Sage VC

Hiring at Startups Using Circumstance Based-Theory

As the CEO, Head of Product or VP Engineering at a startup, hiring is one of your most important, but difficult tasks. You don’t have enough time to meet candidates, you don’t have years of experience hiring candidates, you’re not 100% what their job spec looks like and the list goes on.

If you are trying to get the right people into your startup at the right time, then you might want to consider the circumstance based-theory which was devised by Professor Morgan McCall from USC’s Marshall School of Business. McCall points out that skills that enable new hires to succeed in a new role were shaped through their experiences in other assignments in their careers. A previous role can be thought of as a school, and the problems that they have confronted within it is the “curriculum”. The skills that new hires ca be expected to have or not possess depend on the courses they did and did not take.

Given you are building a new product in a new market that has never been built before, how do you hire people that have taken the relevant courses previously in their career? If you are hiring grads straight out of college, how can you be certain that they will be a fully functioning and productive member of your startup? 

You need to look at the kinds of issues that your potential hires have tackled in the past. It’s not as important that they accomplished huge milestones, rather it is important that they have faced similar kinds of problems and figured out how to deal with them. It is difficult to ascertain whether or not a new hire was successful in their last role because they may have succeeded for reasons outside of their control.

One place where we see founders struggling consistently is with early sales hires. When you’re looking for your first handful of sales people to come and take over from you as the founder, you typically overshoot and start talking with people at very large successful software companies selling products in a similar category as your own. These hires typically joined their respective orgs when the org’s were already generating leads, converting them into opportunities, had marketing materials, customer success etc and didn’t have to establish early sales execution. So how relevant are they to come in a help you define your early sales execution?

Using the circumstance-based theory for hiring early sales managers, you should be assessing: how early did they start in their last co, how many sales people were there when they started, where did they hire the first sales people from and what profiles did they have, how many customers were there, what was the average deal size when they joined/now, how did they build the sales org etc? If they were at a larger company, its unlikely they they would have done many of these things rather, they were on the phone generating leads and closing deals - being a good salesperson, not a good startup sales execution person.

For a much larger company looking for a COO the circumstances could be: were they directly responsibly for running the operations in their last company with many direct reports, how fast was the growth over that period and how were they correlated to that, how many people did they hire directly, what kind of P&L responsibility did they have?

Hopefully this approach will enable you to recruit and retain the best possible talent for your company.