Avoid These Mistakes When Hiring Your Leadership Team
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You really do get what you pay for.
As an entrepreneur who has hired thousands of employees—and watched other companies hire thousands more—I’ve got a lot of experience in building out a team.
I’ve also made a lot of mistakes.
One of the most important lessons I’ve learned is the value of a senior leadership team. I’m not talking about their impact on the culture or even how they can grow your business (although those things certainly matter).
I mean the literal value of the leadership team: executive compensation.
Executive comp is one of the hardest things for growing businesses to get right. Bringing the right people on board really is 90% of the success of your company.
But finding the right people and getting them to stick around? That’s one of the most difficult things you’ll ever have to do.
Avoiding Executive Talent and Compensation Mistakes
There are two big mistakes I see companies make over and over when it comes to executive talent and executive comp.
Mistake #1: Not knowing benchmarks
The first problem is that companies choose to remain completely unaware of what the market demands for certain roles. I can’t tell you how many $15M companies I’ve seen that want to bring on a full-time high-powered CRO for $150K or less.
That’s…not nearly enough if you’re trying to scale to $30M or $50M. The reality is that CROs who build $50M companies can cost closer to $300K...or more. And that’s before benefits, bonuses, and other incentives.
I know full well the sticker shock that comes with that kind of price tag. But if you don’t understand what the going rate is for a particular role, you’re going to waste time, energy, and plenty of dollars in your recruiting efforts.
Mistake #2: Trying to get away with less
The second mistake companies make, even if they are aware of the benchmarks, is buying into their own exceptionalism. They think they (and they alone) are the company that can make do with a less expensive resource and still hit growth goals. Or they believe that their culture is so great that top-level talent would happily do the same work for less money.
It isn’t. And they won’t.
That’s not because your company isn’t great! It’s because the market is the market, and that’s just how supply and demand work.
If you advertise a job for less than what it’s worth, you may get candidates. But they won’t have the experience you’re looking for—and that’s likely to cost you later, when you don’t grow nearly as much as you thought you would.
In other words, you have to go to the right pond if you want to catch the right fish.
Stretching Employees Beyond Their Capabilities
And here’s one more mistake I see: trying to stretch a current employee into a role beyond their capabilities.
This one is easy to understand. Some of your best team members are likely those who have grown with you for years. You’ve seen them stretch and develop to new places before.
But at a certain point, talent, willingness, and loyalty can’t make up for a lack of experience. And pushing an employee without the requisite experience often means setting them up to fail.
It’s essentially the Peter principle: promoting an employee to a “level of respective incompetence.”
There are exceptions to this rule, but in the vast majority of cases, that employee will be far more successful under the mentorship of a new, extremely experienced executive who comes into the organization. Giving them a new boss makes them more valuable, not less.
How to Make a Successful Executive Hire
I know what you’re thinking: it’s a real catch-22, right? You can’t afford to pay an extra $100K for a role until you grow your business. And you can’t grow unless you get that role that costs an extra $100K.
Clients in this scenario generally have two choices:
Fractionalize a high-level executive to act as the tip of the spear for your organization. You might only need that CRO or CFO 1 or 2 days a week. Leverage their expertise without paying full price.
Accept the hit to profitability and make the full-time hire. If you truly can afford that executive, you might be better off bringing them on full-time from the start. Yes, it will take 6-12 months for your profitability to come back. But you won’t have to go through another transition when you decide you need your fractional resource full-time.
My best advice on executive hiring and compensation? Do not fumble your way through this process on your own. It’s too expensive and too critical to your growth.
That’s why we’ve recently partnered with Broadreach Staffing Solutions, which specializes in executive search and hard-to-fill roles.
A recruiting firm can help you benchmark compensation, understand the competitive landscape for certain roles, and bring candidates through a proven process that makes them more likely to sign on the dotted line.