When to Take the Leap from Startup Founders to Sophisticated Management Team

Posted on Apr 26, 2016 in Eli Fathi: My Take on Business | By: Eli Fathi

My previous blog Success factors of a founding team highlighted the key traits of a winning startup team. But what happens as your company evolves into the next stage… growth.

You now have investors, partners and key customers. All of which you have managed to do as a small yet mighty founding team. But the tides are shifting. You have started to notice that patience is growing thin from these key stakeholders for repetition of the same mistakes.

Taking the leap from startup founders to management team

At some point, ready or not, you will have to step up and lead the hungry, gritty team out of that “startup” grind to prepare for a new level of sophistication. The time is now to take that next step and add reinforcing layers of talent to compliment the strengths of your existing team.

By increasing depth on your management team bench, you will naturally evolve your competitive edge in the market place. Consider that the most successful hockey teams have second and third lines of players that are almost as good as the first line. The first line can’t play the full 60 minutes of an 82 game season and expect to remain competitive… or for that matter, alive.

When looking to increase depth of the team, I believe that there are 3 key traits that individuals joining the company should have, without which they will not fully integrate with the founding team: 

  • Buy into of vision of the company;
  • Have total commitment (be the Pig not chicken as outlined in my previous blog); and most importantly;
  • Be “DOER’s” / ACT on their responsibilities; capable of focusing and executing tasks on a priority basis

When you are satisfied that the individual you are about to hire possess the above traits, you must next focus on the skills that the person has and the fit with the overall skills of the current team. Team composition is the most important factor to consider when pulling the trigger on adding new hires. Selecting the proper team to join your company’s journey will be the determining factor of your company success.  The concept of “Horses for Courses”, as noted in The Cambridge Dictionary, emphasizes the importance of choosing “suitable people for ​particular activities because everyone has different ​skills.

When adding “new blood” to your core team, a key concern would be a mismatch amongst the new team members and the group that has been with you from day one. Adding or replacing a team member must be carefully planned and executed. To emphasize the importance of this step, consider that in transplant operations, the body’s immune system will first attempt to reject the new organ and it requires special medication to manage this process.

Consider these key concepts when going through the selection process to building your team:

  1. “Effects” – Concepts to assist with the team building process
  • Dunning- Kruger Effect – This is named after David Dunning and Justin Kruger from the department of psychology at Cornell University. The results of their study carried out in 1999 stated that people with a lower level of skills and competency rate themselves higher than they really are. Conversely, individuals with a higher level of skills and competency rate themselves lower than they really are. The take away from this study is that the CEO must be mindful that an individual’s feedback regarding self-assessment cannot be fully taken at face value. It is of added value to receive confirmation about the capabilities of the person being hired using third party validation.
  • Cinderella Phenomena - The classic fairy tale story of Cinderella is about a young girl under the care of a cruel stepmother and her two daughters who mistreat and humiliate Cinderella. Cinderella, it turns out, is highly capable and a hardworking individual. One day, Cinderella, whose stepmother prohibited her from attending a dance, attends the event and wins the heart of the prince, who marries her and they live happily ever after.

The “Cinderella effect” is a metaphor used in situations where the capabilities, skills and potential of individuals go unrecognized.  I have seen this in practice on many occasions with individuals who appear to not have on paper the right credentials, but when presented with the opportunity, perform beyond expectation. My recommendation is to find these “diamonds in the rough” and give them the opportunity to shine. As an added bonus, it is very personally rewarding to observe the professional and personal growth of these individuals and the added confidence that they obtain. 

  • Prima-Donna Phenomena – As the lead female singer in the opera productions in Italy circa 19th century, the “Prima-Donna”, was the star of the show. As they became more famous, most of these stars had developed a larger than life personality. They had unreasonable demands from co-workers and management while exhibiting a very short fuse temperament, which was highly disruptive to the rest of the crew. The present day reincarnation of the Prima-Donna is known as the “Diva”, exhibiting similar behavior. Although these individuals are highly talented, and can contribute to the overall success of the company, the destructive attributes associated with their Diva personality, negates the benefits of their contributions. As a general rule, avoid hiring Divas and only on very extreme circumstances, make them part of the core team. 
  • Synergy Multiplier Effect - Dictionary.com defines synergy as “the interaction of elements that when combined, produce a total effect that is greater than the sum of the individual elements, contributions.” From my perspective this is the most important factor that will determine how well and effective the team interaction will be, and subsequently, the overall performance of the team. A team that has a high degree of synergy amongst its members is a high performance team that can achieve magical accomplishments.
  • NO effect – Not to be confused with the evil character in the James Bond movie but rather this is about having someone on the team that is providing the sobering second thoughts prior to embarking on a major activity. This is especially needed when the wrong decision could have profound ramifications on the company’s performance. In very large organizations, this function is built into the overall process, also known as the “department of NO”, which is necessary to protect the company operations. By definition, a startup company has to change the status quo with a bold vision. In this environment, the “Dr. NO” functionality while could be highly relevant, must be quantified.
  1. “Personal Attitudes” – Be mindful when hiring these individuals
  • Clock watchers - Overall productivity may be an issue (a watched pot never boils).
  • Yo-Yo people – These individuals are hot and cold about everything in the company (policies, procedures, product vision, etc.) which impacts productivity level of other team members.
  • Status seekers - People whose first priority is their titles and other status symbols are not good long term employees as they tend to be in a transient state in the company and use it as a stepping stone.
  • Toxic personality - Beware of people who poison the environment around them, which will have an impact on the moral of the whole company.
  • Naysayers – The non-believers in the company’s vision will be a distraction to the overall team.
  • Inflexible sticklers to process – These individuals will bog you down requesting details that may not yet be available in a startup company and diverting effort to address the requests.
  • Second line players that want to be first – These individuals will leave the company at the most inopportune time, when you need them the most.
  • The comparison shoppers – These individuals do not fully buy into the company’s vision and will continuously be on the lookout for better opportunities.
  • I can do anything – These individuals will either continually seek added responsibilities or will not refuse accepting new responsibilities and as a result will not be able to deliver effectively.
  1. Third Party Contributors - Maybe you should take a second look

Although a company may wish to have its own dedicated core team accessible 24x7, this may not always be practical at times when financial resources are low. Under these types of conditions, it is worthwhile to consider complementing your team with a part time consultant who can fill in the gaps of knowledge and expertise. In the long term, consultants may not to be as effective as the full time team members. A part-time arrangement with key consultants can also provide a means to keep these individuals engaged in the company which could change to more permanent roles once financial circumstances change.   

Not ready quite yet to go on a hiring spree?

Here’s a hack that will help your core team navigate to the next phase without taking on a tremendous amount of risk; find yourself a seasoned group of advisors. This action will help bring much needed insights and broader industry connections that will be invaluable to your early-stage company.

Once you have built your team you need to focus on execution. As Thomas Eddison, the famous American Inventor said “Genius is 1% inspiration and 99% perspiration”. This phrase is equally applicable to describe the operations of a company by paraphrasing it to state that the success of a company is 10% inspiration (product and plan) and 90% perspiration (the execution).

BizRule#12 - Trust, but verify

A scorpion wishes to cross a stream but it is stuck on the dry land as it cannot swim. The scorpion meets a frog on the bank and asks the frog if it would carry it across the stream to the other bank. The frog naturally is concerned that the scorpion will sting it while transporting it on its back. The scorpion reassures the frog by saying that it will not sting the frog because if it did, it would lead to both of their demise. 

Feeling reassured, the frog agrees to carry the scorpion across the stream. Midway thru the journey the scorpion stings the frog after all. Before the poison kills the frog and both creatures sink and die, the frog turns to the scorpion and asks it to why it decided to sting the frog knowing full well that this act will result in its own death as well. The scorpion replied that it is in its nature to act in this fashion. 

The take away from this fable is that both the scorpion and frog behaved exactly as expected. The scorpion is not able to change its core beliefs even if it may cause distress and difficulties leading to its own death. The frog accepts the scorpion’s promise to not sting it on face value, without attempting to challenge its validity. In cases of uncertainty, one piece of advice that would be valuable to follow is that of Ronald Reagan, the 40th President of the USA who during the signing of the Intermediate-Range Nuclear Forces Treaty (INF) with the Soviet Union used the phrase “Trust but Verify”. 

In principle, most people cannot change, or as the saying goes “you cannot teach old dog new tricks”. In rare occasions, some individuals, under extreme circumstances, can change their core beliefs. It is typically easier for an individual to change external attributes and, to a limited degree, behavioral traits, but not well ingrained habits. In most cases when the external conditions causing the superficial changes are removed, the individuals will revert back to their previous behaviors.

When building with your team or hiring new employees leverage the interview process to gain a better understanding of the individual’s habits and behaviors to determine cultural fit. It is however, unlikely that you will have a full picture of how a person will behave and interact with your team and the culture fit until they start working in the company. Furthermore, you cannot afford to spend unlimited resources to find that out.  Once you are sufficiently comfortable that there is a fit, you should hire the individual but don’t be surprised if a person is not acting “as advertised”. 

Edited by Jamie Keeley, Marketing Manager, L-SPARK


Eli Fathi

Eli Fathi

CEO of EFEI, building the next Start-up. Co-founder & co-CEO of Fluidware Corporation from 2008 to 2014 until the acquisition of the company by SurveyMonkey & worked on integration until April 2015. An Internet software company, Fluidware offered Software as a service (SaaS) online applications based on collaborative feedback with 2 products: Fluidsurveys; online survey tool & FluidReview; online Application management tool. In 1986, Eli founded Applied Silicon Inc. Canada to provide engineering consulting services. Following an investment from Newbridge Networks in 1996, the company (Telexis) shifted focus to video over IP solutions, growing to 180 employees. Telexis was acquired in May 2000 & became March Networks. Eli also founded in 2002 OrbitIQ Inc., a business accelerator company with globally-deployed channels to market. Eli is involved with the community & high tech community in particular by serving on a number of Boards including: Community Foundation Ottawa (CFO) starting in 2012. Eli also serves on the Board of C-Com, a publicly traded company on the TSX-V since 2007. Served on the Ottawa Center for Research & Innovation (OCRI) from 1999 to 2007, Ottawa Chamber of Commerce (OCC) from 2004 to 2009, the Ottawa Community Loan Fund (OCLF) Board from 2008 to 2012 & 1 year in 2009 on the Editorial Board of the Ottawa Business Journal. In 2004 was Recipient of the Order of Ottawa for Economic Development, & was the Recipient of OCRI 2004 Civic Entrepreneur of the Year award. Since 2008, Eli organized & chaired yearly Corporate & Community Social Responsibility Conferences at Algonquin College in Ottawa www.ccsr-conference.com. Eli Co-authored a book on Software project management & had 12 publications.

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