4 Signs You’re Building A World-Class Team
by Pete Flint (@PeteFlint). Pete is a General Partner at NFX, a seed-stage venture firm based in San Francisco.
There is a lot written about the importance of team building, but little is actually shared on what it takes to go from idea to IPO — and beyond. When I was building Trulia, I had to quickly learn a counterintuitive truth: in company building, the team is the product… and the best product will win.
You can have the best strategy or market opportunity in the world, but getting the team wrong results in stunted growth at best; failure at worst. By contrast, getting it right is like being part of a SpaceX launch, and it can be the driving factor for a company to achieve lift-off.
Exceptional Founders have the ability to think long term, even while sprinting to stay alive. You plan ahead for the roles and people you will need in your organization, even before you need them.
As the Founder/CEO of Trulia, we grew the organization to 1000+ people and a $3.5B valuation when we merged with Zillow in 2015. Along the way we focused on 4 distinct principles for building out a world-class team:
- Plan for the future, then start with the burning issues of today
- Become an exceptional developer of talent
- Be uncompromising and set exceedingly high standards when hiring
- Double down on onboarding to set your new hires up for success
A strong team is an enormous multiplier. Founders need to be pushed to raise their sights and should be recruiting, developing, and onboarding world-class people.
1. Plan for the future, then start with the burning issues of today
When I speak with early-stage Founders, they are often too focused on playing whack-a-mole in the short-term and don’t spend the time to identify what their organization will look like over the next few years. It’s challenging to think on a multi-year basis.
But it’s essential to map out the optimal organizational structure and then work backward. Simply put, draw out your organizational chart for 18 months from now, based on what leaders and structures you need to put in place to hit your goals.
What markets will we be entering? What new product lines are we planning? What should management look like in 18 months?
Then look at who might fill those spots. Who in the company has potential to develop? Do we need to find talent externally?
Sketch it out in advance. Then examine what gaps you have between today’s team and your future team. This is a tactic that helps you identify which talent to hire now that will be best positioned to grow into bigger roles at least 18 months from today.
Founders need to be thinking many steps ahead. Even just one executive role can take one year to fill, and missing any key role during a growth phase can be devastating for a company.
HBS Professor Tom Eisenmann called this problem “Help Wanted” in a recent NFX podcast and essay and declared it one of the 6 most common failure patterns in startups. It’s basically a venture that has product-market fit, and the basic formula in terms of LTV/CAC is on track, but something on the resource front goes awry — and it’s typically a key management hire.
As I’ve written before, moving from Founder to CEO is defined by your transition from building a great product and finding product-market fit to building an enduring, sustainable company.
Designing Your Optimal Org Structure
When looking at least 18 months out, you should be clear on your organizational structure and growth stage. The exact roles you need to fill and your management approach will depend on your stage and org structure.
It’s often surprising, but the organizational structure of some companies can be the single biggest reason why they succeed or fail. The organizational structure that you implement often has many unintended consequences and will impact the culture and operating cadence of the organization. Executives at Google and Facebook studied the failings of eBay and Yahoo, which ported corporate org structures to fast-moving technology companies with terrible consequences.
Many rapidly scaling startups oscillate as they find their balance between the efficiency and platform benefits of centralization and the customer-centricity and speed of decentralization. It varies by company and by stage and competitive dynamics. The fundamental principle in designing the structure is to optimize for the fastest way to capture the opportunity at hand.
Uber, in its hyper-growth years, was an example of a decentralized organization. They moved fast, ran many experiments, and pushed execution down to the local markets, but overall sacrificed efficiency due to their decentralization. This structure works for them because of the local network effects of their marketplace, intensifying competition, and access to capital.
Google and Facebook’s organizations are more centralized because of the leverage they can get from technology and their more limited local network effects. They have more of a functional structure that is more efficient across the organization but they can be slower to respond to customer needs.
In identifying the optimal org structure for your startup, it’s helpful to speak to successful peers who are building similar companies in adjacent spaces who are further along. Understand from them the pros and cons of different structures and plan for what is right for your team, company, and stage.
In particular, you need to manage the tradeoffs between:
- Aligning against internal expertise vs specific customer needs
- Most effectively utilizing the abilities and interests of people you have today
- Spending based on the resources available to you
- Speed vs efficiency
Team Building In The 3 Stages Of A Startup’s Lifecycle
Identifying your company stage will also help inform your team’s org chart — today and 18 months from now. There are at least three distinct stages in a startup’s lifecycle:
Stage 1: Founding team searching for product-market fit
There’s a set of people you know you can work well with in an ambiguous environment. You have shared trust even if you don’t know the path or destination. And you’re checking some functional boxes across the early team, but most of all you have a unique insight and ambition to make it work.
High velocity of experimentation is critical. Don’t worry too much about defining management and organizational structure at this stage. Simply figure out how you can move as quickly as possible, iterate, and build to get to product-market fit.
Stage 2: Once you find product-market fit, rapidly scale
In this stage, you are experiencing rapid scale and adoption of your product. As you grow from ~15 to 50+ employees, you need to put more structure and process in place to develop early contributors into functional leaders, and to augment them with other leaders. For example, if you have a committed customer service individual, they may not be a great VP of Customer Success, even if they’re the closest existing team member to the role. Evaluate every new position carefully.
This scale-up process typically starts with the most pressing challenges, normally around the go-to-market. You’ll need to navigate these challenges as you start to build out your management team.
Overall, focus on running a functional organization at this stage. Simple is best. It’s okay to have some short-term complexities where people wear multiple hats but make sure there is a longer-term plan to transition from this.
Stage 3: Scaling the org and startups within startups
The 75-500 person stage is the most challenging organizationally, as you’ve achieved some level of scale and you’re still growing quickly.
At this stage, it is necessary to put more structure in your organization, and that can often be uncomfortable. Organizations without appropriate structure and leadership start to break down as they approach the 100 number ahead of Dunbar’s number of 150. So it’s critical to get a few critical leaders in place before then.
2. Become an exceptional developer of talent
One of the great and challenging things about growing startups is that there are constantly new problems. Growth opens new needs and new roles, which presents the opportunity to move people around the organization to match them with your most pressing problems.
It’s a common misperception that building a team depends exclusively on recruiting external people to join your company. The truth is that it is critical to also develop talent internally. This is the second principle of building world-class teams.
Develop Leaders From Within
Roles change and people evolve. Founders-turned-CEOs have the responsibility to get the right people in the right seats, and must constantly re-evaluate whether you have a good match.
Developing from within creates a strong signal internally to entry-level colleagues that there are no limits to their growth, which is incredibly appealing to ambitious people. Internal hires also ensure cultural continuity, strengthen shared know-how, and reinforce the company’s vision. Make it clear to everyone within your organization that individual contributors can become managers and leaders.
When promoting internally, you’ll often be creating many first-time managers. It is critical to help them in this journey. Give them mentorship and guidance so that they can become great managers. In many cases, even the Founders have never managed people before, so there can sometimes be a lack of managerial reference points within the company. Find mentors, coaches, workshops, and peer discussion groups to help put basic managerial processes in place.
The last thing you want is to be perceived as the organization where the only way to become a VP is to be hired externally.
Create A Culture of Opportunity
When you’re committed to developing leaders internally, you need systems in place to recognize the potential in your employees. There are several things you can do to create more opportunities for your employees, which in turn makes it easier for you to identify their potential.
- Push communication and transparency so employees have more access, information, and context about the company.
- Celebrate the work success of more junior employees.
- Create opportunities for employees to interface more with senior management.
- Schedule 1:1s with emerging leaders in the company.
- Regularly ask your managers which employees are ambitious and constantly taking on more projects above and beyond their roles.
Great Founders know that the potential of their employees is largely constrained — or unlocked — by the culture they cultivate.
3. Be uncompromising and set exceedingly high standards when hiring
A players sometimes hire B players. B players hire C players. But truly great Founders raise their sights and consistently hire A+ players.
The quality of people the Founders are able to recruit is a key factor in determining the overall quality of a company. The early team sets the DNA for the entire company.
If you’re able to hire A players, this suggests:
- You strive for nothing but the best in all that you do.
- You are able to bring others to join you in building your vision.
- The fact that world experts will join you signals, both internally and externally, the quality of the product or approach in the marketplace.
More often than not, the Founders I meet with are surprised at their ability to connect with and recruit these people, even those who are seemingly entrenched in their jobs. The appeal of an articulate vision, a big opportunity, and a chance to make a directional impact at a startup are not to be underestimated.
8 Signs Of An A-Player
- Hire someone if this will be their career-defining role — they are on the cusp of their career. This means finding individuals where this is the biggest role yet for them. They will do everything it takes to succeed.
- Find someone tenacious who is drawn to the opportunity to grow, to tackle a challenge, and to run something.
- Look for diversity of opinions and backgrounds. Do they add to the culture and do more than just “fit in” with the culture?
- People who have seen hyper-growth. They know how to scale companies and teams. But be careful to understand their role. If they were part of a rocketship, try to figure out what they actually contributed. Were they driving the train or just going along for the ride?
- From an EQ perspective, are they comfortable with the ambiguity inherent to a startup? Will they survive at a smaller company with fewer resources?
- Prioritize aptitude over experience. Look for the innate capabilities that will make this person successful in this role and in future roles, rather than requiring that they have done this job before. In fast-moving startups, the nature of the role and problem you are solving changes so quickly that you need to have adaptable individuals.
- Ensure they have the ability to communicate well with the rest of your team.
- They need to be pillars within your company, and often within their network. They need to be able to hire amazing people under them to build out their own solid team.
5 Failure Modes When Hiring
- Hiring for a single point in time. There is often a hiring mismatch where you hire for today when you should be looking out 18 months. This hiring mismatch can cause you to shortcut your process and result in lower quality hires. It’s critical to hire ahead of your current needs.
- It’s okay to be opportunistic. Never miss out on an incredible talent just because they are available before you are ready to fill that role.
- Confusing V1 and V2 leaders. As you scale, there can be a lack of seniority in your company. It’s important to know if you have V1 leaders (who are good at 0 to 1) or V2 leaders (who optimize and scale). Reassign employees as needed and hire with the next 18 months in mind.
- Saving money in the wrong places. If the candidates are proven, they are often worth the price. While painful, high compensation is a reflection of value add. Headhunters are often worth it for VP and executive hires. It’s painfully expensive, but talent is the best way to minimize your burning constraints.
- Not properly onboarding your senior talent. This is one of the most surprising failures of many startups. Onboarding is a key ingredient of building world-class teams.
4. Double down on onboarding to set your managers up for success
Onboarding is of paramount importance to successful hiring; it’s also the step most often missing — especially when bringing on new executives and senior management.
Founder-CEOs spend a disproportionate amount of time sourcing, interviewing, negotiating, and hiring an A-player… and after welcoming them on Day 1, then what?
It’s common for Founders to suffer from imposter syndrome. They are typically talented generalists but inexperienced managers. When they hire an experienced expert in a key position, Founders can often feel uncomfortable and uniquely unqualified to tell them how to do their job because they think this person is world-class at it.
But you are the functional expert in your company. Simply saying “Here you go, you’re in charge” is more often than not a disaster. You are setting your new hire up for failure if you don’t give them guidance about what’s unique about your company, the people in it, lessons learned, problems to be solved, and how it works.
It is 100% the team leader’s responsibility to help your new hire succeed at your startup. But how to do this is often a mystery, because onboarding can be a double-edged sword: it requires both delegating and empowering.
It’s counterintuitive to think about micromanaging a senior leader. The distinction is to micromanage the onboarding, delegate the role, and empower the person.
Give your new executive a roadmap to the destination, and if they find obstacles, they should be allowed to take detours and even re-set the destination if it makes sense. You need to give them the tools to be successful on their journey, and also the ability and authority to change direction.
A Great Onboarding Manual Looks Like This
In the early days of Trulia, we started out with a fairly hands-off approach to onboarding executives and senior management. As a result, we had a few avoidable failures; even one failure to install a key role during a growth phase can be a major detriment to a company.
We quickly leveraged this learning to create a new onboarding process to help new leaders succeed. New hires at Trulia were often surprised by how we would painstakingly onboard people. We started planning out their first 60 days in great detail. (This can be 30 days if your organization is smaller and less complex.)
As the CEO, I personally wrote detailed 5-10 page onboarding documents for all my senior hires. Who you should speak to week 1, week 2, week 3, week 4, and so on. I would sequence the learning in the most efficient way to make the first 60 days as successful as possible.
Some people are uncomfortable with this level of detail, but it’s critical to successful onboarding, and should actually be understood as a generous commitment to setting the new hire up to succeed.
Furthermore, the team leader has to visibly and actively endorse the new leader. Introducing someone in the right way, with a visible endorsement to empower and entrust, will convey a positively contagious confidence in their ability to lead. The opposite is when you don’t properly acknowledge the new hire; worse, when you undermine them by doing their job for them instead of delegating.
In order to set them up for success, a good senior management onboarding document has 4 key parts:
1. Top Focus Areas – The 3-5 most important areas to orient their attention and work in the first few quarters. For example, a VP of Marketing’s focus areas might be Demand Generation, Brand Development, and Public Relations.
2. Quarterly Initiatives and Time Allocations – This a bulleted list of the highest leverage initiatives to advance their focus areas for the next few quarters. For example, two possible initiatives for Demand Generation might be:
- Content development to improve SEO
- Develop traffic acquisition models to maximize ROI on paid marketing
And the time allocation might look like:
- Quarter 1 time allocation for SEO and paid marketing might be 25% and 15%, respectively. And Quarter 2 could shift to 30% for paid marketing and 10% for SEO with other initiatives accounting for the remaining time.
3. Meeting Sequence – This is a specific list plus calendar of who they should meet with and in roughly what order. Many of your new hire’s initiatives will involve team members, often across many functions, so it’s important to schedule time for them to meet. Working relationships are often set early on in an employee’s tenure. Be sure to open the appropriate channels for new hires in their first 60 days.
4. Lessons Learned & Institutional Knowledge – This is a list of resources for where to get up to speed on the organization’s learning to date. Some of this will be learned and transferred in conversation during the meetings above, but other knowledge can come more rapidly from reading internal documents, subscribing to certain newsletters, analyzing customer feedback, and more. While many companies drop a host of resources into someone’s lap, surprisingly few have well-organized, curated libraries of learnings.
It will give you and your new hire a major advantage if you can compress learnings into a short period of time and optimize for a quick ramp-up. This should be table-stakes onboarding behavior for all companies and hires.
The 60 Day Report
At the end of the 60 day onboarding period, have your new hire report back to you what they saw and what they learned. Ask for their candid assessment of the team, company, opportunity, and things you should do to improve. Take in all the things they noticed.
Particularly for companies that are a few years old, it’s difficult to see many of the obvious challenges in front of them. It’s useful to have a fresh pair of eyes to identify those challenges so you can change them or allocate them to the appropriate people.
The 60-day report back to the CEO is another critical step that is often skipped when bringing on new leaders. Companies also often get this check-in concept directionally wrong, with the CEO reporting on the new hire’s progress instead of asking for feedback in return.
Another significant benefit of the 60 Day Report is that the new employee can at that point design their own path forward with confidence. This is the empowering part of onboarding, mentioned earlier.
It’s All About Time
Founders often mismanage the growth stage because they’re so focused on the moment. Great Founders can think on multiple time horizons. They can address burning issues today while also planning their organization 18 months or more into the future. They hire A players ahead of their current needs and are comfortable investing seemingly outsized time and effort in onboarding world-class functional leaders.
Getting the right management team at the right time is the highest leverage function for Founders post-product-market fit. Then you need to work with your management team to mentor employees to develop and elevate themselves or add new team members to augment them.
And once you’ve done it all, you need to do it again. Startups are always evolving and the job of hiring talented people is never done. At every stage, a strong team is your biggest unfair advantage.