Episode 24

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Published on:

4th Jan 2024

24. Leadership Transitions: Uncompromising Strategies for Success

In this episode we unpack the topic of: Leadership Transitions: Uncompromising Strategies for Success with Andrew Duncan, Talent @ Atomico (ex-UpGroup) and Maddy Cross Partner @ Erevena (ex-Notion Capital)

We discuss the following with Maddy and Andrew: 

  • Given the average tenure of senior execs in scaleups, what advice would you give execs and what should companies that are hiring consider? 
  • How uncompromising do you need to be to get the right leaders in place?
  • What is the difference in leadership skills needed between early and late stage? 
  • Do we need someone that has been there and done that? 
  • What is the right mix of experience needed for a leadership team? 
  • How do you identify gaps in a leadership team?  

References

Biography: 

Maddy Cross is a Partner at Erevena, an Executive Search firm focussed on investor backed businesses, where she leads the European Technology and Engineering practice for B2B. Previously she was Talent Director at Notion Capital, a $1bn B2B SaaS focussed VC, and she holds an MBA from London Business School.

Andrew is a Talent Director at Atomico, one of Europe's largest venture capital funds. He supports portfolio companies in finding and hiring elite executive talent and is responsible for advising founders on the evolution of their leadership teams. Previously, he spent time building executive teams while at Kindred Partners (San Francisco) and The Up Group (London).

Summary: 

  • Cannabis legalization in the UK. 0:06
  • Bethany Ayers discusses her frustration with the UK's lack of progress in legalizing cannabis, citing the ease of access and variety of strains available in the US.
  • Brandon Mensing agrees, noting that alcohol is often used as a stress reliever in the evening but can have negative effects on the body.
  • Bethany researches cannabis for blood sugar control and weight loss, finding limited evidence but potential benefits for women.
  • UK legalized cannabis for medical use five years ago, but limited access and high costs for patients.
  • Bethany and Brandon discuss leadership transitions with Andrew Duncan and Maddie Krause, with a focus on the ideal tenure for executives (2-4 years) and how to handle executives with shorter tenures.
  • Maddie shares advice on how to handle executives who have experienced a shorter tenure than they would have wanted, emphasizing the importance of empathy and support.
  • CMO tenure and leadership in enterprise software companies. 8:03
  • Duncan notes short tenures for CMOs in tech, but highlights successful cases.
  • Executive tenure and its impact on career growth. 9:45
  • Maddie Cross and Andrew Duncan discuss the nuances of being asked to leave a business, with Maddie sharing examples of sensitive departures where people have stayed in the company for years after being asked to leave their original role.
  • Andrew adds that for senior execs, especially those later in their careers, market timing can play a role in their ability to find new opportunities, and talent professionals should consider this when evaluating candidates.
  • Both Maddie and Andrew emphasize the importance of handling departures with sensitivity and respect, and providing support to help people move on to new opportunities.
  • Maddie Cross highlights the importance of considering tenure in the context of each function, as marketing and people roles tend to have shorter tenures in high-growth b2b software companies.
  • Andrew Duncan asks if the same tenure standards apply across functions, with CFOs having shorter tenures due to their specific roles and responsibilities.
  • Leadership decisions and ruthlessness in business. 15:49
  • Andrew Duncan and Brandon discuss the importance of assessing someone's background and experience to determine their fit for a business, and the potential for short tenure in leadership positions.
  • Maddie Cross emphasizes the need for ruthless decision-making in leadership positions, but also stresses the importance of being direct and constructive in those decisions.
  • Managing a business during a downturn. 18:57
  • Founders, investors, and executives are having harder conversations about business performance and course of action.
  • Bethany and Maddie discuss the challenges of making difficult decisions as a founder, including sequencing and taking advice from trusted individuals.
  • Maddie suggests breaking down the decision-making process into smaller, more manageable steps to avoid feeling overwhelmed and making no decisions at all.
  • Leadership skills and expectations at different stages of a company's growth. 22:31
  • Andrew Duncan notes that companies have had to develop internal communications plans to effectively communicate sensitive decisions to their organizations, particularly in the last 12-18 months.
  • Bethany asks Andrew about fundamental changes in skills and expectations at the BC-D to IPO stage, and what leaders bring to the table.
  • Andrew Duncan: Executives in later stages may prioritize process management over working in the business.
  • Bethany: Communication and delegation become more challenging in later stages, with many layers between leaders and those doing work.
  • Leadership team composition and diversity. 27:47
  • Maddie Cross suggests having a mix of experienced leaders and up-and-coming talent on a leadership team for a healthy balance of perspectives and skills.
  • Brandon agrees and adds that a mix of both types of individuals can provide a more well-rounded leadership team, with the caveat that everyone needs to know their role and responsibilities.
  • Maddie Cross analyzed two groups of b2b software companies: unicorns (valued at over $2B) and less successful ones.
  • Key differences between the two groups include the range of years of prior experience (tighter delta in less successful companies) and educational background (more people from top universities in successful companies).
  • Leadership team gaps and hiring decisions in early-stage companies. 32:33
  • Andrew Duncan emphasizes the importance of trusted leaders in early-stage companies, even if they haven't held similar roles in other businesses.
  • He highlights the need to balance proven track record with potential risks when bringing in outside execs at later stages of growth.
  • Founders should consider a mix of people with and without prior experience in their role to bring diverse perspectives.
  • Identify gaps in a leadership team by clearly defining North Star goals and assessing confidence in assigning them to team members.
  • Use a combination of internal and external resources to surround functional heads with people who can increase their likelihood of success, such as mentors, boot camps, or other trusted individuals.
  • Hiring and leadership for venture-backed companies. 38:48
  • Key capabilities need to exist in a business for a successful series B fundraising round, and a strong leader must be responsible for those capabilities.
  • For B2B SaaS businesses, a strong sales leader is crucial for fundraising, while a CFO with extensive experience may not be as critical.
  • Maddie Cross advises not letting fear of making hiring mistakes hold you back, while Andrew Duncan highlights the importance of contingency planning for executive success.
  • Andrew Duncan and Maddie Cross discuss the importance of accepting risks in building venture-backed companies, sharing examples of successful executives who have made mistakes.


This podcast uses the following third-party services for analysis:

Chartable - https://chartable.com/privacy
Transcript

Brandon 0:06

Hello, everyone and welcome to another episode of the operations room a podcast for coos. I am Brandon Mensing, joined by my lovely co host, Bethany Ayers. How are things going Bethany, are

Bethany 0:17

going fairly well. I have it's been a long week. I'm happy that it's Friday. I thought it was going to be Friday since Wednesday, so I'm happy it's finally arrived. Me too busy than I should be for not working. Although maybe I'm working more than I realised.

Brandon 0:34

That's the under the covers workload going on here. Yeah,

Bethany 0:37

I still just love the weekend. My husband really doesn't get it. But I do. I think maybe it's something psychological about it. So I thought I talked today about my continuing Zoey experience, is that what we call it

Brandon 0:51

travails? I feel it's like a Star Wars trilogy, the type thing? Yeah.

Bethany 0:55

So what is it like an analogy, so we'll get up to nine different parts is that way before setting it aside? I

Brandon 1:01

don't even know what that means on ology. But so you've just added a new word to my vocabulary right there.

Bethany 1:05

I just made up a word. So Knology, I'm guessing that nine of something would have something like that. But I said it was such conviction, you thought it was a real word. So

Brandon 1:14

I always assumed Bethany, that you're much smarter than me. So

Bethany 1:19

just fake it till I make it. Say Anything with conviction, and you'll get away with it. So, I have now decided that I really annoyed that the UK is nowhere close to legalising cannabis. This is actually connected to Zoey, which is alcohol. I need a way to wind down in the evening, quite often, alcohol is legal and it's easy to access and have my glass of port at night with my now dark chocolate covered roasted nuts that I make myself.

Brandon 1:52

Wow. Sounds like a luxury evening in the Bethany Ayers household. Here

Bethany 1:57

it is. And it gives me 86 points out of 100. So you know it's a good thing that I can eat indiscriminately for myself anything. So I have the porridge and I have my little bit of chocolate. But poor it has a lot of calories and it affects your blood sugar. And I like coming down with alcohol but I don't like really like alcohol. And now when you go to America and cannabis is legal everywhere, and there's like 400 different strains. And you can go to the dispensary and have a chat around highs lows this that you know, and then you buy something and it's like exactly the amount. And you know what you're getting? There's no guesswork, you can consume it in different ways. And I just want that optionality in the UK. And I don't understand why it's not happening. Yeah,

Brandon 2:47

I mean, you have a point here, right? Because I think a lot of adults do exactly that. So they've had a stressful day, a stressful week. And alcohol becomes like the the bit of the downer in the evening time. So the question in this case is, what's less negative for the body? I guess, in a sense, and I think you're exactly right back in Canada, they have very specific packaging for things like this with exactly the right amount, just like you just talked about to take off that edge for the evening time.

Bethany 3:11

Exactly. And then I also did a bit of research because I was like, well, he had the munchies, is it actually good for your blood sugar? Is it worse for your blood sugar, maybe it can have as bad of an impact. And the research isn't definitive, but it looks like? Well, first of all, the research does look like it doesn't affect your blood sugar as much. But then secondly, for women, they've done some meta studies, regular users of cannabis, who or women actually report weight loss using it. Whereas regular consumers of alcohol never report weight loss. They're also doing research on cannabis use for controlling and helping regulate blood sugar for people with diabetes. So for those of us who have very reactive blood sugar responses, the ability to have something that doesn't spike our sugar and chills this out just seems really lovely. I would like to have access to but then it's still illegal. And you don't know what you're getting. And you don't know what percentages. And so just like selfishly and practically, why don't we legalise it, and then I ended up watching a documentary. It was on the BBC a couple of weeks ago, and it just pissed me off so much. So five years ago, the UK technically legalised cannabis for medical use. Do you remember it was like the story with the boy who had really bad epilepsy, and cannabis would fix them, but it's basically just a lie. So guess how many people have been prescribed cannabis on the NHS because it's under 10 and might possibly be under five. Wow. Okay. So basically this kid and four others managed to get it and then nobody else. So doctors are not allowed to freely prescribe it, they have to go through a panel and it has to be approved. You have to try to other things first and prove that they're not working. And then the panel, other than those original cases have never ever approved the use again.

Brandon 5:13

Okay, so yeah, so it's kind of on paper, but in practice, nothing's going on.

Bethany 5:17

Yeah, well, so you can go privately and do it. But it's super expensive. It's like 250 pounds a month for a gramme or two grammes. And you also have to keep going back to the doctor keep getting certified all of it private. So again, it just becomes something that people with money are able to access and nobody else can. It was because of Zoey that I went into this massive research hole. And also like my great need to want to not drink alcohol, but still have something that will chill me out at night. Yeah,

Brandon 5:49

or I can be like me now where you wake up at 415 in the morning for a workout and therefore you pass out around 830 without having a glass or a drink of alcohol at that point. So. So we have got a phenomenal topic for today, which is navigating leadership transitions, uncompromising strategies for success with Andrew Duncan. He is talented at Tomoko and we've got Maddie Krause, she is partner at Arrow Vina so it should be a fantastic discussion. So with that, why don't we move on to our conversation with Andrew and Maddie.

Bethany 6:27

I've known both of you for ages. Maddie when you were at notion and Maddie went from notion to air Vienna. So she's crossed one way. And then Andrew met you at the outgroup. And you're now at atomic co so you've gone the other way. We have so many questions for you. But I think the first one we want to start with is actually based on research Maddy that you did when you were at notion on the fact that the best companies cycle through their leadership teams every 18 to 24 months is that the right number?

Maddie Cross 7:02

It's a little bit longer than that. But it's not far off. It's it's more like two to four years is kind of the where like 80% of execs who have their tenures within high growth businesses that go on to become unicorns,

Bethany 7:15

which is great for the business not so great. If you're one of those execs, who is either in it for the long term, or maybe has some vesting schedule that doesn't quite match that tenure. One of the things I was really interested in hearing from both of you is, before we get into how to be ruthless, and how to hire who you need to is more on the personal side, dealing with execs who are victims of it, I don't know victims, probably not the right word have experienced a shorter tenure than they would have wanted to. But just because they've done a really good job position the business well, and now you need somebody to take the next stage, it can be pretty soul destroying. So what advice do you give to those of us who've experienced that?

Andrew Duncan 8:03

o had longer tenures and like:

Maddie Cross 9:45

good. It's gonna sting anybody that's been there if it's not their choice, but I also think that's kind of part of the game. You know, the financial rewards if you get it right are huge and the risk is that it's not always going to go right and like Andrew said, there's some and people out there that are absolutely brilliant have had huge successes. But it hasn't always been that way. They've had maybe sure to sense at different times in their careers. I think the other thing is like so much of it is in the nuance of how it's handled, someone can be asked to leave a business extremely respectfully. If it's positioned as you got us from 10 million revenue to 25 million revenue, we couldn't have done it without you, it's been so valuable to us, we now are in a new phase of the business, we need someone else, we would love for you to stay and do a slightly different role, or we would love you to say and help us find the person that's going to follow in your footsteps, we want to stay in touch, we're going to give you some early vesting on your equity because we really value your contribution. That's a really different conversation, too. We forgot to tell you, we hired your successor by like, we see everything, like we sort of joke about it. But I've heard that happen before, right. And like I've seen everything on that spectrum. And there are lots of stories out there of both sides of the spectrum. But I've definitely heard lots of stories of the first side of the spectrum that I described, which is one where it's really sensitively done. And sometimes people stay. And they have a number of years in the company not in the job that they signed up for. And I can think of a number of examples of that, where the person has genuinely been quite happy where someone else come into the business. So I think it's hugely in the in the nuance of the detail of how it's done. Yeah,

Andrew Duncan:

absolutely. And I think this would sort of echo some of what Maddie said, I mean, we're also in a kind of market period at the moment where there's a lot of, you know, I don't want to say chaos. But you know, there have been people who have been put in positions of having to lay themselves off, people who have joined companies, of course, that have gone through large scale layoffs. And for senior execs, in some cases, there's just not enough for them to do they feel right. And so I think the ones, especially if you're later in your career, and can take some time out to kind of think about things, some of those people have come off the market, and aren't even enrols at the moment. And again, I don't think that's like a knock on their ability or the quality of, you know, their leadership, it's a lot due to market timing, and the fact that it's been a really rough 1824 months. And so as a result, I think for talent professionals, you know, it is incumbent on us, or in the advice that we give to clients or portfolio companies to say, look, yeah, on the surface, this might appear this person's had a short stint or something's not worked out. But here's the background, here are the references that we've taken on that tenure. And what we understand to have happened, as a result probably would make sense to take that person seriously. Even if you know, your instinct might be, this person doesn't seem to last very long in in certain roles. Yeah. And

Maddie Cross:

just to add to that, I think also like looking at what people actually achieved, whilst they were in a short tenure, if we look at someone like Bill macchiatos, I think he did a year and a half at Zendesk and a year and a half at Slack. You just look at the 10 years, those aren't great, but what he did during that time was like, insane, and I don't think anyone would ever look at Bill macchiato CV and go, well, it was only a year and a half at SLAC. I think he was there from 50 people to like 400 people or something of that order. And so yeah, I think amazing executives can achieve a lot in a short period of time, and that shouldn't be overlooked. And that also makes people tired. I definitely know people who've opted out at a certain stage because, frankly, they were just exhausted, and especially now post COVID. I think it's it was a hot house for a lot of people. And now that a lot of people are in that position that Andrew is described where the market isn't necessarily favourable, people are kind of opting to take that time and reset, which is probably quite healthy. For everyone really.

Andrew Duncan:

Question for humanity? Do you look at it differently by function? You know, because I could imagine a scenario where for a CFO, like if a CFO has consistently very short tenure, maybe that raises a different sort of question or flag relative to a marketing or sales executive. Yeah, it's

Maddie Cross:

a really good question. I think we do and we also take into consideration the tenure data that we have. So typically, in b2b software, high growth companies, marketing and people functions are the are the roles that have the shorter 10 years. Longer tenures are an engineering technology and product. So a short 10 years in marketing and people relative to the peer group are not as noteworthy as they are an engineering so if an engineering leader has back to back 10 years or a year to two years, needs more questioning than a people leader, a marketing leader. And similarly with finance I think, usually CFOs or VP finance are brought in To take the company through a specific event, whether it's fundraising or x, if they don't achieve that, whilst they're there, then we have to ask the tough questions. But then similarly also for VP, finance, or a CFO was there for a short time, but they did take a company through an exit event, as was intended, they will often moved up move on.

Brandon:

Just a quick answer to that. How would the ops professional in this case? So we've talked about some of the other functions?

Bethany:

So the CFO, what's their average tenure? The

Maddie Cross:

CFO is a really hard one, because there's so many different shapes and sizes of COO, you see the financial COO, you see the revenue COO, so it kind of depends, I hate not being able to answer a question, there's a straight answer. But like, it depends, in my view, Andrew, I don't know, if you've got a different, I

Andrew Duncan:

would always want to tie it in again, this is in the framework of or in the context of trying to assess someone's background or experience and their, their achievements. You know, one, you always want to understand what they were brought in to do. And if for how they accomplish that someone was brought in to really unpick a mess. And you know, really, that was a 12 month project. And once that mess was unpicked, it made sense for them to move on, then more power to them. And if the business feels that they're stronger as a result, then that's absolutely not a flag. But again, I think you can start to have questions is, in the case of short tenure, is that a pattern? Is it something that we need to you know, if you think about with hiring, and specifically with execs, you know, there is a risk assessment part of this, which is, okay, if the person has had consistently, only 12 to 24 months, since it's fine for us to hire them. But if we do, should we think about planning that they wouldn't last longer than 12 to 24 months? And, okay, if that was the case, are we going to be happy if we get the best out of them during that period, and then we have to go again, to go find someone else or to, you know, backfill, promote through the team, whatever the case may be,

Brandon:

you know, oftentimes when I joined businesses, I do an audit and the audit partially is related to the leadership team, do we have the right people, the right place for the company to grow to the next steps that we need over the next 1824 months? And the question of how ruthless you need to be in that decision making process, or uncompromising, or whatever you want to call it? Do you have a view on that? Because oftentimes, you can either shy away from that or go overboard. And I guess the question is, how should one think about that?

Maddie Cross:

I think, as a CEO, a founder or anyone in leadership position is in a position to make those decisions, you have to be ready to be racist, it doesn't mean you can't also be a genuinely good person and handle things extremely well. But I do think you need to be ready to pull the trigger. I think the bigger question that needs to be answered really is like, on what dimension? Are you pulling the trigger? And have you assessed where the person that you're considering exiting the business is on that dimension, and over what period of time if ruthlessness means to someone, in my first week in the business, I'm going to fire anyone that wasn't on target for the last quarter? I think that's too ruthless. I think if you join a business, or you're a founder of a business, and over a number of quarters, with really honest and constructive and direct conversation, someone really isn't making progress towards where they need to be, then you need to be ready to pull the trigger. And I think if there's a surprise in that trigger pulling for anyone, then someone's made a mistake on one of those sides. Those decisions should never be made where it's a total shock to either party. But in answer directly to your question, if you're in a position to make ruthless decisions, you should be able to do that where it's necessary. With all the other checks and balances boundary. I'm not sure if you

Andrew Duncan:

are Yeah, too. I mean, one thing is that for a long period of time, let's say from 2019, through to beginning of last year, so in that kind of three, four year, up into the right market, it kind of felt like there was limited ability Branden, for people to conduct that deep audit deep diligence on businesses that they were looking at. That wasn't always the case. But I think generally speaking, people want it to believe that things would go as well as they possibly could. And I think one thing that's been interesting about a more challenging environment over the last 18 months is founders there investors and executives looking at these businesses, probably having harder conversations on the way in about how business is actually doing, what the forecasts, you know how realistic they are, that a company is going to hit certain targets or, or revenue numbers, and what a course of action should be, if that doesn't come to pass. And I think as a result, you know, bit of what Maddie was saying, you're seeing more companies that have I've been upfront with executives about, you know, hey, this is going to be not necessarily a turnaround, but we are going to need to rebuild some of the team or it is going to be about cleaning house and creating organisation that is a little bit more suited to the current market environment.

Bethany:

Which brings me on to a question of how many triggers can you pull at the same time or like what's the right way of sequencing, because sometimes you'll either move the downturn reach a point where the people who are in place just aren't working out. And sometimes they might not have the skills but other times, I think, just come with all that baggage, you can't think clearly. And you're kind of stuck in I created this, and I don't really want to uncreate it and you need those fresh eyes. But that can happen across loads of functions all at the same time. What do you do, then? I

Maddie Cross:

think you take advice from the people that you trust, you know, like, I think as a founder CEO, you don't just have a responsibility to the executives, to kind of keep them in the job, you've also got a huge responsibility to people have invested money in your business, and they will have opinions. And often they'll be very helpful opinions. And I think, where these decisions can get really muddled as when particularly sole founders trying to make them in isolation. And the reality is, you know, that's why you have a board to help you through these kinds of decisions. And it's also arguably why founder coaching is now such a big industry, because this decisions are really hard and sequencing them is really hard, because you just don't know what's going to be around the corner, and you can't do all things at once. So I think taking advice from people that you trust, that you can give information to to help you make that decision, obviously, because a lot of it's extremely confidential, is kind of the best way to approach it. And I think also like not having too much choice paralysis, I think there can be a tendency to just do nothing, because the whole thing is overwhelming. But at least trying to do one thing and make one tough call at a time rather than trying to do everything and then do nothing as a result, because my experience certainly is when I try and do everything I end up doing nothing. So breaking it down into like, what's the easiest decision to make first, so at least one is taken off the table before you then start thinking about sequencing the rest. But again, I'm not sure if that's just my experience 100 different view.

Andrew Duncan:

I mean, I think we've seen things land more effectively in our portfolio, at least would be, you know, if there are big decisions to take, take them quickly, not in a kind of slow, drip fashion. communicate them clearly. You know, I think a lot of companies in the last 1218 months have had to develop an industry relevance operations leader certainly is like an internal communications plan about what we're doing and why. And you know, that is something that I think was easier to get away with not doing well or not investing so much in when again, everything was up into the right. And companies have needed to think seriously about how they're communicating quite sensitive decisions out into into their organisations. So

Bethany:

going back to something you said earlier, Andrew, you see, are you saying that in the portfolio, you've seen multiple senior leaders either be exited or exit at the same time? And that's better than drips? Or am I miss hearing what you were suggesting?

Andrew Duncan:

I can't think of a scenario where we have seen multiple, in parallel or in in one go. So in some ways, what I'm saying is, hypothetically, if that was on the table, you probably want to see that done quickly with a good reason. As opposed to, you know, we know we want to do this, but we're going to wait another quarter for the sake of optics or something. If you know you want to make that decision anyway, then why not action it quickly.

Bethany:

I have never managed to get past Series C and like maybe 350 400 people. And I don't know if that's because I don't like it when it gets so big. And all we're doing is PR like internal PR, or if it's at five year mark, and I'm shattered and I just can't face it anymore. So I was wondering since you've seen more of it, you've seen past that. Are there fundamental changes in skills and expectations? I'm kind of comfortable on the A to B but I'm more curious on the BC D to IPO. And what do leaders bring and what skills are you looking for at those points.

Andrew Duncan:

One of the things I frequently observed again, this is a big generalisation. But I think having worked on the West Coast, you often see pools of executives who are very stage specific. And people who all they want to do is take an early stage software company from seed or Series A, to Series B, maybe, maybe see, but oftentimes you have this kind of seed to Series B run. And you see that not just in OPS, you definitely see it in sales and product in marketing. And that's all those people want to do. And it's kind of a little bit of a rinse and repeat. And, you know, when I came to Europe, I found Sometimes there was a real reluctance to be pigeonholed in that way. Or you would find executives who almost felt like they had graduated and kind of done their time in the scrap your early stage environment, and then just wanted to kind of work in a probably not correct but slightly more comfortable environment at a later stage or larger scale. I think in reality, you know, there are executives who thrive in different environments, and also depends on what relationship you want to have with your co founder, your business, the board itself. And I just think those are fundamentally different environments at earlier stage, as opposed to kind of expansion stage. And in some cases, there might be technical topics. And what I mean by that is, you know, at later stage, you're probably looking at some quite specific milestones of international expansion. You're looking at building relationships with much later stage investors, you're looking at how to think about preparing a company for IPO readiness, that's incredibly different from, you know, standing up early business functions that series A Series B. And that's your point, I think, yeah, kind of Series C plus one. It's really more about you would know better, but is it more about kind of process management programme management is more way more about delegation than it is about kind of working in the business. And people often make this analogy of, you know, are you working in the business or kind of on the business might be one way to think about it?

Bethany:

I mean, for me, it's not even working on the business, it's just communicating to the business. There's so many layers between you and the people who are doing things, the delegation in a way isn't really there either. Like it gives, you're like a leader of leader of leaders, at least, that's my experience has been. And so there is the politics, there is the strategy, and a lot of people work, but most of it is just communicating context. And you know, the thing of need to say it seven times before somebody hears it, it just gets quite tedious, I found versus earlier stage where you are, I like the energy of it, and the solving the problems and the bit more of immediacy of seeing the differences rather than spending all of my time going, this is why we're doing this. This is where we're planning. We're

Maddie Cross:

coming in with this, this second part of contract. It sounds like you're the person that shows up in Series C and goes, this is my dream job. Let me it's something a little bit like you're better suited to the early stage. I think it also depends on who else on the team as well, right? Because I genuinely I totally agree with Andrew like, there are people that just are better suited for whatever reason to doing certain stages and doing certain things. And over time, those things change. And they generally change from the more being in the business to being on the business. But I think if I can think of a couple of examples, one being Jimmy Fitzgerald, who Co Op paddle, he joined from ServiceNow, I think we're a much bigger business, but he joined a team of people, most of whom who hadn't done bigger stuff. So actually, his experience of bigger surf with a team of people who generally had smaller stuff works very well. So I think, at the individual level, there are a lot of things to consider that we've just talked about. But I also think that the team dynamic shouldn't be overlooked. And sometimes you just need those people that have seen the business work really well on a much bigger scale to kind of bring some of that in, whilst you have the people from who've got a higher comfort level at the earlier stage to keep a bit of the scrappiness whilst the business kind of transitions through scrappy to professionalised and everything in between. So I think the team level kind of shouldn't be overlooked.

Brandon:

Yeah, and maybe just a riff on that. So that this question always comes up? Do we need somebody that's been there and done that as the hire? What's your take on max, it seems like a truism that's always bandied about in terms of the searches executive searches, in this case for a lot of companies. And I guess with that question, there's maybe the sub question which I think you just brought up, Matty, which is, you know, when you look at a leadership team in totality, is it fine or good or healthy to have a mixture of people that have been there, done that? up and comers this that the other? So how do you view that question in terms of do we need some of those Been there done that and what kind of mixed we need on the team do you think?

Maddie Cross:

I think the more mix, the better with the caveat that everyone needs to know what they're do Doing, by which I mean that, you know, you, you can't have like a full mix of people that have never been been been the function. But one of the research reports that I worked on recently, which is very similar to the unicorn trajectory that I did at notion, the second one is called beginning 2 billion. It looks at at b2b Software, unicorns and who was in our leadership teams from years zero, which is like the year of first product launch to year five. And then I also looked at 40, b2b software companies that were not so successful that were never valued at more than 250 million to see who they had in their teams. And the overwhelming kind of themes were just like number of people hired into leadership in more successful companies at an early stage, but also the diversity of those people. And I didn't look at things like ethnicity and gender, because it's very hard to do that without contacting people individually. But I looked more at things like years of prior experience in education, university education. And what I found was that, in the unicorns, the range of years of prior experience was, on average, five years to 25 years. And in the companies that weren't so successful, it's more like 10 years to 22 years. So you've got like a much tighter delta in the companies that weren't so successful on the years of experience, and you do in the companies that were really successful. And then similarly, with educational background, in the more successful companies, there are a lot more people that went to top 50 universities for their undergraduate, but also a lot more people that did not graduate from any university at all, than they were in the companies that weren't so successful. And I think that is an indication that having people with different backgrounds around the table is extremely helpful. And I don't know, because I didn't investigate specifically what size of company people had come from immediately before they joined one of those companies. But I would be very surprised if that also didn't show up as a theme in the sense that the most successful companies had people in their early who had big company experience. And there's some famous examples of that right as well, like David and Janet joining Hashi Corp, when they were still reasonably small, they've done okay, since then I think their market cap is now like 25 billion. And so I think there are these examples of diversity around the leadership team and diversity not being limited just to gender, ethnicity, sexual orientation, but also being frankly, expanded to age, actually, and also, previous company size.

Andrew Duncan:

If you think about it, through the lens of kind of like risk management, generally speaking, I'd be a lot more comfortable, at least in our portfolio with less sort of proven or less tested, functional leaders operating at early stage, let's take let's call that seed in Series A, I think in a post kind of series B environment, especially as you're getting to a point where a company is, is looking to recruit and onboard outside expertise. That's where you're probably applying a lot more rigour to what you're bringing into the business. And so for example, given the choice between a CFO or a CFO, for a company, that's 100 plus million Arr, have they taken one public before, if you have your choice, you're probably going to go with the person who's done it before. That's why when I think about, you know, a lot of our portfolio companies, you have a lot of very trusted leaders who have been with businesses from early stage, be it in operations in sales in product. And those aren't always going to be people who have been VPS, or C level execs and other businesses, and so long as they continue to grow with the business. And in some cases, you know, they'll put their hand up and say, I need to find a successor or, frankly, a boss, because they want to start playing a different role in a business when it gets to certain stages. That's fine. But you know, generally speaking, I'm very much in favour of, you don't need to have been there done that in order to run a function in a startup, again, particularly at seed and Series A. But if you're getting to a point where a company needs to bring in outside execs, that's when, you know, you're working with Headhunters, you're working with your, you know, talent counterparts within a fun to say, what is the type of profile? What are the kind of archetypes of profile we could think about bringing in here? What are the trade offs here? What are the risks of bringing in someone who is less proven at our scale, versus someone who is, you know, done multiple tours at the scale in this role? And you know, it's never gonna be black and white. I think that's what keeps a lot of us really engaged, working with, you know, early and growth stage companies is the fact that these aren't easy or straightforward decisions all the time.

Maddie Cross:

And just to add to that, I think that sometimes it can be quite easy to fall into the trap of thinking that you need people in the job that have done it before. But there's two things to think about specifically when one gets into that way of thinking. One is often the people that have done exactly this stage before, don't want to do it again, in Europe, as Andrew mentioned earlier, like, they often have done it once and want to do something slightly different. And the other thing is also, if you're a founder of a business, and you look at the businesses that are similar to yours, in terms of domain or market go to market motion, when you look at the people that they hired into functions at a similar stage stage that you're at, often those people won't have done it before. So have a look at what they did before. And get a view on kind of what's possible. Like, oh, like, you know, we're Company A, and we looked at Company B, who are three years ahead of us, and you know, two times our value or whatever it is, they actually hired like one person from McKinsey, and they hired someone from Google. And they hired someone that was like, you know, from an unknown company as well. They hired someone out of academia, like maybe we should think about that mix. And at some point, we'll probably also hire someone that's done it before. Because if everybody around the table is in the biggest job of their life, that's probably an issue. But it's not an issue if a couple of people are, in fact, it's arguably beneficial.

Bethany:

And it's also hard if there's only one person who's done it before having been that one person in the room. It's pretty tiring, after a while. And

Andrew Duncan:

Beth one thing, just one more point is I think in in the venture world, if you have supportive shareholders, and backers at early stage, who can find and Maddy mentioned earlier, the kind of growing and increasing popularity of coaches, mentors, advisors, that's of course, become a whole cottage industry in and of itself. But if we are considering, for example, making an investment in a company where a head of a function is not proven at the scale that we would hope them to be, the options are pretty clear, you know, you just bet on them and take that risk. You don't bet on them and look to replace or layer them, or bet on them and think about surrounding them with either other execs, for example, in atomic COEs portfolio, or people operating outside of our portfolio who we would trust to, you know, mentor and guide those functional heads, you know, whether it's on a on a regular basis or, you know, hey, do we can we get these people into the right boot camps? You know, how can we surround them with people who will increase the likelihood that they will be successful, helping usher that company to the next level of its growth?

Brandon:

How do you identify gaps in a leadership team? Well, what's what's the right approach to that? If you are, let's say a series a company,

Maddie Cross:

thank you have to be quite clear on what your North Star is, what your goals are. And essentially, what were those goals are not being met, or where you just can't give a goal to someone like if you think about what your North Star is, and you divide that up into four or five really big things. If you look across your organisation, and you can confidently give those to people, you have a gap. And if you can give them to people, but it's not with a high degree of confidence, or it isn't, then the goal gets missed repeatedly. You have a gap? And I do think and I totally understand that. Because founders are so busy doing so many things, I do think there can be a tendency to put goals, and Northstar type metrics together quickly, because it seems like quite a time suck. And I get that because there's so many things going on. But it is if you invest in doing that, well, it does pay off in terms of understanding how well your organization's put together. Yeah,

Brandon:

love that. Perfect. And then what's your take? Andrew?

Andrew Duncan:

We often talk about it here in kind of two ways. One is the prompting question is the same. What needs to be true for a series a company to go out and successfully raise following capital in a series B environment? Now the answer to that one is certain capabilities need to exist in the business. And, you know, I think the four of us for typically understand there also has to be someone responsible for each of those capabilities. And you know, those capabilities also map to kind of key strategic areas of of a business's growth plan. For example, if you say, look, and this is not often the case, but say your software engineering function is not key to the success of a business because of the simplicity of the product, the space that you play in. And so if you have a relatively weak head of engineering, that's probably not going to be flagged as like a big risk to going out to raise your series B. Right. And so actually, when you think about it that way, we tend to find it it's actually pretty clear where the gaps are within a leadership team because we know the business we do not you know know what the founders strengths are kind of superpowers might be. And oftentimes it founders are getting a bit wrapped up in Oh, watch my next hire P or how am I going to think about, you know, making changes within the team. Oftentimes you can bring people back to, hey, think about when you go out to market for your series B, and you're talking to someone about a, you know, 5060 $70 million capital injection. And oh, by the way, you're a FinTech business that has no functioning finance capability. No one is going to take you seriously. I know that's a bit of like a strawman argument. But at a nuanced level, it holds up, you know, you have to have the capabilities in the business and the strong leader responsible for those key capabilities in order to even hope to be credible going out for your series B.

Bethany:

Yeah. For b2b SaaS businesses, that's a strong sales leader. If you don't have a strong sales leader, you're not going to get it

Andrew Duncan:

completely agree. And you know, and probably in those instances, Beth, you're less worried about, you know, whether you have a you know, CFO with 2030 years experience, like that's probably not as critical to having a business that has a repeatable, sales motion, or, you know, a real sense of ROI, and its marketing spent.

Bethany:

So I'm sure we could ask a million more questions, just generally being curious people who want to know more things, but unfortunately, we're rapidly running out of time. Our final question for each of you is, if our listeners could only take one thing away, so it doesn't necessarily have to be something we've covered today. What's the one thing they should remember from today's episode?

Maddie Cross:

I think what I would probably say is like, nobody gets this right 100% of the time, everybody makes mistakes with hiring. Don't let the fear of that stop you from taking decisions around hiring people letting people go, you will get it wrong. But the game is not to never get it wrong, the game is to get it right more than you get it wrong. And if you let that bother you, you won't do anything.

Bethany:

And I think conversely, you can also choose the wrong company, as a candidate. And if you get it wrong, cut your losses after a while don't just try and suffer through it.

Andrew Duncan:

I have a two part answer if I can kind of swerve the question slightly. One in terms of the takeaway from the conversation today. Matty often talks about this and does really resonate. When you think about the expected duration or tenure of a leader in a business. That is not something that happens in a vacuum, like it is something that happens in relation to a a talent pool of executives, where there's all sorts of dynamics that contribute to how long or how productive an executive will work within your business. And I think having a bit of a contingency plan around how to help someone be successful or, you know, increase the likelihood of their success or how to mitigate risk, if they aren't successful is something that people don't spend enough time talking about or thinking about. And then one last thing, it's just it's a really good concrete example, a guy named Barry McCarthy, who is the CFO who who IP owed and worked for Reed Hastings at Netflix, for many, many years, like one of the most successful CFOs ever, then became the CFO of Spotify, which he took public in its direct listing. He's now the CEO of peloton in New York also listed business in the US. I encourage people to go look up his stint at a company that went up in flames called Clincal. Because it's a great example of someone who has one of the most Sterling reputations and track records in the world, who had a huge swing and a miss on a company that very quickly went up in embarrassing flames. And again, it's kind of like the the point I made at the beginning bath around execs who have short since have made poor decisions or decisions that couldn't have known report at the time. But I think if you want to be in the game of building venture backed companies, you have to accept that those risks come with the territory. Totally

Bethany:

all so many risks. But that's what makes it fun. Right?

Maddie Cross:

And you know, that question that people ask in job interviews sort of more at the graduate level, like, Oh, tell me about a time when you made a mistake. Like most people can't respond to that by saying like, how many do you like how many, like,

Andrew Duncan:

how long do you have?

Maddie Cross:

A lot and then the the interviewer is like no one is one. Like most people will have that laundry list of like, Oh, should we begin and that's healthy, that's healthy, and we can celebrate our successes as well because we know what they look like.

Brandon:

That's true. It makes it all that much sweeter when you get it right. So thank you, Maddie and Andrew for joining us on the operations room. If you like what you hear, please subscribe or leave us a comment and we will see you next week.

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About the Podcast

The Operations Room: A Podcast for COO’s
We are the COO coaches to help you successfully scale in this new world where efficiency is as important as growth. Remember when valuations were 3-10x ARR and money wasn’t free? We do. Each week we share our experiences and bring in scale up experts and operational leaders to help you navigate both the burning operational issues and the larger existential challenges. Beth Ayers is the former COO of Peak AI, NewVoiceMedia and Codilty and has helped raise over $200m from top funds - Softbank, Bessemer, TCV, MCC, Notion and Oxx. Brandon Mensinga is the former COO of Signal AI and Trint.

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