Two Reasons why new CXO level hires leave startups quickly

A startup is a long and arduous journey with multiple phases.

A feature isn’t a product; a product isn’t a business; a business isn’t a company; a company isn’t an organisation.

Sanjay Anandaram.

This amazing quote is one of 30 startup mantras by one of the top mentors in the Bangalore startup ecosystem. A new company's journey starts with a couple of brave hearts, dreamers, executors who take it from zero to one. Then, they attract a set of like-minded folks who help them go from one to ten as they build out the product, attract customers, and get some early revenue. Soon, if they are fortunate, they need to figure out how to build a real organisation; on how to build reliable systems and repeatable processes. As the company starts scaling, they need to attract lot more senior talent.

The Problem:

Senior hires are brought in from large companies like Google, Amazon, BCG, McKinsey etc. Increasingly, some of these folks are now being hired from the Indian Unicorns like Flipkart, Ola Cabs, PayTM, Makemytrip, etc.

Obviously, they want to hire a candidate that will work and take the company to new heights. Money is no objective. At the same time, the candidate is often going to walk away from an existing, comfortable job with great pay, large job scope and a set of established systems and processes. They yearn for more impact, the excitement of creating something new, and perhaps striking a big pot of gold. They certainly are not interested in joining for a 1-2 year gig. However, the senior hires leave just around their 12 month anniversary, either voluntarily or involuntarily.

This phenomenon happens in any kind of company but seems quite prevalent in larger, Indian startups. I have personally met with and seen a dozen or so senior hires walk in and out of these companies.

Why?

Two Reasons for High Level of Attrition:

So, why is it that CXO level attrition rates at startups are super high? I believe companies are missing out on two basic reasons.

1. Culture Mismatch

2. Reference Checks (or, lack thereof).

Culture Mismatch:

Company culture get formed in the first 9-18 months of their existence. I've written more about this earlier. Startup founders are successful and scale because they often have a ready-fire-aim mentality. They apply that to hiring as well. I believe startups need to be more deliberate, esp. with senior hiring. They need to evaluate not just the brand name of the previous employer, functional skills, leadership quotient or IQ for the candidate but also think if they are the right fit for this stage of the company?

A few things to evaluate include:

-     Have they dealt with ambiguity, chaos and constantly changing priorities?

-     Have they been able to hire future superstars at low budgets? Have they been able to optimally utilise resources at all? Or was budget never a constraint?

-     Is there “chemistry” between the founding team and the new CXO hires?

-     Are the founders willing to “let go” of areas that they are bringing these senior folks into? Or, is it forced by external events, perhaps even investors.

Lack of thorough reference checks:

I’m sure you are thinking everyone has done reference checks. Perhaps they have. However, I’m afraid, they have NOT done it thoroughly. Perhaps, the task was delegated to the recruiter or a junior HR team member. It is imperative that the Founders or the Head of HR invest time and do this themselves.

Just as well, it is amazing how senior people will just jump into a new gig or venture because of the title or the prospective pot of gold without doing serious diligence on the company culture. Both the candidate and the company should speak to at least 3-5 people apart from the cited references.

The candidate needs to figure out what kind of culture does the company have. Here are some indicative questions one might want to explore:

• What is their vision?
• How much of the vision is bought into by the organisation?
• How do the founders deal with dissent?
• What are their pet peeves?
• What are they willing to do let go and what are they not?

One of the best and simplest hacks is to do reference checks on founders is to talk to some ex-employees of the company they are considering joining.

The company needs to figure out what kind of professional culture this person has grown up in. I find that talking not just to their bosses but their juniors, or even their peers, is highly insightful. How would these people describe the candidate? Would they work for, or with them again? Are they a team player? Would the company they are leaving hire them again?

I would think the entire startup ecosystem would do itself a huge favour by spending some quality time evaluating culture fit through deep reference checks. 

Amit is a Managing Partner at Prime Venture Partners, a seed stage VC firm based out of Bangalore, India. Prime invests in category creating, early stage companies founded by rock star teams. Amit has held leadership positions at Makemytrip, Google and IBM. He is also deeply engaged with the early stage startup ecosystem in India and actively volunteers with iSpirt, TiE and NASSCOM. He tweets regularly @amitsomani and is trying to become an active, late blooming blogger).