. It’s very rare that the same person can evolve through all these phases.

    1. awaldstein

      My experience is different here. Possibly unique to me.The reality is that the majority of startups fail. The majority of them never get over 20 or 30 people, even less.When you are part of a small team (90% of all of my jobs started with 0-5 people), your job is part doing, part leading. If you’ve built a team that small where you are managing most of the time, something is amiss.3-20 people, early stage is a giant slog, with some seed or bootstrapping both. You are doing all day long. You want your team to be self managed as well. Culture is embryonic, everything is flux. This is an environment for the self started and the overly enthused.

      1. William Mougayar

        I’m talking beyond the 20-30. Sales, especially changes dramatically, from evangelism, to repeatability, to growth spurting, to optimization, etc..Jason Lemkin has a great post on that:

        1. awaldstein

          I’ll check it out.To the person building a company and at $0- $20K a month, this chart is less useful than the delivery menu of the Thai place that delivers after midnight πŸ˜‰

        2. Matt A. Myers

          That author’s not very responsive to comments I noticed. πŸ™‚

          1. William Mougayar

            πŸ™‚ we are spoiled here on AVC.

        3. ShanaC


      2. panterosa,

        Ahh, the self managed team….

        1. awaldstein

          If you have 5 or less people and you are managing them, not working with them, look again at who you have.

          1. Matt A. Myers

            I believe this statement because I can’t foresee myself having the time to manage each person – only guiding the overall vision in team meetings (or whatever you call them) – because I’ll be so busy getting everything else into place, as well as overseeing to make sure the parts are fitting into the whole.Is it possible to have a mostly self-managed team at 20-30 people? I suppose it would have to do with how defined of roles and responsibility created, and I suppose how much you trust them or depends on the processes for brainstorming/execution/iteration?

          2. Dave W Baldwin

            No way. You wouldn’t be at 20-30 folks with no defined responsibilities and it would drive you nuts if you thought each one were to report to you individually. For that matter, 5 is on the edge.

          3. Matt A. Myers

            Ya true, that’d be a lot of interruptions …

      3. PhilipSugar

        My experience is the same as yours. That’s why past 100 people not really me. But there is another thing to remember, which is the person that is good at managing tons of people will flounder miserably when there are not tons of people and inertia.

        1. awaldstein

          This is as true for individuals as managers at times.We all want to hire team players but we want doers.When I interview people from large companies, I always needed to dig deep to see what is behind the ‘we’ when discussing what they’ve done.People who spend equal time reporting on their efforts as doing them are just not startup personalities.

    2. Matt A. Myers

      A lot of the time I’m not sure most allot the money or time to helping their early team grow to where they will need to be prepared for. I personally want to help foster and promote this – though I have no idea if time constraints will make this impossible – or if this will allow for a good balance between doing and learning – and time looking for the future and problem solving for it, which is useful and valuable time spent (assuming you are correctly predicting the future outcome, say like needing to scale).

  8. John Saddington

    One of the most important and best posts written on this topic. Saving for reference.

  9. AlexHammer

    If they are loyal team members, you can easily find another place for them on the team, which better reflects their ability to meaningfully contribute as the company scales.

    1. Matt A. Myers

      Hopefully reflecting as well that they are passionate and care.

  10. rahul joshi

    Fantastic Article.. I am sure it applies at every stage of company… What get’s you here dose not take you there..

  11. Tehsin Bhayani

    “One of the signature faults of a first time founder is they are too loyal to their founding team and stick too long with them”I am hoping there is a better way to think about this. I get the fact that the company might scale faster than the individual, but shouldn’t there be a process to get the team members to level up. And if we follow (from Good to Great) the idea that we need to pick our who before the what; pick our team carefully, we will hopefully pick people who are capable of levelling up. I’d rather have learning resources available, get that outsider big shot vp of engineering to come in and help my founding guy grow. It might not always work, but having such a process in place to allow that to happen I think is a better option(?)After all, if I can level up to a CEO, can’t I expect the smarter guys than I, that have been hired to also level up?Btw love all your posts Fred.Thanks.

    1. Andrew Kennedy

      I’ve seen the above quoted fault wreak havoc at a start-up I was at. At the end of the day it was the Founders fault. It was very personal. The stronger the leader, the less likely the company suffers from this problem. That said, if you are able to put together a team that can go much farther (and likely costs a bit more) from the start (which is hard to do) it could be a real competitive advantage in my mind.

      1. fredwilson

        well the skills need at the start are different than what is needed at scale. at the start you need utility players who can play multiple positions. you need scrappy resourceful get things done quickly types. i just don’t think you can go from zero to sixty with the same team.

        1. Andrew Kennedy

          I agree what get’s you from A to B is not what gets you from B to C. I also know that you know a lot more about this than I do. The point I was trying to make is that re-tooling is expensive and it can really throw a wrench in the machine re: company culture if it isn’t done correctly (my experience). That said, timing is everything with this in my mind (and in life) as bringing the right person too early can be a real problem as well.

        2. LE

          Agree. I would think the “scrappy resourceful get things done quickly” types are detail oriented “utility players” but later on having those skills actually becomes detrimental. Have to be more big picture. Otherwise you get bogged down in details and minutia. [1]Problem is that’s really hard to big picture if it is your nature to be into the small stuff. That to you matters. (And it does matter – it’s just not consistent time wise with handling the big picture.)[1] No doubt a great thing at the start to be able to wear so many hats and learn quickly up to an “B+ to A-” level.

    2. Matt A. Myers

      Not everyone may want the new responsibility or role – though if there’s room, and time for them to learn what’s needed – pre-emptively learning, then cool. Otherwise I think by the time you need to scale, for most, you’ll need new / additional team members.

    3. fredwilson

      i am talking about managing not founder/CEO leadership. the founder and CEO needs to do three things well; raise capital, set the strategy and vision and articulate it, and attract and retain talent. none of those requires strong operating day to day management. so the founder/CEO can scale a bit easier than the rest of the leadership team.


        Should the founder be looking to build a team from people who’ve been “turned” before?

      2. Tehsin Bhayani

        Fair enough, I get what you are saying and of course agree with the above.I still think and perhaps I am wrong but this is how I feel it should ideally go down:The founding team will fall into people that want to level up or they don’t.A) If they don’t, well then that’s simple. Let’s find a position for him/her within the company that works for all or ask them to bow out gracefully.B) If they do want to scale up though, I believe it’s our responsibility to ensure that we have created a model where scaling up to a leadership role is possible. (Thinking Starbucks model).If they can’t grow fast enough, then sure let’s do the replacing, but I think it’s a shared responsibility to create an environment where that scaling up is encouraged, it’s given a chance, and the resources to do that are provided.Now having said that, I haven’t had nearly the same experience as you, maybe it doesn’t work that way because it has too happen really quickly… I don’t know, keeping fingers crossed.I’d be happy to first get to that level where I need to worry about it. Back to building the product πŸ™‚

      3. jason wright

        you should head up to Saratoga Springs and advise Serotta on what to do next now that Ben Serotta has been fired by the board.did Fiat fire Enzo Ferrari? It did not.

      4. takingpitches

        when there are multiple founders that leaves the non-CEOs vulnerable because harder to find a position that scales. Sounds like what happened at FourSquare:From Fast Company:Selvadurai finally confirms: “There was pretty much no other role for me at the company. Beside the CEO, there’s nothing a founder can really stick around to do. You don’t know a lot of these things when you’re starting off.”

    4. falicon

      I believe you pick the ‘why’, then the ‘who’, and finally the ‘what’…if you do it this way, each leads to the next and helps keep everything on track and focused.The founders and early people that truly believe in the why will also be *very* aware when the time comes that they are no longer scaling with the company…being open about those conversations throughout the journey, and remaining focused on the ‘why’, makes the transitions actually pretty easy.The early people that are great at building at believing in nothing but a vision and then helping to actually build that vision are mostly not interested in scaling into management positions — they are in it to change the world from day-to-day. When they no longer feel like what they do day-to-day has an impact on that vision, they are more than ready to move on as well…

      1. Tehsin Bhayani

        Yea I keep thinking about that quite a bit, every time I read ‘First Who, then What’ in Good to Great, it reminded me of Simon Sinek screaming ‘Start with Why’…. That’s a whole separate discussion but yea I think I agree with you πŸ™‚

    5. andyidsinga

      like your comment and would add that there are lots of really good employees who don’t want / need to level up and should not be shown the door.

  12. PhilipSugar

    This is really hard for me. I have done it. I agree but I will add two things:1. This is why you always pay the top producer more than the manager in both development and sales. If you don’t you will have one of two situations: top producers will want to manage which they are not good at, or top producers will get upset and quit, leaving managers to manage subpar teams.2. Do not think that the reason you aren’t scaling is because you need to bring in outside management. That will kill a team. This is a high class problem to have, its because you are growing so quickly that you need to bring in some management.This is the biggest worry I have because some will read this and think, I’m not growing what I need to do is turn the team, and that is just wrong.

    1. William Mougayar

      Agreed. I always default to developing/grooming/coaching the internal team before going outside as a last resort.The other side benefit is you make them self-conscious about the “personal growing” they are doing, and if it doesn’t work, then you can say, “we tried this and that…so how about we get some help from the outside…etc..”

    2. fredwilson

      yes, yes, yes to number two. that is a terrific point and should be a blog post in its own right. ideally next monday.

      1. Matt A. Myers

        No love for #1? πŸ˜›

      2. PhilipSugar

        The title should be The Clash: “Should I Stay or Should I Go”

    3. Aaron Klein

      My only disagreement with this is that #2 should say “That will kill a COMPANY.”

    4. ShanaC

      be careful how you frame 1 though. I could see some people in management getting egos about it

      1. PhilipSugar

        That is exactly why you frame it brutally and bluntly.

  13. Adrian Bye

    some great posts lately, fred!

    1. fredwilson

      thanks. i am on “vacation”

  14. reece

    +1 for founders to seek the advice of mentors, but important for that mentor to actually know the team as wellif the mentor has the lay of the land and has at least met, if not spent some time with the teammates, then they’ll have a better idea of how those teammates fit into the big picturetough to scale across everyone, but not toooo hard to get a mentor/advisor enough exposure to the right teammates

  15. ShanaC

    Is there a way to grow people – how do you know if they can grow

    1. Aaron Klein

      Most everyone can grow. It’s the rate of growth and the time to get there that matters.One very wise mentor of mine once met with one of the people I had hired three months before and said “Look, that person is 1000 customer interactions short of being amazing. Do you have time for them to get there?”I made the change. Tough.

  16. Richard

    Getting the minimum viable team and the minimum viable product to grow and scale such that each is COMMENSURATE IN SCOPE is not something that is talked or written about. This is a good start.

  17. Chris Phenner

    Reminded of Reid Hoffman’s book ‘The Startup of You,’ which despite its cheesy title, may be the first honest look at ‘The Real Contract’ between employees and earlier-stage firms. Why ‘succession’ applies almost universally to larger, public company CEOs makes so little sense.

  18. andyidsinga

    hmmmm. something doesnt sit right with this post.the problem is that turning the team doesnt seem to include improving the team and the presumption that those team members may be motivated to stay on and work hard. if they are the best performers in a certain context i would rather be hell bent on creating a context for them to be good performers. certainly you still have to scale, bring on new people and change people’s roles… but letting good employees go???

    1. Aaron Klein

      I haven’t had this problem before.But when someone like Fred tells me he’s seen it 50 times and he’s never seen the entire team be able to scale all the way to the finish line…that speaks volumes.Keeping people but demoting them to lesser roles may feel kind, but I’m not sure it really is. People thrive when they are in jobs that fit their skills and abilities.If you’re a rock star CTO of a company from 20 to 500 employees, why would you want to end up being a middle manager of a company with 1,000 employees?

      1. andyidsinga

        agreed it speaks volumes when Fred says it :)but I’m not talking about demoting or promoting people.if a good manager can recognize a good employee at stage X, but cant recognize a context for continued good work at stage Y the good employee?? hiring is REALLY hard – and if you end up being a serial entrepreneur your current employees are likely to be on our call list for your next venture – better not fire the good ones.

        1. Aaron Klein

          I guess I don’t see it as firing them. That doesn’t make it an easy conversation though.”Look, Tom. I love you. You’re brilliant. You’ve made this company a huge success.”And ultimately, that’s the problem. I’ve thought a lot about it, and you are one of the best engineering leaders in the world when it comes to managing a startup team.”We’re not a startup team any more. We have 50 engineers. It’s a totally different animal.”I’ve made the incredibly hard decision that we have to make a change and recruit someone who would suck at leading a startup team but is a good fit at leading large, scaling engineering teams.”Of course, we can find a place for you. But I want you to think long and hard before taking some kind of senior engineering role here.”You are made to be a rock star CTO at the startup level. I’d work with you again any day of the week. So I’m not sure trapping you in a middle management or individual contributor job here is the right step for your career.”I’m 110% behind you and your career. Take the next week and think carefully about what you want to do and how I can help. Nothing about this transition is easy, but I’m hoping it ends up with you hitting two home runs instead of just this one.”PS: You can’t say any of this if it isn’t actually true.

          1. andyidsinga

            thats pretty good – but its a bit of a shit sandwich ( see ben horowitz’ post ) which may piss off good + experienced people. …but i digress… the key is whether or not the “of course, we can find a good place for you” is real.

      2. LE

        “he’s seen it 50 times and he’s never seen the entire team”Initial age of team comes to mind. Wonder to what extent this is grossly true with teams funded at other VC firms in different markets where the founding team just left Boeing or a F500 company. (Question not a conclusion.)

  19. Aaron Klein

    About seven years ago, I was leading a company that failed. Too close to the end to make a difference, I encountered the best kind of mentor β€” a truth teller.There are many things he said, but one of them I will never forget: “You know what your achilles heel is?”I sat up straight in my chair. “No. What is it?””You have this beautifully optimistic view of the world that everyone, with a little bit of training and hard work on your part, has the ability to be just about anything they want to be.”I shifted uncomfortably. “Yes…””It’s not true. Different people are a good fit for certain jobs, and a horrible fit for other jobs. You do them and this company a great disservice when you fail to tell the difference.”He was right. And it has been easier to do the right thing for both them and the company ever since I learned that hard lesson.

    1. LE

      A great story. An example of perspective. Shows the difference in how something is viewed simply by how it is framed “sold”.Key is “You do them …. a great disservice”. (You already were probably 75% on the way to the “this company” part.)But point made is “this is better for them”.Interestingly though this is not a strategy that has to do with somehow making the recipient of the bad news feel any better. Nobody is happy with rejection. People don’t even like to not get invited to a party that they don’t even want to go to for gods sake. Nobody wants to hear they failed in something they care about. This is about how you feel like a parent making an unpopular decision which is “better for my kid”.”And it has been easier to do the right thing”What something like this does is merely plant a nice rationalization in you brain that makes you feel better about doing something that you are uncomfortable with otherwise. Which makes total sense.

      1. Aaron Klein

        True. I think you can rationalize a lot of things that still suck.But the reality is…that person has zero chance to be a rock star for what they’re good at if you have them stuck in a job they can’t be successful doing.Once I saw that…it made it easier to make those changes which were necessary for all β€” them, the rest of the team, and the business.

        1. LE

          I wish more people in bad marriages would take the same view of “zero chance to be” and stop thinking that it’s better to stay together “at all costs” “for the children”.

    2. Matt A. Myers

      This feels like good timing for me to hear, though probably something that would resonate me with regardless of when I heard it.Part of my concern is that I wanted to allow everyone the freedom to do work they’d fully enjoy – though people aren’t necessarily the best at that. I do wonder if there can be a balance had, where they get to do both – what they enjoy sometimes, and what they are best at (and hopefully also enjoy to some degree)..

      1. Aaron Klein

        One thing I took away from what he told me is that people cannot fully enjoy work they cannot be successful at.Simple yet profound.

        1. Matt A. Myers

          I can see what he means there.Thanks.

        2. awaldstein

          Someone sometime recently said–people love what they are good at.I buy this completely.

          1. Aaron Klein

            Me too. πŸ™‚

          2. Matt A. Myers

            Accomplishing things efficiently feels good, is rewarding. πŸ™‚

    3. ShanaC

      one of the best things I realized about myself was that. Good bosses also realize that

  20. goldwerger

    2 comments:1. I always tell anyone who’d listen (and who’s believe it..) that the #1 job of any manager (CEO, VP, mid level manager) is to make oneself redundant. Because, counterintuitive as it may seem, it is actually the true indication you have succeeded in your job – getting the right people on board, empowered, in lockstep, and performing without further need of supervision.It is when you are redundant in your current role, that you have accomplished it and are ready to scale up and take on more. Many people who view it the opposite, do not scale..2. A piece of tactical advice I’ve found useful over the years – when recruiting anyone, including very senior execs, always say upfront you are a fast-moving company operating in a dynamic environment that requires rapid changes and in which future needs cannot fully be anticipated, so therefore you reserve the right to recruit above them in the future. Secondly, I explain that overtime the candidate’s job may narrow as more specialization would be required as a company grows, but that doesn’t mean diminution of responsibility, as with narrowing comes deepening, and in fact greater responsibility more accurately defined as a larger team needs to be brought on board (footnote: this concept is very similar to adding sellers and redividing their territories because there’s more business for each to generate out of smaller territories as the company grows, and not less).After recruiting many people over the years, I have never come across anyone that – once their role, compensation, title, etc are agreed and great fit – would turn down the job because of communicating what may happen in the future. At that point, in fact everyone is very excited to come on board, and appreciate some honesty if well articulated. Later, that early communication sets a foundation for a discussion that reduces a lot of unnecessary discomfort and increases somewhat the possibility of a friendly change in role or departure (in those cases where possible).I believe this concept can and should also apply to founders. Here though the role must, in large part, be in the hands of their seed investors. It’s a tricky one, as investors may be competing for the deal, and wanting to build a good relationship on the first day. Striking a balance on this one is hard (this could alternately be made easier through a trusted relationship with an independent chairman/board member, though they are less commonly present in seed stage companies).

  21. ashafrir

    The additional challenge happens when the Founder/CEO was able to identify the needed change, has brought in the new team, but than finds herself unable to personally function within that new team/environment, and reverting back to a more known/comfortable management style that was great for that initial phase but that does not click with the new team/phase

  22. JLM

    .This is the classic crawl, walk, run problem.At each phase, the span of control broadens, the depth of the management challenges deepens and the risk of a single failure tanking the entire operation increases.And, yet, folks routinely make these kind of transitions all the time.There are so many useful analogies that one can make to understand the reality of the problem.Flying — not everybody can fly a jet because most jets are not single pilot aircraft. The second you HAVE to have a co-pilot, the game changes for the command pilot.Military — scale is parallel with promotion. As a Butter Bar, you can handle and see all 50 of your men in combat. As a company commander (Captain), you have to fight with some of your subordinate units (platoons) out of your eyesight or voice. Now, you are giving orders counting on subordinates to make them happen.Business — the big driver of the personnel is the org chart which should show how Vision, Mission, Strategy, Tactics is being converted into individual objectives. When objectives cannot be accomplished by the current team, then the org chart tells you to grow the staffing.This is a bit mechanical and not as emotional or earthy for some folks but it is a clear picture of how body count, talent and management experience/capability drive the business.Do you have a sales or a marketing issue? This is one input that will help you bring it into focus.The dashboard of the company also needs to address the logical things like “revenue per employee” and other KPIs which can be tracked through different cycles of growth. If done on a monthly basis, the tipping points can be identified easily. You can see them on the graphs.The big unsaid thing is that often a founder/CEO is also not the right guy — by design and inclination, not by accident — as certain levels of scale present themselves. Not always, but absolutely sometimes. And sometimes so obviously that it is in technicolor.JLM.

    1. Andrew Kennedy

      “The big unsaid thing is that often a founder/CEO is also not the right guy” #totally_agree.

  23. JLM

    .The basic employment compact between an employer and an employee is for the employer to consciously provide an atmosphere in which the employee’s skills and talents can be challenged and she can do her best work.If folks chat about this upfront, then when the situation changes — the employee does not have the right skills or talents or experience, as an example — the basic employment compact is not changing just the environmental conditions.Many great employees will arrive at the same conclusion as the CEO if they are given a chance to be engaged in the conversation BEFORE it becomes a call to action.In fact, theirs may be the first voice heard suggesting a change.I have fired very, very, very few folks in my entire business career but I have had some tough conversations with some folks who agreed that the environment was no longer respecting the basic employment compact — for whatever reason.In effect, the folks were firing themselves.In the end, all we really negotiated was the methodology of their exit. Not a tough thing when both parties agree it is necessary and, frankly, useful to both.JLM.

    1. LE

      “In effect, the folks were firing themselves.”More or less reminding them that they can and should “drop on request”, eh?

  24. pointsnfigures

    Also good for founders to understand when to step aside. Not all of them are capable.of running a large company.

  25. Eric Friedman

    This is a great post – thanks for covering this important topic.

  26. Pete Griffiths

    Got to hand it to Snapchat. They turned their team when there were only three of them.

  27. Martin Eriksson

    Doesn’t this go for the founder/CEO themselves as well?

  28. David Fleck

    One thing that I’ll say having lived through ‘both sides’ of this is that this is not a binary function. What I mean by that is that it’s not ‘up or out’ for everyone on the team. That first salesperson who got the business off the ground does not necessarily have to be shown the door if the business scales to 1000 salespeople and they don’t have the mettle to be the VP of Sales. However, they DO need to understand that the organization will hire around them to fill in the gaps, and that may mean hiring above them. Generally, in my experience, the early people are the ones that are the most ‘athletic’, meaning they can take on different roles and responsibilities. As the organization grows and scales, they’ll need to specialize; most of the them can do this very well, it’s more a question of IF they want to do that. Some are very attracted to opportunities where they get to wear many hats and will decide on their own that they want to move on because either a) the organization needs to hire above them and/or b) the organization needs them to specialize more than they’re willing to do.IF the early people are humble and flexible to the organization’s needs, I think oftentimes they can stay much longer than this post leads one to believe.

  29. Eric Brooke

    Good post FredThis all makes sense if the startup does not invest in the growth of its people. And/or the people cannot keep up with that is needed from them. It also makes sense people (founder/CEO) who have done it before will repeat their same patterns from their previous success. It becomes the self fulfilling prophecy cycle. Lets say Leadership 1.0 with the growth strategy patten of “revolution 1.0” both 1.0 because we can see it works.The trend seems to be enhanced by Angels and VCs who will want security, by bringing people in they know and trust.If you are aware of the phases, you can plan for them early, with professional development making it clear what is expected and what is failure, I call this Leadership 1.1 with growth strategy “evolution 0.1”

  30. Kasi Viswanathan Agilandam

    Is the situation same with angel investors and Series-A investors? Do they give-up their board seat during Series D or E round? OR when nearing the IPO?If not what would be the best way to push them out?

  31. hypermark

    Great post. I have one data point on this concept in the “lessons learned” bucket.In one of the startups that I did, we had an Early Sales Guy who was exceptional at closing the deals at the stage when the product was imperfect, the value proposition was incomplete and the market proof was was fuzzy at best. We would have died without him.Yet, as we grew, and started to build a sales organization, the limitations of Early Sales Guy in terms of hiring and managing a sales team, establishing and driving realistic quotas and achieving predictable sales numbers became obvious, and we replaced him with Head of Sales Guy, who was fantastic, and ramped sales prodigiously.When I did the next startup, I brought along Head of Sales Guy, figuring he’d turned our unpredictable sales at the last company into a machine of predictability and growth, and would do so again.Well, guess what? He fell flat on face. Why? It turned out that the new startup’s products were at a similar early stage of murkiness as had been the case at the early stages of the old startup.Head of Sales Guy was great when the product was baked, there was lots of proof and channels had been grooved, but struggled mightily with a sales process that was more about handholding, promising, and smoke and mirrors. We needed Early Sales Guy.Since then, when I hire sales people I am quick to focus on history of selling success RELATIVE to the stage of company and product.

  32. Jack Holt

    My big mistake along these lines was setting up my first company as an LP – thus firing a co-founder is not really an easy option. Having your founders shares vest was the best piece of advice I got from our lawyers.

  33. Jay Oza

    This is no different in politics when you start as a community organizer and then run for a state senate, then senate and then the Presidency. I am sure he had different people at each stage working with him.

  34. Theo Vachovsky

    great post

  35. Arkadiusz Dymalski

    Let me play the devil’s advocate role and ask: if a leader can’t scale the competencies of his team, isn’t it a leadership failure? It’s an honest question because I wonder if the costs of changes in the company culture caused by bringing new managers aren’t higher than investing in the development of people you already have.I’m aware that the answer depends on many factors, but I believe it deserves a second thought.

  36. EarlyTeam

    This post is very founder centric – what advice would you give to the early team that does want to scale with the company?

  37. Preston Pesek

    Based on this perspective, would investors also be guilty of placing too much emphasis on the founding team? Time and time again you hear “we finance the team, not the product”, but this calls into question whether or not investors make the same mistake that an over-attached entrepreneur might have to early partners. After all, aren’t we all just looking for value creation with inertia, regardless who happens to be creating it at the time?

  38. Toby Bryce

    This post may exist — in which case many thanks for a pointer — but if not it would be super-helpful to see a thumbnail for size of equity grants by employee type / level and company stage. Obvs numerous variables on each axis of the question but some sort of primer would be super-helpful.

      1. Toby Bryce

        Great — I thought I remembered something along these lines but couldn’t find. Many thanks.

  39. Matt A. Myers

    This is how I assumed it would be done – and hopefully if doesn’t feel capable at any point or needs extra external consultation that they will have it available to them.

  40. fredwilson

    the tech co-founder becoming CTO is often a great solution if they want to stay with the company.

  41. sigmaalgebra

    > the founding tech lead start and leadR&D efforts.Right, and even better, let’s get him achair in CS at MIT, CMU, or Stanford,right? I mean, after all, if he wrotesome of the initial code, then, sure,being a chaired prof of CS research shouldbe a piece of cake, right?Sure, P = NP as long as P = 0, right?He can be editor in chief of a major CSjournal with papers he can’t read, directdissertation research projects in topicshe doesn’t understand, have no idea how toteach the courses, hire junior profs, doresearch, write papers, or get grants,etc.But, right, boot him upstairs as head ofsomething trivial and useless like R&D –after all, he proved he can write code!Do I have this about right?Instead, how about: The actual had of R&Dgets a list of CS profs and walks the guyaround to the profs at their universities.They discuss how to manage a softwaregroup of 100+ programmers and how tomanage a server farm of 100,000 squarefeet. They collect copies of class notes,books, journal articles, and relevantindustry products. Some of the profsvisit, tour, meet, see some of thechallenges, give lectures, and leave andreturn with some more specificsuggestions. They sign up some of theprofs as consultants.They get sales engineer visits fromcompanies with relevant products andservices.Then they pick some not very difficult lowhanging fruit that can help in the shortterm, get some appropriate people workingon them with access to the profs and salesengineers, manage those projects, roll outwhat was learned to the rest of theprogrammers, pick some higher fruit, rinseand repeat.So, take the programmer and grow him intobeing a CIO over both software developmentand the server farm. With the right handholding from the profs, etc., he should dofine because, actually, so far, still,there’s not much in CS that is important,difficult, and takes a long time to learn.Q. You suggested that research wasdifficult then you suggested that it’seasy?A. Being a research prof or head of R&D isdifficult. Working under a good prof onCS topics that are important in practiceshould not be too difficult or take toolong. The prof had to separate the wheatfrom the chaff and otherwise try to createmore wheat; the programmer he is leadingjust needs to make bread starting withgood flour.The same for marketing, finance, HR?I’m really reluctant to believe that acompany should throw away a person who hasproven to be good and effective just dueto lack of some unspecified knowledge orexperience when those two cannot even bemade explicit. Indeed if the knowledge orexperience are made explicit, then itshould be possible to learn them quicklyenough. I mean, just what is the reallydeep stuff need to know about marketing orfinance that can’t be learned quicklyenough with, say, profs, mentors, andconsultants to provide some guidance andtutoring?For the guy who wrote all the software andgot the first sales, that has to be meyou’re talking about, and as solo founder,100% owner, and CEO, I don’t intend to bepart of the ‘team’ that is ‘turned’. Forwhat I need and don’t know, I’ll learn it,possibly with help.E.g., when it comes time to standardize onan ‘integrated development environment'(IDE — so far, like a significantfraction of experienced developers, Iprefer to use a programmable text editorand some command line scripts), arepository (so far just the file systemdirectory structure on my computer), buildprocess (so far just trivial), testbuckets (what I’m doing so far is lessformal but in time some explicit testbuckets should be worthwhile), unit test(yes, I do that, as necessary), systemintegration (it’s working well so far),documentation standards (I write longerdocumentation than posts at AVC!), codereviews, etc., I’ll bring in some people,profs, consultants, sales engineers, andpick what we are going to use.I’ve seen a lot of big shots in business,and rarely did I conclude that they hadmuch going for them tough to learn givensome good profs, mentors, consultants,etc.I can believe that what Fred said aboutturning teams is what he has observedhappens in practice, but that doesn’tconvince me that it is necessary or good,and I suspect that in significant waysit’s bad.More generally, being a successful startupis rare so that we have to be suspiciousabout following practices that have beenpopular in the past especially when thosepractices come with scant, solid evidencefor why they are best, necessary, or evenharmless. At one time the roads weredominated by Model T Fords, but thatdidn’t mean that we should look to a ModelT as the best car.If some of those big shots from outside tobe hired in at high levels have somereally good stuff, then they shouldpublish it as some peer-reviewed papers oforiginal research and get a chaired slotat a big time B-school. I don’t see muchof that! For people who write businessadvice books, only a small fraction havechaired prof slots.Usually, if burn some calories between twoears, collect some background info, etc.,then there are better ways to proceed thanfollowing practices visible in the rearview mirror.

  42. sigmaalgebra

    > I couldn’t get through this–busy day.You lost me early on.Well, when you are ready actually to readwhat I wrote …!R&D is not to be trivialized. E.g., howto climb, cruise, and descend an airplaneto save money on costs of flight time andfuel burned and stay with the schedule?Okay, charge off to MIT and meet with MikeAthans as inMichael Athans and Peter L. Falb, ‘OptimalControl: An Introduction to the Theoryand Its Applications’, McGraw-Hill BookCompany, New York.He says, “It uses necessary conditions foroptimality and computationally is atwo-point boundary value problem withmixed end conditions”.So, what now? Got to know or at least howto find out.If by R&D you mean he just outlines thedesign of the next step forward in thesoftware and/or server farm, then, sure,but that work was software engineering forthe product and likely legitimately anduniquely his to do anyway.If some actual R&D is needed, then needsomeone with appropriate qualifications,and then can proceed as I outlined.But if company growth means that thecompany needs more in software management,say, a Chief Programmer, a Director ofSoftware Development, a VP of Software, aDirector of Server Operations, andeventually a VP Operations or a CIO, thenI’d try promoting the guy who wrote thesoftware and give him help in learningwhat he needs to know.He’s proven to be a good resource; verymuch try to keep and build on what’s goodthere. Bringing in an outside guy to be acentral and crucial part of the team addsmany risks — with generally biggerpotential downside than with the existingguy — much more difficult to handle thangetting that first programmer sometutoring, mentoring, and consulting.Generally I’d try to save the guy, notdump him. Besides, as the software teamgrew, should have been hiring on people tohave a pool from which can get promotionsall the way to, say, CIO.More generally, try to promote fromwithin.Besides, there’s a war story that DetroitDiesel was a sick puppy, Roger Penske tookit over, kept all the management, and madethe company successful.For my mention of promoting the softwareguy to a chaired prof slot at MIT, thatwas facetious.Maybe, net, what the CEO should do is nottry to add capabilities to the team byfiring and hiring but, instead, byperforming some leadership of the existingteam. That is, take the programmer, don’tleave him lost and alone in his officewithout guidance and without knowing whatto do next and how to do it and, instead,help him discover what to do next, how toget the information and help he needs todo it, and, then, how to do it.Or, with usual business norms, the poorguy can’t just walk into the CEOs officeand confess that he’s done all he knowshow to do and is about to need to dothings he doesn’t really know how to doand is about to be five feet under water;he can’t say that what he really needs todo is to go get some tutoring. Besides,likely he doesn’t even know how to getgood tutoring, mentoring, and consultingand doesn’t know how he will be judged ashe is on this ‘educational detour’.There’s nothing wrong or strange about the’detour’; it’s work that needs to be donemostly like any other. And, as before,the guy needs management by his CEO, withsome discussion, identification of what todo, freedom and encouragement to do it,review of what he’s doing, and praise whenas he does well.So, the CEO tells him, “Yes, we will getyou a company cell phone and a goodlaptop, a company credit card, how to keepdata on expenses and file your expensereport, freedom to fly off to universitiesand conferences, how to set up consulting,how to buy books, how to order photocopiesof technical papers, user privileges at thelibrary at the local university, luggageif you need it, a travel agent, etc.”Think of it as a kid — bright, provencapable — in the seventh grade who needsto write a term paper for science classand doesn’t know where to start, not thesubject or how to find it, not how to usethe library, not want materials to use,not how to organize the paper, etc. andneeds some tutoring for this new work.Give him some leadership; let him do thework; and get a good paper.

  43. kidmercury


  44. LE

    Similar to my point the other day about the video (and lack of intro to draw you in), long replies need to be summarized at the start with an abstract then followed with more details below. [1] [2] Or at least broken up with section headers. You can do that in comments.[1] Although I also write long replies they are written on a 4th grade level and as easy to follow along as a children’s book.[2] Things like this [footnote] also increase readability. No need to pack everything inline.

  45. kidmercury

    i must confess to secretly liking the occasional long comment made by others because it gives me the opportunity to make a parker joke, which is one of my favorite jokes. i’m a bit torn regarding whether “pulling a parker” or “that’s a bunch of b corp” is my favorite expression at the moment. i think i might give the nod to b corp, since i genuinely think it sucks and is a scam, while parker is just silly rather than genuinely malicious. so i have greater passion for jokes that denigrate b corps.

  46. sigmaalgebra

    Summary:After the initial part that was facetiousand intended to be an outrageous parody,the summery was:”But, right, boot him upstairs as head ofsomething trivial and useless like R&D –after all, he proved he can write code!”Or, from ‘Alice in Wonderland’:”Off with their heads”.Or, to paraphrase ‘Treasure of the SierraMadre’,”Loyally? What loyally? We don’t needno stinking loyally”.Or,Instead of new people, how about some goodemployee development and leadership fromthe CEO?Or,Develop people and promote from within.Or, sure, fire the guy who wrote all thecode and hire some new people — good wayto split the company into warring campsand nearly destroy the company.One rule in firing: Wait until asituation is so bad that nearly everyoneagrees the employee needs a new job.

  47. LE

    “…”Well I know that Charlie likes this but while I wouldn’t call it a scam (and don’t know enough about it to comment intelligently as to why it sucks) my BS detector did ring immediately as far as the entire presentation as an earthy crunchy birkenstock alternative to big bad (or small bad) business.In the end everything ends up in the same place to me and all that stuff is just window dressing. Palin would say “lipstick on a pig”.Noting the background of the founders in particular this is not Ben and Jerry exactly (at the start of Ben and Jerry that is):The Co-Founders of B Lab, Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy, share passion for creating a better world through business and have been friends for over 20 years. Prior to B Lab, Jay and Bart were Co-Founder and President respectively, of AND1, a $250 million basketball footwear and apparel business. Andrew spent his career as a private equity investor; most recently as a Partner at MSD Real Estate Capital, a $1 billion real estate fund controlled by MSD Capital, the investment vehicle for the assets of Michael Dell and the Michael and Susan Dell Foundation.…Not to mention that I don’t like any “movements” and attempts to get young impressionable people without much life experience to think “yeah this is the right thing to do yeah this is great” by dropping an idea into their head as if it’s a thing with world wide credibility.And that whole “certification” thing is trying to sound way more important and authoritative than it really is.Note this as well, trying to gain invented credibility by using copy that compares to something already viewed as important (well played!)GIIRS is a ratings agency and analytics platform for impact investors. Like Morningstar ratings and Capital IQ analytics, GIIRS gives investors the tools they need to analyze the impact of their investments with the same rigor as they analyze their financial risk and return

  48. kidmercury

    teh founder of b corp, andrew kassoy, is on record as stating the “holy grail” of their whole agenda is for b corp companies to get tax breaks and stimulus. that is why they are working so hard for legal recognition in states. a total scam, the crap they recommend isn’t even good for the environment or the economy. the whole agenda reflects little more than their own lack of education.oh yeah, and you have to pay up to 25k in annual fees to b labs to get approved as a b corp. hahahhahaaha!!!

  49. sigmaalgebra

    When you get your work done andget back to reading, my posts willstill be here!

  50. Aaron Klein

    “I didn’t have time to write a short letter, so I wrote a long one instead.” β€”Mark TwainShort, concise and understandable writing is a critical skill. I won’t hire someone who can’t do it.

  51. LE

    Much better.”Instead of new people, how about some goodemployee development and leadership fromthe CEO?”That would take time. Times have changed. Similar to the reason people don’t repair broken toasters. (Ironic given the fact that the saying “if you want a guarantee buy a toaster” is still in use.)

  52. sigmaalgebra

    > That would take time.I addresses such considerations inmy longer post.For the “time”, have a collection ofemployees selected to be candidatesfor promotion and get them training.For the guy who wrote the software,lead him and give him help and motivationand a chance. For a guy whose technicalbackground is essentially just in thesoftware he wrote, something deep inmath, physics, or engineering mighttake too much time but, still, mightbe doable with the right tutors andconsultants. But for just for somethingusually just childishly, nearly brain-dead, dirt simple, e.g., nearly all ofcurrent computer science andeven more of practical computing,no, with tutors, mentors, andconsultants can zip through thatstuff quickly.