Maybe? But not if they are truly “big company” executives in their basic makeup. Of course, if you’ve spent your career to date strictly in large companies, it may be hard to determine what your true nature is. At your core, do you have a big company mentality or a startup mentality? That is really the question.
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This is a jump that definitely can be made; I made it myself a while back. But it’s not a move everyone should make. So, whether you’re a senior executive at a large company thinking about moving to a startup, or a startup investor/owner thinking about adding a very senior, high-profile executive to your startup team. What are the things that make up the risk/reward equation? Here are a few things to think about:
The longer you’ve done it, the harder it is to change a big company mentality
This is true of many things in life, but I believe it is particularly relevant to the discussion about the differences between big company mentalities and small company mentalities. If a senior exec is comfortable and happy within the big company culture, I question whether a jump to a startup is advisable. Or has a strong chance of success. Many make this move and are very successful, of course. My basic message is that this move represents a massive change in environment, leading to at least some adjustment period due to culture shock. There really isn’t a great way to judge the odds of success. No matter who you talk to or what steps you take to prepare. Until you’ve actually worked in a startup, it’s difficult to say whether or not you’ll like it and whether you will develop the startup mentality required to thrive.
Big company vs startup mentality: Different skill sets
Of course, there are those rare individuals who excel at anything and everything they do, regardless of the situation they are placed in. Smart, charismatic, and hard-working tend to play well everywhere. But the operative word from that first sentence is “rare”. For everyone else, we are all probably better suited for either a large company or a small startup. But not both. What passes for ‘conducting business” is very different in each environment. Say an executive is happy conducting large, lengthy meetings daily, managing large staffs, is comfortable with matrix/overlay organizations, and has a focus on process and structure. These proclivities generally don’t transfer well to startups. All of those things can be valuable in startups as well. However, different skills tend to be more important, as we’ll discuss below.
A sense of urgency is a big part of a startup mentality
In big companies, things usually move at a more measured pace than in a typical startup. There are a lot more zeros involved in the normal large company decisions, and the “cost” of making the “wrong” decision appears higher. In actuality, the stakes of a bad decision are even higher in startups. The very existence of the firm may be on the line. But there is certainly less existing business to lose. In a large company, decisions tend to be taken more slowly, often including layers of management discussion and approvals.
There is a greater emphasis on consensus-making and internal communications. Frankly, we’re talking about political skills here, which tend to be VERY important in larger companies. In a startup, there’s usually no time to waste on a lot of internal stuff; people who are viewed as too politically astute are often called out for it. Hopefully, there are very few management layers that you’re required to “sell” your ideas to. In a startup, speed is often a predominant winning characteristic. Speed is usually a requirement to beat large companies, which have big leads in the marketplace and a huge advantage in resources.
Comfort with ambiguity and making decisions with minimal data
Being able to see “clearly” while ignoring all the noise is very important in any-sized business. It is particularly so in startups and early-stage companies. This is especially true in fast-moving segments such as mobile hardware, mobile software, and SaaS technology markets. The very act of starting up a business comes with a real ambiguity about where you fit in the market. You start with no brand, no pricing data, no historical customer feedback. How should you approach important decisions in this environment? The startup executive must often be comfortable pondering company-making or breaking decisions with very little data.
Possibly the most important attribute of the startup executive is adaptability. When that feedback or other data finally does present itself, no matter how skimpy, the company must be able to pivot on a dime in a new direction. Sticking too long with a losing strategy kills many startups. Nimbleness is essential. Not everyone is comfortable with all of this uncertainty. Or is naturally adaptable. This can be particularly true if a very senior executive at a large company has become used to absorbing large amounts of data. And taking their sweet time before making big decisions.
Level of personal accountability
As I’ve mentioned above, there are MANY different people involved in nearly everything in big companies. In most cases, being a “team player” is really important. In startups, on the other hand, oftentimes you’re left alone on an island. It’s your decision alone to make. At the earliest stages, it may be your responsibility to execute alone as well. There’s nowhere to hide in such an environment. Not only are you responsible, but there may not be another individual within the company you can even bounce your view of what needs to be done. There may be no one who will understand what you’re talking about.
This can be a shock to the system of someone who has spent their career in a consensus-oriented, matrix management culture in a big company. One with many other smart, professional people to consult with. A successful startup executive usually relishes this high level of personal accountability. They enjoy the “wins” and can accept blame. Yet can quickly move on and work even harder after the “losses”.
From a big company straight to a startup CEO is the most DANGEROUS jump of all
A while back, I followed closely the activities of a startup software company with promising technology located here in San Diego. They had so much promise that they raised a large amount of venture capital at a very early stage. On the order of $75-100M if I remember correctly. With all this money, they attracted a VERY high-profile, high-level executive from a publicly-traded telecom company. He was given a huge compensation package and proceeded to hire a staff of 8-10 VPs, all with impressive big company resumes.
Paid them all salaries in the $175-250K range, plus bonuses and equity. All of this happened when the company still had very little revenue, let alone profits. Needless to say, this company folded with just a few million in annual revenue. They never even sniffed real traction or came close to profitability. They ran through that huge nest of investment capital in record time. There simply was no leader with a startup mentality. This is an extreme example, of course, but a cautionary tale nonetheless.
New work environments are difficult, no matter how senior the executive is
The real issue this illustrates is that for a very senior executive in a large company, the CEO role seems the only reasonable move to a startup environment. There’s no place to “get their feet wet” in this radically different environment. This can cause A LOT of problems. All of the things discussed earlier in this article become more extreme in the situation where a lifelong big company exec jumps directly into the startup CEO role. As captain of the ship, every decision is magnified, and there is really no time for the normal learning curve to be climbed. As would happen if an individual makes the big-to-small company jump to a position further down in the organizational ladder.
There is also really no one to “learn from”. Who is going to “teach” the CEO how things work in a smaller organization? Many, if not most, CEOs won’t seek out such “teaching” from a subordinate. For many other reasons, this generally wouldn’t work very well anyway. There are exceptions to everything. As I stated earlier, smarts, charisma, and hard work tend to work well almost everywhere. And you might find a senior executive in a large company who really was a startup guy/gal at heart all along, or simply a superstar easily adaptable to any environment. But if it were my money on the line, I wouldn’t bet on it. This move has a high probability of being a company-making or breaking decision.
Big company vs startup mentality summary
Be very, very careful whether you’re considering this move for your own career or as a hiring decision for your company. I would be very hesitant to hire an executive with only big company experience for a very senior position in my startup. Let alone to lead it as CEO. Let another company be the guinea pig in judging whether or not that executive fits in a small company culture. Just my view, of course, many may disagree.
What do you think? Please post a comment to fill us in.
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I’ve seen so many times in my career, when “professional” managers begin to manage, innovation dies.
Buu, very true, that’s definitely one of the concerns….
Phil, these are observations that indicate you have lived the experiences more than once on both sides of the isle. Excellent enough insights that I have posted a reference blog on our website. Thanks, David
David, thanks for reading and for your kind comments. -Phil
Underlying motivation of a move was not discussed as a criteria. I find those that do shift successfully demonstrate a history of entrepreneurship in those ‘large’ companies. They often changed jobs annually and were tapped to drive new initiatives and projects.
Sean, nice addition to the discussion. -Phil