Start-up Hiring: Chops vs. Flops

Noam Wasserman of HBS has extensively studied the start-up founder’s dilemma which he characterizes as “Rich versus King,” meaning should the founder optimize for keeping control, keeping a large chunk of equity and staying as CEO (“King” options) or be open to bringing in experienced partners and investors and ultimately taking a smaller slice of what could be a much bigger pie. He posits that it ultimately it comes down to the founders motivations: they’re either in it for the money (“Rich”) or they’re in it for the lifestyle and to leave their stamp on the world (“King”).

A similar trade-off is faced by start-up teams when hiring the first group of employees – should one optimize for deep industry experience, rolodex, gray hair (“Chops”) or raw processing power, potential and hunger (“Flops” referring to floating point operations per second, which measures the processing speed of a computer). Should you hire the person who has “been there, done that” and will help you avoid mistakes or the super-smart kid who believes in the mission and will go through walls for you.

Obviously “Chops versus Flops” doesn’t always represent a pure trade-off. A “No Chops or Flops” candidate is an obvious “We’ll keep your resume on file” while a “Chops AND Flops” person would seem to be an obvious “When can you start?”. Both situations are relatively rare and what interests me is whether entrepreneurs should emphasize Chops or Flops when creating their hiring strategy and then ultimately evaluating resumes.

There are obviously many, many more criteria than “Chops versus Flops” at play in hiring decisions. For example, do you like the person and do they fit the culture you’re trying to build? Don’t underestimate these points – you will be spending more of waking hours with this team than you do with your wife and kids. Life is too short to hang with people you don’t like. One of my past bosses used to ask the question, “would you want to spend six hours sitting next to this person on a long flight?”. Good question.

In one of my favorite quotes on hiring, legendary management thinker Dee Hock throws light on some of these other criteria when making the case for Flops and the relative unimportance of experience:

Hire and promote first on the basis of integrity; second, motivation; third, capacity; fourth, understanding; fifth, knowledge; and last and least, experience. Without integrity, motivation is dangerous; without motivation, capacity is impotent; without capacity, understanding is limited; without understanding, knowledge is meaningless; without knowledge, experience is blind. Experience is easy to provide and quickly put to good use by people with all the other qualities.

Even though this quote resonates with me personally, my sense is that it was written with a big company in mind. Unlike big companies, start-ups don’t have time for training on the job and can be crippled by a bad hiring decision that costs the company 3 or 6 or, God forbid, 12 months of productivity. One single hire represents 10-30% of your entire employee-base; not so for IBM.

Plus, hiring a big shot from a well-known company can give your start-up tons of credibility when talking to partners, customers, press, future employees and investors. Being able to say, “We hired the former CXO of GE Healthcare” can take a start-up from three guys with an idea to a newsworthy force to be reckoned with in the industry. It’s like raising money from KP or Sequoia – you’re instantly big-time.

By the same token, as we’ve been told ad nauseum, early stage start-ups are all about changing direction or pivoting. What does your former GE Healthcare CXO do when the “right” application for your nano-giga-cloud technology turns out to be wind turbines, not medical devices? And how company cycles do they waste trying to convince you that the “right” direction for the company is the one where they remain relevant?

In the end I think the crux of this trade-off depends on where you are in the start-up life-cycle. If you are in customer development and business model generation mode, you should emphasize Flops: really smart, hungry fellow entrepreneurs who are mentally flexible and passionate about building a meaningful company. Once you figure it out and you’re ready to execute, bring on the Chops.



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