Common CEO Mistake: The Buddy Hire

It is tempting.  You are a new CEO and you need to make an impact quickly.  You have been successful in the past and there have been people who were on your team previously whom you would love to have with you on this new journey.  You don’t know the current team that well and have not fully assessed everyone’s talent, yet some new blood at the top would definitely help.  It is tempting.  Tempting to hire quickly, to bring in a number of people you know, and to make sure you have people around you who you trust and who can have your back.  Tempting but in so many cases this is the wrong move.

When I first arrived at Verticalnet, where I ultimately became CEO, in mid-2000, we had a new leader who had been hired from a different industry.  This CEO, Joe, practiced this kind of hiring broadly and brought in many senior executives who knew little about the business or industry.  Then his hires acted the same way.  Soon business development was full of former supply chain consultants and marketing was all ex-Lotus people, while product management seemed to be from two camps with completely opposite views of the world, and marketing was run by someone used to selling to big box retailers.  It didn’t end well as 1,500 jobs were shed from that point until about the time I took over and most, if not all, of these buddy hires did not survive the cuts.

Think about the potential mistakes of this “buddy hiring” behavior if you were the CEO:

• In crowd / out crowd:  Quickly there are the new hires who have a history with you and the old hires who don’t.  A natural gap is created, especially if the people you hire know each other and not just you.  The motivation of the people who have been there is quick to decline, despite their initial optimism about a new leader and a new approach to the business.  Often, the new hires are not local and will need to be relocated over time or do the weekly commute.  Thus these new people are in the office for only three full days a week, amplifying the challenge.
• The wrong hiring tone has been set: You hired these new team members without having the existing team interview them or you said to the existing team; “I want you to sit down with Meg and tell me if you think she is a good fit for CTO.  She and I worked together for five years and I think she is awesome.”  Now really, what can your team say?   “She’s awesome” is the usual reaction.  Your hiring behavior just set the tone for the company.  Now others will do the same thing and will hire people they knew before and quickly every function potentially becomes a little clique of previous co-workers.
• To a hammer everything is a nail:   Your people might have been good at the last job, but will they be good at this one?  Different business, different customer, different solution.  Some executives are great at jumping from situation to situation but many are not.  Pattern recognition is a negative when the business is different.  Hiring people who say “we did it this way at the last place where I worked with our current CEO” is not only alienating but it often could be just the wrong thing to do and not what you, as CEO, want them to do.

Do yourself a favor and institute a formal hiring process, or if the company has one, abide by it.  Create job descriptions and interview scoring templates.  Have hiring teams who are tasked with interviewing a minimum number of candidates before making a hire.  It is great if you have a strong network and access to talent and you should always be excited about bringing people from your network into the process – as long as you tell people to hire the best person and not the person you know.  Maybe you should interview the top three candidates and form your own opinion of who is truly the best individual for the situation.  Require relocation of new hires if the job is an on-site job.  You will still end up hiring some people with whom you worked before and that’s ok, because everyone will agree that they are great and were part of the process.  Even then, team building exercises are critical, as are creating new stories from shared experiences at the current company while leaving most of the old stories at the door.

One caveat.  When building out a sales team and looking to move quickly to hire sales resources, leveraging a network seems to create much less resistance.  This is likely because the results are tangible and those that fail will not survive, no matter the past relationships.  Still drive a structured process where possible, but in technology sales, past success is often a predictor of future success.

The behaviors described above are very real.  We see these actions inside of our portfolio and we look to change these behaviors before the culture gets permanently altered.  When we are interviewing CEO candidates, we ask in detail about hiring and HR practices as well as how people leverage their networks.  A CEO with a strong personal network is a great asset, but only when combined with a strong process-based hiring discipline.