Dylan Salisbury’s weblog

Second post in a series on applying Balanced Scorecard concepts to start-up companies.

Start-ups differ from almost all mature organizations in the expected amount of growth through hiring. This provides a number of challenges for the Learning and Growth perspective. A start-up will have relatively less emphasis on improving the learning of existing employees, and more emphasis on recruiting talented individuals and successfully incorporating them into the company. Start-ups must hire executives and senior managers, which may need different techniques for recruiting and monitoring than individual contributors.

One of Netscape’s founders, entrepreneur and investor Marc Andreessen estimates that roughly half of executive hires are successful, and the best CEOs will take at least three months to identify and replace the other executives (Andreessen, 2007). Chris Paisley, former CFO of 3COM and board member of venture-backed companies, said that this three-month estimate is accurate because it takes that long to assess the performance of any newly hired manager (Paisley, 2009). Even if the estimations of Andreessen and Paisley are pessimistic, the important conclusion is that simply the filling of executive positions is not an adequate metric for executive hiring.

A scorecard measure for successful executive hiring is difficult to define. It may be appropriate to assign a skilled human resources professional to assess the success of each newly hired executive through interviews with the executive’s subordinates and peers. As suggested by Andreessen and according with BSC principles, the CEO must be prepared to react to poor evaluations by quickly replacing the recently hired executive. This may be the single part of the BSC which should be confidential, shared only between one or two top executives, the board of directors, and the person performing the executive evaluations.

Successful growing technology companies have been known for setting very high standards for bringing new employees into the company. Two of the most famous technology company founders of all time, Bill Gates and Steve Jobs, are both known for evangelizing the motto “A players hire A players, and B players hire C players,” meaning that lowering the hiring standards a small amount would eventually lead to a very significant drop in the quality of employees (Spolsky, 2000) (Zito, 1983). During its most prolific stage of hiring, Google was well known for its very thorough candidate screening process and demanding interviews (Vogelstein, 2004).

Accordingly, scorecard measures must evaluate the quality and performance of new employees in the first months after being hired. Paisley also recommends following up with every employee who leaves the company voluntarily after about two months after separation to get a candid assessment of why the employee left (Paisley, 2009). Management should be prepared to react to problems by seriously changing recruiting, screening, and interviewing practices in any part of the organization.

References in this post

Andreessen, M. (2007, August 28). The Pmarca Guide to Startups, part 8: Hiring, managing, promoting, and firing executives.

Paisley, C. (2009, February 2). (D. Salisbury, Interviewer)

Spolsky, J. (2000, March 23). Command and Conquer and the Herd of Coconuts. Joel on Software.

Vogelstein, F. (2004, December 24). GOOGLE @ $165 Are these guys for real? Fortune.

Zito, T. (1983, September). How to Hire Insanely Great Employees. Folklore.org