Business success always starts and ends with the people. It doesn’t matter if you are a Fortune 50 or startup, your company’s success depends upon the quality of the talent at all levels of the organization, the ability to inspire and empower teams towards a vision, developing strong partnerships across your ecosystem, and effectively managing risk. Everything else flows based on the quality of the people leading, supporting and partnering with your company.

A fish rots from the head first. This is another way of saying that the culture and the tone for the business are set by the CEO. The buck stops with the CEO.

The lessons below are important for all leaders regardless of the size of their organization. Although, as a rule, the larger the organization, the longer it will take for the impact to be meaningfully observed in business results – customer and partner satisfaction, financial, and employee engagement – and the longer it will take to unwind the damage.

As a VC-backed startup CEO, it is imperative that you understand and apply the lessons below if you want a reasonable chance of emerging a market leader. Where you compete and how you compete to win will flow from making quality people related decisions. And, you are expected to yield 10x returns to your investors in less than five years. To improve your odds of success, you need to rapidly put organizational decisions into action, assess what is and is not working, swiftly adapt and move on.

In the early stages of a startup, one cannot understate how important it is to find investors, co-founders and team members that complement, push and support each other in constructive ways. You want to have the right people for the current stage of the journey and the right processes in place that both empower teams and enable rapid iteration and decision-making.

It is a fantastically fun journey – the pace and the impact are thrilling for those who love the S-curve and want to build something that makes a difference. So, here we go with the 7 lessons for you on your journey. Have fun!

1)     You will never regret letting talent go too quickly. You will always regret keeping them too long. Make the tough decisions about talent fast especially with senior leaders that hire and manage talent. You can let someone go with grace and compassion. Your team will thank you and they will thank you (maybe not in person, but if they are honest with themselves, they will thank you because deep down they know it wasn’t a fit).

A good leader also takes the time to work with talent to enable them to be successful by setting realistic goals and priorities, clear responsibilities, communication cadence and vehicles, incentive structures and resources. If you believe they have unique capabilities that can be unleashed in another role without creating gaps or risk (toxicity) in the business, you can try moving them into different roles. You may find that you have to hire a replacement for their prior role or you may be able to fill the gap with contractors or other team members. When creating new roles and changing others, always make sure that you are not adding more to someone else without taking something off of their plate or providing them with additional resources. Furthermore, you will likely have to adjust titles and compensation for any and all employees impacted by this change. The key with roles and structure is to be flexible - yet firm – regarding employee expectations required for everyone – and the business - to be successful.

It is both an art and a science to get the timing right with respect to any organizational change. Yet, most leaders wait too long to avoid: (1) conflict (2) perception of failure (3) fear of lost productivity due to time required to fill the role. And, the price of waiting is always higher given the impact on the team of an under-performing and/or negative team member. It can reduce team engagement, morale and performance that becomes harder to reverse the longer the problem persists.

2)     Start with a strong founding team who has “been there and done that” early in your startup organization. Until you find product-market fit, you want leaders with Pi-shaped skills - strong generalist, specialist and leadership skills. These leaders have the ability to understand strategic, operational and economic context of decisions across the business, the relative risks, and the judgement to both make those decisions and implement them quickly as you assess, test and iterate on market demand, product and GTM. Net net, experienced leaders can iterate faster and more effectively to find you product-market fit sooner with lowered risk and higher returns.

The time to hire interns or recent graduates is later in the evolution of your business after you have found product-market fit and started to effectively scale with repeatable processes and systems. Your organization will be better positioned to on-board, train and leverage more junior team members as there are fewer operational variables at play and the trajectory requires fewer high-risk decisions by a larger organization. 

3)     Hire the right people for the stage of the business that you are in and make sure that your motivations, styles and skills are compatible given the goals of the business. If you are VC-backed or seeking to be VC-backed, you are building for a specific growth trajectory. Therefore, you need fellow leaders who are willing to do the work to achieve those objectives, embrace hypothesis-based rapid iteration models to find product-market fit and future innovations, comfortable with ambiguity and willing to make decisions with less than perfect data. You will need to love the journey of high highs and low lows. This is not the time for work life balance, but rather work life integration enabling people to thrive and sustain the journey.

If you are building a self-sustaining business and not seeking outside funding or sale to an acquirer, you will likely seek a different founding team profile.

Here are some questions for you to consider when partnering or hiring fellow founding team or early stage leaders:

Reasons for Pursuing Opportunity

·       What are your reasons for pursuing this opportunity? Are there any deal-breakers?

·       What type of business are you seeking to build (autonomous, investor backed, sale)? What is the timeframe for these?

·       Are your skills complementary with other team members? If not, how will any gaps be filled (contractors, consultants) and what type of risk does this imply for the business?

·       What do you need in order to feel financially comfortable and secure? Is this different based on where the company is in its business cycle (e.g. POC, MVP, Growth)

·       What do they think is required for the business, the team and themselves to be successful?

Individual Work Preferences

·       Driven by results, process and/or people (mix)

·       Role clarity or make it up as we go; ability to make and keep commitments

·       Pace of decision making - fast or slow

·       Comfort with ambiguity versus need for certainty

·       Comfort with goals, metrics, process, and transparency

·       Approach to conflict resolution

·       How you show support for others; what you need from others to feel valued

4)     Penny wise, dollar poor. You get what you pay for. Don’t skimp on paying talent. People can work on ‘inspiration’ for a while, but the tank will start to deplete and show up as declining performance, resentment and/or leaving with their institutional knowledge for a better opportunity. Don’t fall into the ridiculous trap that so many fall into – “if I can get it for free I should”. Some people just love the game of finding out how little they can pay for talent and will spend more time waiting for inexpensive labor and ignoring the opportunity cost versus just paying for high quality talent and accelerating their time to market.

I can’t tell you how many times I have heard some version of the following: ‘Her husband makes a ton, so she can afford to do it for less’; ‘They should just be grateful for this job and opportunity that I am giving them’; ‘They already have enough money, it doesn’t matter to them’. At the end of the day, do the right thing because it is the right thing to do. Pay people what the market demands. It is none of your business if they need it or not – and, quite frankly differentiate yourself by paying more than market – it is a bet on the long game.

Review market salary and equity reports to find the compensation by roles, stage of company, sector and founder status. You have three primary levers to pull in a startup for compensation – cash, equity and benefits. The sum of all three equals total compensation. And, understand the vesting period - four years with monthly pro-rated vesting is reasonable.

Duh, right? I can’t tell you how many leaders think you don’t get this and try to pull the wool over your eyes. You can change the mix of the three factors, but know that rationally, a solid employee is weighing the relative value of each element to determine if the total comp is the same on a risk-adjusted basis. They may not discuss it with you, but they are making the calculations and assessing trade-offs that may ultimately not benefit you in the long run. If they think you are undervaluing them, they may already be planning their ‘exit’ and using this ONLY has a launching pad to something else.

Of course, everyone should be thinking about how this role helps them build a talent stack that makes them more valuable to you (and to others) – that is the key to sustained growth, relevance and marketability. And, if you compensate them fairly, the exit plan is not their primary concern - how they can be of value to your firm becomes primary. Win win. 

5)     Aspire to play like the New England Patriots in a Superbowl winning season - not a chaotic intramural football team just racing to get the ball into the end-zone. 

If I hear ‘just do it’ or ‘get @#$# done’ one more time, I may lose it. The implication is that knowing the end game is all that matters and that the ‘how’ is obvious. If that was true, then an intramural football team could beat the New England Patriots. The Patriots win based on individual and combined team skills, playbooks and practice, competitive intelligence, individual and team conditioning, and leadership. If you are going to thrive as an organization, you need to think the same way and be smart about your needs based on the stage of your business.

Segregation of duties and organization structures are important at every stage to foster effective teams - clear roles, scope responsibilities and decision-rights. Without these, you will rapidly find balls being dropped, duplicative activities, confusion and disfunction. The root of most team disfunction is a lack of role clarity.

To be sure, the structure needs to be dynamic in early stage startups to account for shifting business demands. And, any shifts in structure need to be made and communicated explicitly and proactively across the team. While high performing teams are willing to help each other in pursuit of the mission, you also need an underlying culture of individual accountability where there is a clear and common understanding of what you can expect from each other. This is the foundation for building trust and focus across an organization. Politics arise when roles are not clear, thus leaving room for gaming and posturing.

In addition, establish an operating cadence to enable frequent, relevant, timely cross-team communications to establish objectives and priorities, escalate and resolve issues quickly, and adapt based on changing demands or insights. 

6)     Be smart about how you use resources – human and capital - early on. If you build a strong founding team, you can leverage outside resources exceptionally well for targeted advisory (Legal, HR), capability development for internal team to execute (e.g. marketing), and commoditized services (e.g. payroll, A/P).

7)     HAVE FUN!!!!! Life is too short to take seriously. Enjoy the journey and find a mission that makes every day worthwhile and inspired.

Libby Unger is an advisor for CEOX. She works closely with senior business leaders to identify and deliver the capabilities required to compete and win in the dynamic markets they serve. From startups to the Fortune 50, accelerating product innovation, margin expansion and growth starts at the top with the right leadership and culture. She has created significant strategic value for businesses from her start in investment banking to turnaround executive to venture capital backed tech CEO. Doing the right thing - and making the tough trade offs - for customers, partners, employees and shareholders is not just good business - it is great business. She knows it and lives it.