Shakespeare famously spoke through Juliet, asking “What’s in a name? … a rose by any other word would smell as sweet.” That’s true, as long as you know you are truly holding a blossoming rose (and not a seedling or a plant that has yet to flower).
Many startups bring on promising talent to run large portions of the business. Because cash is usually tight and equity pools are limited, founders scramble to offer compelling packages to attract top talent. One common “carrot” or concession offered during the interview cycle is a big fancy job title. The rationale is that, if you can’t increase the salary nor the stock options, then let the candidate take a VP or a Director title. It costs you nothing, so the prevailing logic goes.
Pay Me Later
But the reality is that job titles are not free — you eventually pay for it later. Founders should think carefully before doling out executive or senior job titles. Founders need to ensure that the candidate’s skills truly match the expectations of the senior job title. Multiple challenges can arise when an employee is over-titled, including:
- Insecurity that leads to defensiveness. Difficult personnel issues surface when it becomes apparent that the employee isn’t capable of playing the senior role. Employees who are overly hungry for a big job title usually have a hard time facing the facts if they aren’t meeting your expectations of the role. Their insecurity often takes over when you try to provide constructive feedback and they resist any notion that they aren’t truly VP or Director-level material.
- No room at the top. If the candidate is over-titled, eventually founders need to bring on a truly senior employee to take over. But if the current candidate already holds a VP title, then you are left with few options other than to bring in the new person as a Senior VP. Top-heavy small companies easily become unbalanced when they have too many generals and not enough infantry. You need a typical distribution of titles within a team to properly allocate work between leaders and staff. New investors will also question your management decision making when they see an unbalanced, top-heavy organization. In addition, if you bring in the next person at a higher title just because the current person is over-titled, you run into more problems with compensation. The new person will expect a salary and equity package that is commensurate with the higher title, further draining your limited resources.
- Low morale among the troops. The staff working for the over-titled executive will eventually recognize that the team leader isn’t meeting the expectations of the role. The front-line staff are often the first people in the company who recognize that the leader isn’t doing the job well. They won’t want to work for the person, which results in disunity and dysfunction. Their expectations put pressure on the founders to deal with the over-titled individual, creating a messy people issue to resolve.
- Can’t right-title. In many cases, the over-titled individual is a hard worker and a reasonable employee, just not at the title he/she currently holds. The right thing to do is to change the person’s title to one that more appropriately reflects their current capabilities and contributions. But just about everyone will see this as a demotion. Very few people are comfortable with being demoted, leading you right back to cleaning up a messy HR issue.
Because most people hate dealing with messy HR issues, I often see founders avoid the problem altogether. Avoiding the HR issue means your company will just limp along, under-performing along the way. Progress will slow, investors will sit on the fence or lose interest, and employees will get disillusioned.
Right Titles, Right Foundations
Occasionally, you’ll find a promising candidate with great potential. Chances are the candidate will have many options to choose from, forcing you to compete for their services. Don’t give in to the temptation to over-title the candidate in order to make your offer more attractive. Do talk about your solid HR practices and culture and how you want to provide many opportunities for employees leverage their preparation. Every team member wants to feel successful, so highlight the fact that success is likely when opportunities and preparation intersect. Bring the candidate in at a lower title — the right title — and offer regular feedback and coaching. If the candidate exceeds expectations of the lower title over a sustained period of time, promote them. This approach avoids the risk of over-titled employees. It also motivates the employee when they see their contributions being recognized and their career opportunities growing.
As I wrote in my posts on interviewing and finding the right candidates, hiring game changing employees has to become a strength of every startup. Employees are the foundation of your startup. It is important to align the job title with the candidate’s true capabilities and proven experience. Over-titling employees runs the risk of creating multiple layers of complex, messy problems. But rational, consistent and accurate mapping of roles and titles can form a solid foundation for you to grow your startup. Hire well and grow well!