by Elad Gil
Elad: You mentioned getting disconnected from product. How much do you think that depends on the founding team? How do you think about the broader leadership team versus the CEO as the full driver or primary owner of things?
Sam: I do think there are many examples of teams that have several strong founders, where you see these roles get divided up. And I actually think that can work really well. It’s important to know who’s doing what and have some amount of clarity. But I think it can work really well to have multiple people sharing the responsibilities.
Elad: How do you think the role of the CEO, and what the CEO should focus on, shifts in a downturn? Or alternatively if the company is just not doing well?
Sam: In general, the other thing that CEOs should not lose sight of is that they’re building businesses. And at some point they have to deliver returns and make money. People always say that the CEO’s job is not to run out of money, and what they usually mean by that is fundraising. But the other way you can do that is to make money. And so I think if the company is not doing well or if the environment is really hard, it becomes much more urgent that the CEO—who should never lose sight of the financial performance of the company and the cash flow of the company—is really looking at that all day.
Elad: When it comes to board management and communication to boards, what is the most important role of the CEO?
Sam: I think the most important thing is that boards hate surprises. And boards hate feeling like you’re trying to hide bad news. You want to over-communicate with boards for sure. Certainly if you have bad news, you want to get that to them ahead of the board meeting.
As a general operating principle, I also don’t think it works super well—most of the time, there are occasions when it does—to go into a board meeting and say, “Hey, I’m really struggling with this idea. What should we do?” Not only because boards don’t like that. (And in general they don’t; they want confident leadership.) But because in a board meeting, you usually have all these weird dynamics of different VCs trying to impress each other. You’re actually just much better off to have individual conversations ahead of time when you really want open-ended brainstorming. You’re likely to get better results.
Elad: Are there any other CEO distractions that you see a lot? One thing I’ve noticed, for example, is that a lot of founders equate press with success. So you see these CEOs chasing press, when that’s really not the most important thing they should be doing in many cases. Unless it’s a product like Twitter where the press is really the customer acquisition mechanism very early on.
Sam: Yeah, I think it’s almost always a huge mistake. Twitter is one crazy example—as far as I can tell, Twitter’s best users are still journalists. If your customers are the press, then yeah, go after the press. But most of the time press feels great and delivers nothing. There are exceptions; that’s a little bit of an overstatement. And it’s usually somewhat easy to get press if you’re doing something interesting. But I think most founders—actually, I’m pretty confident in saying almost all founders—overweight the importance of press. So you should do it. It definitely can be helpful, and there’s clear value in it. But you see far more startups make the mistake of orienting their entire company around press than making the much smaller mistake of not focusing enough on press.
Elad: Speaking at events, too—it seems like people will end up on these speaking junkets versus being in the office and focusing on the business or meeting with customers.
Sam: Yeah, a lot of founders fall in love with that. It’s not that hard and you get to travel and your company pays for it. And you feel special. The point that I always try to make is that it’s important to do very small amounts of that. Less is more. If you look at the most successful founders, they’re not the ones that are on the circuit.
Elad: What are the biggest challenges you see as companies scale? And how does the role of the CEO need to change accordingly?
Sam: I think the biggest change people fail to make is that at some point your job becomes more about hiring people and working with them to get what you want done than doing it yourself. The number one failure to scale that we see in CEOs is the failure to make that transition. You need to be conscious as it’s happening, and realize that at some point you’ll get far more leverage on your time if you hire people and work with them closely than try to do everything yourself. And that’s a hard transition for many CEOs to make.
Elad: How do you see people navigating that well, or what are some tips to do that effectively?
Sam: No one does it well the first time. No one is naturally good at letting go of something they care deeply about. So, I think you just have to give yourself permission to screw it up for a while. You can internalize that it’s important to delegate and give people authority, but you won’t do it well the first few times. Just continually try to get better at it.
Elad: Relatedly, I think CEOs often forget that the same thing is happening to members of their team who joined early, maybe just out of school, and who are managing for the first time. They need to learn that skill too. And so you see, at some point of scale, different team members bite the dust in terms of effectiveness. Then the organization limps on until they figure how to either coach that person or bring in somebody more experienced.
Sam: Yeah, this is actually a pretty systemic mistake that I think very few companies get right, which is how you evolve early employees. Obviously I think that’s a really important thing to do. These people have been with you for a long time. They’re probably extremely talented—if you’ve done well, you usually have very good early employees. A) I think it’s the right thing to do for the employees, and B) I think they have institutional knowledge that no one else does. It’s really worth trying to keep them.
Elad: When those early employees haven’t scaled to the point where you want them to, though, what do you do? Do you try to offer them an individual contributor role? Do you offer them more of an influencer role, where they’re, say, a CTO but don’t have direct-line reporting? Do you get a coach for them?
Sam: I don’t think there’s a one-size-fits-all answer to that. What I tell people is just that I think it is really worth more effort than you would normally spend on an employee to try to figure it out.
Elad: Do you have any advice for people who are trying to scale as CEO, but are so busy that they don’t have the time to properly hire the people that they need? Is literally the only thing they can do just take a big step back and not get certain things done?
Sam: I have come to that belief. It’s never easy advice to give or to hear, but I haven’t seen anything else work.
When you’re at these breaking points, I think what happens is most CEOs find some sort of formal or informal coach, often a board member. In my case it was one of my board members. We set up a dinner once a month. I would talk to him, and he was incredibly generous with his time. He was a former, very successful, CEO. And I basically said, “Hey, things are breaking. This is not going to go well. Will you teach me how to be a CEO?” And he did. I think most founders find someone to have a similar dynamic with.
“People always say that the CEO’s job is not to run out of money, and what they usually mean by that is fundraising. But the other way you can do that is to make money.”
—Sam Altman
Elad: I think a lot of people too should actively look for that, or reach out to people that will have those additional experiences and are willing to put in the time. You have to be very proactive about it and figure out what do you want from that person.
Sam: One of the hard things is that, as the landscape of investing has shifted, there are fewer and fewer investors willing to really put in the time on one company. And that is really bad in this particular case.
Elad: One way we’ve tried to manage that at Color Genomics is by finding investors who don’t have a lot of angel investments but who’ve built businesses from the ground up. There’s a number of people like that out there
, but traditionally people didn’t go after them as investors. People just stick to the same pool in Silicon Valley.
Sam: Yeah, I think that’s incredible and a really, really good thing to do. Founders don’t realize how important that is until things break. And so they go for the big-name investor or the investor paying the highest price. And then a year or two later, everything is on fire and they really wish they had allocated their round differently.
This interview has been edited and condensed for clarity.
CHAPTER 4
Building the executive team
Hiring executives
First-time founders or CEOs typically find it hard to hire the first executives to join the team. As a founder, often without deep work experience, you have pulled off the impossible and created a product or service lots of people want to use or pay for. And you did so without any fancy executive-type people from Google or Facebook, with their expensive paychecks and reliance on process.
At some point, however, you will notice that lots of things start to break down. Communication within the company gets gummed up. Various product teams start to lose coordination. You don’t have time to get every important thing done in the day, and indeed you start to run out of time to think. Your hiring process falls apart, and it takes weeks for you to follow up with candidates. Your sales pipeline is largely dependent on you and a handful of inexperienced individual contributors—and suddenly follow-through crashes to a halt. You may try to promote existing employees (who also have no prior experience) to run various areas, and in most cases this fails or does not really help anything.
Suddenly you realize that you really need someone with more experience on your team.
Hiring executives for the first time can be quite tricky for a founder. However, once you hire your first seasoned exec who works out, you will be grateful for her presence. All sorts of things will magically just get done. People will get hired, deals will get closed, process will tighten up. It can be a wondrous experience. You will kick yourself for not hiring an experienced, high-capacity executive sooner.
Unfortunately, things could also go badly. The executive is a bad culture fit, or is too senior for the role and spins his wheels. Time is wasted and progress lost on a poor fit—or even worse, some of the best people on your team quit when managed by someone who’s not working out.
Finding a great executive for your company can be challenging, but it’s well worth the effort. And there are some steps you can take to maximize your chances of success:
Hire for the next 12–18 months
If you have a 10-person engineering team, and in 12 months it will grow to 30 people, you do not need to hire an SVP from Salesforce whose job is to manage a 1,500-person team. This person will get bored with the small job offered to her and may simply spin her wheels. She is too senior for the role.
When hiring executives, look for people who have the experience and background that would make them a good fit or hire for the next 12–18 months. Anything shorter than that and they will not be able to scale sufficiently far relative to the time it takes to hire them. Anything longer and you will over-hire and end up with someone who is a bad fit for the job.
Traits to look for in executives
Whatever the role, there are a few key skills and traits that you want your executives to bring to the table:
1. Functional area expertise.
Do they understand the major issues and common failure points for their functions?
Do people in their organizations respect their opinions and feel they can learn from them?
Are they right for the current scale and trajectory of your company? You can over-hire for a position, as well as under-hire, given the phase your company is in. For example, do you really need to hire Ruth Porat, Alphabet’s CFO, to manage the finances of your pre-revenue 10-person team?
2. Ability to build and manage a team in those functional areas.
Can they recruit exceptional people? Can they build a recruiting culture within their teams?
Do they know how to motivate people in their functions? The incentives for a salesperson are different from those for a product manager.
Can they effectively manage people from their function? Managing designers, for example, requires different approaches than managing a customer support team.
Do they understand how to build out an organization with multiple layers if needed? How deep of an organization have they managed in the past, and how does that fit your current needs (again, think 12–18 months here)?
3. Collegiality.
Do they play well with other executives who are their peers?
Can they put a collegial, mutually supportive environment in place for the company as a whole, as well as their function?
Do they try to do what is right for the company even if it is not in their own best interest?
Do they fit your culture? Each culture is unique, and like all employees, some executives fit a culture and some do not.
4. Strong communication skills.
Are they strong at communication across the company?
Can they consistently get other executives, and the CEO or founders, on board with team changes, promotions, road maps, goals, etc.? (Exec-to-founder communication may be its own magical art, depending on how introverted or opinionated the founder is.)
Are they able to understand underlying issues and communicate them within their teams? Are they able to communicate to the board, external partners or customers, and other major stakeholders?
Do they have “cross-functional empathy” that allows them to work with, and communicate effectively to, other functions they work with closely?29
5. Owner mentality.
Do they take ownership of their functions and make sure they are running smoothly and effectively?
Do they own problems and solve them? Can they engage in “black box” abstraction of their functions so the CEO can engage on them, but does not need to be involved day-to-day?
Do they understand that, as company executives, they should think like owners?30
6. Smarts and strategic thinking skills.
Do they think strategically and holistically about their functions? Many people don’t realize that almost every function can act strategically. It is a good exercise to ask yourself as CEO, “What does a strategic X org look like?” (where X can be HR, ops, product, etc.).
Do they think about how their functions can be a competitive advantage for the company? Most companies are only good at one or two things, which is often enough to be successful. But companies that can tackle more than one thing well tend to outshine everyone else (e.g., Apple with hardware design, supply chain, and marketing).31
Are they first principles thinkers? Can they apply their expertise in knowledge in the context of your company, team, and product? Or do they just try to implement exactly what they did in their last role?
“Once you hire your first seasoned exec who works out, you will be grateful for her presence. All sorts of things will magically just get done. People will get hired, deals will get closed, process will tighten up. It can be a wondrous experience.”
—Elad Gil
Define the role and meet with people who do it well
Most of the time, a founder will have no idea what to look for when hiring someone to run a particular company function. What does a CFO, general counsel, or even VP of sales really do day-to-day? How can you spot someone who is exceptional at each role? What characteristics should one type of VP have versus another? For example, how does a VP of engineering differ from a VP of sales, or even a CFO?
If you want to learn more about what a great CFO or VP of engineering does, your best bet is to reach out to people who are great at these roles and ask them for advice. Your investors or mentors may be able to suggest which companies have the best people for each function. For example, if you are hiring a CFO, go and meet three or four great CFOs at companies a few years ahead of yours or larger
public companies known for excellence like Google or Netflix. What would they hire for in a CFO? What traits would they look for? What interview questions, work projects, tests, reference-checking questions, or other approaches would they take to vet a candidate in this area? For your company size and 18–month growth road map, what should you look for?
In order to get in touch with great leaders in finance, sales, engineering, and more, ask your investors or advisors for introductions. Or, you can ask the founders of other companies that are a few years ahead of you to introduce you to their CFOs or VPs of product for advice and perhaps candidate suggestions.
Once you have figured out what you want in the role, write it down and share it with the team that will be interviewing candidates for that executive hire. You want everyone to have a common view of what to look for, as well as what to select against. You can also use this as an opportunity to reemphasize the cultural characteristics the candidate must embody. Clearly establishing what you are hiring for will make a huge difference as you collect your team’s feedback and discuss candidates. It will also prevent poor hiring (or, alternatively, rejection of a great candidate) due to a lack of common understanding of what you are looking for.
