Your First 5 Hires Can Make Or Break Your Company—Here's How To Choose Carefully

For any company—whether you're manufacturing athletic shoes, selling medical devices or developing cloud-based software—talent is the most important piece to the long-sought-after puzzle to long-term success. Talented people want to work with other talented people. You need to keep the proverbial bar high.

That philosophy is never more important than it is when you're looking to build out the leadership team for a startup. Many accomplished technology executives have told me that a new company establishes its culture—and its bar for talent—based on the first 20 hires. Now, that's well and good, but the most important trait of any company is what I call "Leadership DNA," the strands that not only define its values and vision, but that are replicated across future hires.

In my mind, a company's Leadership DNA is set even sooner than its culture and created by the first five leaders of any company in any environment. Getting it right often makes or breaks startups. So, how do you get this combination of people right for that next breakthrough idea and the team that will support it? Here are five pointers:

1. Picking your cofounder(s) is the biggest decision you'll make. Perhaps the most important decision in life you make is picking the right person with whom you walk down the aisle. I'd argue that picking the right person with whom you start a company is right below your spouse in terms of importance. If you're throwing all your chips in on as risky bet as is a startup, particularly after attaining a successful, stable role elsewhere (for me it was founding Okta after running engineering at salesforce.com), you better find someone you can trust and someone you know will match you in terms of drive, stamina, and creativity.

My advice in finding your company partner is to start outside of your first degree LinkedIn network and find someone who isn't already a good friend or solid professional contact. Let's face it—between the stress and pressure and spending long hours on your first investor deck, the friendship doesn't stand a chance.

That was my first rule with Okta. My cofounder, COO Frederic Kerrest, was someone who worked in various roles across the sales and business development groups at salesforce.com (and someone I had heard great things about), but also had never worked with him directly. That was my second rule in founding Okta: Never start a company with a stranger. In embarking on the adventure of building a company (and team) from scratch, you need to partner with someone you have known somewhat superficially over time, but also someone you can reference well. There's too much risk involved to put it all on the line with a total stranger.

2. All successful leadership teams have diversity. Founders often make the massive mistake of building their leadership teams from a few select pools of candidates. They either want to work with people they've worked with and know from past roles, people from more mature companies and, of course, people from other startups they may have worked or partnered with in a previous life.

While choosing from those pools doesn't seem harmful on the surface, the worst thing for a company in its infancy is monoculture. Crazy as it seems, it's natural—actually, it's beneficial—for executives to butt heads and argue. That just doesn't happen often enough on a team with similar experiences, perspectives, and resumes. And quite frankly, many of the best ideas I've been part of in my career have been the result of 12-hour-long debates that went late into the night.

Suffice it to say, in building your company's Leadership DNA, you need to mix it up. Having a bunch of big-company folks turns you into a big company before your time. And having too many startup folks means you won't know how to grow up and scale when the time comes. Plus, as a small leadership team, you're going to be spending a lot of time together, likely in some pretty confined office space. If you're too alike, you'll just drive each other crazy.

3. "Hands-on" > "hands-off" leadership. Nothing kills morale more than bringing on a new leader who nobody thinks can do any actual work. I'm an engineer at heart, and the only way I was able to move up the ladder or start my own company was to work hard at being a manager, as well as a leader. (As I explained in my last Fast Company piece, those are two different things.) The more people, groups and products you manage, the easier that becomes. But that doesn't mean lose sight of where you came from—and how you got there.

In hiring my leadership team at Okta, I looked for mostly "up and comers"—people who showed great talent and ability, but also maybe hadn't owned all of product management or an entire sales team before. These folks have a lot to prove and will work extremely hard to be successful. Of course, since these prospects haven't done the job before, it makes the selection process much more difficult (you don't have exact previous experience to compare), but in the end you get a highly motivated and creative leader who will thrive. These types of leaders also tend to be more grounded. They continue to read the same articles their teams are reading, digging into day-to-day processes and working side-by-side (literally) to solve problems and make things happen.

4. When it comes to the dreaded org charts, arguments are inevitable. As a company grows, the time will come to add more leaders to the company. And when this happens, you'll have to put new leaders over existing employees in the organizational chart. And in my experience, they might not always get along.

As CEO or founder of the company, you need to trust that leader and help him or her gain the trust of all employees. Some of the better decisions I've made were not always the most popular, but those I thought best for the company in the long-term. My superiors backed those decisions, and I do the same for the leaders I've entrusted.

5. Remember the royal "we." One criterion that I've found critical to success of new leaders is their storytelling ability. Yes, it may seem unusual to keep that quality top of mind during interviews, but company leaders need to be able to tell the company story—whether to investors, friends or media—as just that: the company story. If a company leader makes the story too much about them—their contributions, their perspectives, and their experiences—they'll lose the respect of the team they're supposed to lead. As they say, there's no "I" in "team" … and definitely not in "startup," either.

As a company grows, starts signing its first wave of paying customers and get its first coverage, bringing on the first set of non-founder leaders is only a matter of time. These same rules apply. While a company's core Leadership DNA won't change, how those strands are spread across the company must be of utmost importance. Do it correctly, you still might fail—it's the startup world, after all—but it won't be for bad genes.

Todd McKinnon is CEO of Okta. Follow him at @ToddMcKinnon.

[Image: Flickr user Chuck Patch]

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2 Comments

  • Tiffany Felicienne

    I agree with the author but I truly believe the first 100 hires in a company will make or break your organization.  The CEO / Founders need to be keenly interested in hiring only the best people in the early stages of a company.  That doesn't mean they micromanage hiring - I've been a professional start-up recruiter for years and most of my process sets the management team free from the most tedious and time-consuming aspects of hiring, but they need to be involved to yield the best results.  When very talented people join a company the management team feels very confident to let them assert their own creativity and autonomy in their area of expertise.

    Also a word about diversity - I truly believe when everyone is focused on finding the very best talent and not focused on building a culture of personality then diversity happens naturally.  Of course it helps to have a professional recruiter like yours truly who casts a wide enough net that applicants come from many sources and backgrounds.  Hiring based on personality / commonality / previous loyalties really does tend to drive down diversity and quality of the hires.

  • Jose Tollinchi

    This is a good article and I share the similar views regarding the initial stages of a startup company. The first few hires are the most critical decisions an entrepreneur makes when considering growth. This is a business decision and personal feelings need to be "checked" at the door. Although the owner may decide to hire someone outside of his or her close circle of people, it is important to ensure that the person hired is the right fit for the company and the team.

    The "Hands-on" > "hands-off" leadership worked very well for the particular company and I'm sure that was due to the leadership style and culture of the company and its employees. However, I would not say that this is the best approach for all startups. The type of leadership style needed for a company should be specific to that company and its unique circumstances. Sometimes it is necessary to have leaders with technical expertise while other startups may need a charismatic or motivating leader.