Context: When Companies Confuse Start-up Experience for Start-up Experience

October 7, 2011

I had the occasion this week to chat with an entrepreneur still licking his wounds from a stalled startup venture. His tale is a reminder of how easily companies misunderstand organizational context when hiring. For startups, such a misunderstanding can be fatal.

The startup in question was incubated within a large corporation. When its technology began to show commercial promise the parent company decided to spin it out and replace the young techie-founder with a more experienced CEO. As the founder adjusted to being relegated to CTO, the parent firm retained a big international headhunter to conduct a global search for a CEO who would launch the company’s technologies into the marketplace.

After several months, the new CEO was introduced, an individual who had been the European head of a major player in their sector. The executive boasted ‘global perspective’, intimacy with the startup’s target markets, strong relationships within his employer of the past five years (an important potential partner for the startup), an excellent track record in driving revenue growth and……. startup experience. Specifically, the individual had successfully established and scaled his firm’s subsidiary operations across all of Europe.

With the primary objective of growing revenues, the new CEO put his team together and took the very young company aggressively into the marketplace. Unfortunately, the market did not respond as expected. Undeterred, the sales-pedigreed CEO persevered, pounding away, month after month selling harder to more and more companies. But when the stench of the dead horse in his briefcase finally overwhelmed him he retreated and recommended to his board that they take the technology business in another direction. By this time however, both the company funds and optimism were depleted and the parent company pulled the plug on the startup.

Despite what the organization trumpeted when they hired him, the ‘experienced’ CEO was not the startup savvy operator they expected or needed. Instead he was a subsidiary savvy professional manager. He was experienced at taking a proven business model, tweaking it for the local market and then implementing it. Success came from localization of a playbook. The early-stage startup on the other hand is trial and error experimentation. It is improvisational, bobbing and weaving, shape-shifting adaptation in response to market feedback. Growing revenues is not ‘sales’ as understood by someone working for Oracle or IBM but rather early stage business development, missionary stuff made of proselytizing, and evangelizing. It is creative work that requires an entrepreneur’s ear for meaningful feedback and nose for course adjustment. And while these early stage attributes often do not scale as the business starts to grow, an overly optimistic company that hires directly for the scaling stage may find it has no company to scale.

Context is the set of conditions that defines a particular organization. It includes variables such as location, structure, culture, political environment, competition, employee demographics, ownership, financial resources, markets and strategy. Context affects the characteristics of a business, its prevailing attitudes and behaviors. Early stage companies differ from mature companies; cash-starved companies differ from those rich in resources; Israeli companies differ from Korean companies; a branch office differs from a head office environment; and a family business differs from a professionally managed enterprise. Most importantly perhaps, the people who thrive in one context cannot be assumed to thrive in another and thus extreme care must be exercised when hiring someone for a given company and situation.

The company in question knew it needed a ‘fighter’ and paid a fortune to hire a professional boxer from half way around the world. It then threw this individual into an ‘anything goes’ local street fight. The ensuing pain was a direct result of misunderstanding differences between the two contexts and type of fighters who thrive in each.

About the Author

Robert Hebert is the founder and Managing Partner of StoneWood Group Inc., a leading executive search firm in Canada. Since 1981, he has helped firms across a wide range of sectors address their senior recruiting, assessment and leadership development requirements.

Contact Robert by email at rhebert@stonewoodgroup.com or call (1) 416-365-9494 EXT 777