Editor’s note: This is first of two articles. Bill Warner is Managing Partner of Paladin and AssociatesPicking the right executive team is critical to a company’s ongoing success, and should be done with regular discipline. To make it even harder, the requirements for the executive team changes as the company matures.

The team that started the company may not be the one that raises the first institutional round of funding, or leads the company to its first million in sales, or merges the company with another in an exit event. If you hear any of the following, beware:

  • “Products and services are everything, the business and management stuff is easy.”

  • “I will be the CEO for the long haul.”

  • “I just want people that can do the job. I don’t care about their personality.”

  • “I have some close friends and associates that will help me run the company.”

  • “Let’s fill out our management team right away so we have the experience we need.”

    • What you would rather here is a mature assessment of the needs of the business, and then determine what executive team is needed in order to accomplish the near term objectives of the company. If you hear people saying the following, you have a supportive and mature team:

  • “I need people that have business and management experience.”

  • “I probably will not be the CEO after our first round of funding.”

  • “Personality and ethics are very important. We have to be a cohesive team.”

  • “The best way to end a friendship is to hire them into a risky business.”

  • “I will hire the right management when I need it.”

    • In order to determine what you need for your executive team, three assessments are needed:

  • The current executive team,

  • The status of the company and

  • The company’s two year objectives.

    • To assess the current executive team, take a bluntly honest approach to determining their strengths and weaknesses. Answer the following questions:

  • Have they achieved the company’s objectives?

  • What are their major strengths and weaknesses?

  • Who are they as leaders (i.e. creator, driver, supportive, technical expert, business oriented and manager)?

  • How well do they fit into the culture?

  • What role do they enjoy playing?

  • What relevant business background do they have?

    • Take a comprehensive look at the status of the company by doing a classical SWOT analysis:

  • Strengths

    • What does your company do well?
    How strong are you in your market?
    Do you have a clear direction?
    Do you have a positive culture?

  • Weakness

    • What do you need to improve?
    What are your company’s greatest challenges?
    What situations should you avoid?
    Are you able to finance the company?

  • Opportunities

    • What favorable industry circumstances are you facing?
    Are you positioned to take advantage of them?
    Are you entering new markets?
    Is your product and/or service the best?

  • Threats

    • What obstacles are you facing?
    What is your competition doing?
    Are your product requirements understood?
    Is your product or service current?

    Finally, realistically lay out what the company has to achieve over the next two years. These major milestones will indicate the kind of experience that will be needed to lead the company. Examples of typical milestones are:

  • Get a product or service ready for market,

  • Launch the marketing and sales programs for a product,

  • Achieve sales targets,

  • Raise a round of funding,

  • Establish strategic partnerships and

  • Merge with another company or take the company public.

    • With these assessments, you have the information to specify the characteristics of the executives you need to run the company.

  • Strong industry experience to determine the right product, create an effective marketing program or establish strategic partnerships.

  • An experienced sales executive to take the company to its first revenue plateau.

  • Strong channel management experience to create a distribution and dealer network.

  • Professional services expertise to create the implementation services team.

  • Strong financial experience to raise the next round of funding.

  • A strong and charismatic leader to present the company to the public, investors and customers.

    • With these needs understood, you now can determine if the current executive team has the experience and capability to accomplish the objectives that lay ahead. The executive organization can be changed to realign roles and responsibilities. When additional executive experience is needed, a job description can be easily written for the position that has to be filled. This description is then used to identify candidates through whatever recruiting channels are used.

    This process should be undertaken at least annually; as the company matures to new levels of complexity and business need. As companies mature, new challenges are faced that the current executive team may or may not be able to handle. As a company grows, so must its management team in order to deal with the demands of the business. The worst thing that can happen is to be lead by an executive team that is not experienced enough to manage the day to day issues it faces. If such a condition continues too long, the company will lose momentum as too many mistakes will waste resources and time performing recovery actions.

    As more executive positions are filled, keep in mind that some of the players holding current positions may have to be changed as well. For example:

  • The founding CEO will probably be replaced by an experienced CEO to run the company once the product or service is developed,

  • A CFO is not needed until the company gets into complex operations, justifying a full team financial team,

  • An experienced board of directors will be put in place once the company has substantial resources to manage,

  • Marketing and sales executives aren’t needed until a product or service is near ready for market,

  • Business development executives will be needed when partnerships have to be established,

  • Manufacturing executives are needed only when a product is ready to be built and

  • HR executives won’t be needed until a substantially large company has been built; outsourcing this service until then.

    • The message here is that you must know what kinds of executives you need, and when you need them. Foresee the upcoming business transitions and take the steps necessary to hire the right executives ahead of time.

    Unsaid has been that you will need to pick people that will fit into your culture and who are “A” players. Particularly in early stage companies, only the best talent should be employed to insure success. If you are rigorous about picking the right executive team ahead of the crisis, you will have the right people to manage through the next transition.

    Part Two will be published July 1.

    Bill Warner is managing partner of Paladin and Associates. You can reach him via e-mail (paladin@paladinandassociates.com) or phone (919 570-1023).