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Hello and welcome everybody. This is Joe from StartupReady IO. Today
we're flipping the coin on leadership hiring. The did you know
more than 50% of startup leadership hires
fail within 18 months? That means founders are
gambling with the company's future and often are losing.
Today's guest, Dominic Roth has concluded over
400 executive searches. But he's
not your traditional headhunter. He's a diagnostic based CEO
selector using psychology insights and
behavioral prediction, not just glossy resumes to spot
winners. In this episode we will explore why
startup leaders fail, even if they've scaled before
the personality patterns of high performing
CEOs, what to do before you hire
your first VP or C level exec, and how
to avoid a €250,000
mistake. Hey guys, welcome to Startupgrade IO. Today I'd like
to welcome Dominic Hort. He's one of Europe's top
executives search professionals with 400 plus
leadership placements across VCPE backed companies.
He specializes in diagnostic hiring, predictive behavior
and fit beyond the cv. He's also host of
the number one dach leadership podcast, CEO
Career Code. I think we'll link it down here in the show notes.
Dominic, welcome. Thanks for having me here Joe.
My pleasure. We're speaking about the founders folk in the road.
When a founder approaches you about hiring a
vp, Vice president or C level executives,
think about Chief Marketing Officer, Chief Technology
Officer, leaders. What's the biggest red flag
you listen for in the way they ask for
help? That's a good question because it's not exactly
a red flag, but more of an expectation that I need
to question. In general we have the saying.
It'S something that can do everything like it gives you wool, it gives you milk,
it gives you meat. That's right. And in the context of hiring,
it describes candidate who is required to have competencies in various and
often unrelated fields such as finance and also deep knowledge
in technology at the same time. As an example. Yeah,
and this is the one challenge. The other one is that founders often
overestimate the ability to choose the right executives for the companies
while underestimating the failure rate of executive hires in the
startup environment by data because the data we have on the
cost of failed hires is quite alarming as you said also
in the intro, but I guess we will deep dive into that later.
And if we talk about they overestimate, it's
that they often hire for their family and friends
and that comes along with a lot of biases. In the selection
of executives. I see. So
what I like the film is so can be translated I just looked it
up is something like a jack of all trades, a Swiss army knife
or one size fits all solution. That's. That's what you've been
prefer referring to. Yes.
You've said 50% of external startup leadership
hires fail. Can you share cases where
on paper everything looked right but diagnostics told
you a different story? Of course I can.
But what I would like to introduce you first is a study because it
doesn't come from myself. It's like not a claim that I
say that's realistic. It's a study conducted by
Kiefer, Martin and Hunt from 2022
on 2020 and it says that in
approximately 50% of cases an executive turns out to be a
misfit within the new company within 18 months. This is quite important.
The result results are based on representative sample
of 20,000 hiring processes. And
these hiring processes even involved headhunters. And
that is the point. Headhunters have not been able to reduce
this 50 failure rate through the
conventional methods I would name it. So in
fact you could flip a coin and have the same result
and. Yeah, and save money by it. Right.
It's like in my cases I often have
technology companies that approaching me in order to
select executives and sometimes the fit
in the CV and the. The interviewing part is
so well done and well perceived by the decision makers. Also VCs,
NPS that yeah. That they would like to hire this person
because of that. And then later we find
out that maybe this person comes from other environment
more politics, has not the right capabilities in
personality traits to perform. I have a lot of stories about that. I cannot
name a company of course because I'm quite confidential but
we can come to that a little bit later.
I'm just curious, what kind of diagnostics do you do here?
Yeah, there are a lot of tests out there. Right.
So we all know them. And it is
that it is not about the test. In a
nutshell, how does valid diagnostics work?
So it is the combinations of tests. So the
combination of statements from personality questionnaire on
the one hand and the result of cognitive performance test on the other
hand. And this only provides hypothesis
to need. They need to be further validated in an in
depth interview and should not be taken as a fact only if the
person states yeah those personality traits on his or her
self perception and this makes a difference. The test results
are not final and must be further challenged through
behavioral based interviewing. And also
we need to Consider the situation and the cultural aspects of the company.
And this procedure leads to accurate behavioral
prediction, so to say. Yeah, so if you
ask someone how is your empathy level in a test?
Can you imagine someone, Joe, who will, who will state him or herself
like. Yeah, it's two or three out of 10. So that's the
problem with those tests. Yeah, it's. It's basically only
for people who don't want the job. That's right. Yeah, but they need
to, they. They tend to sell themselves of course, and
that's also okay. But it is our job to
figure out what is the real behavior states. And
it's not about personality and description, it's about behavioral
aspects of the job and of the performing person.
Founders do have to convert from operator
to evaluate because they say I know what looks good,
I just trust my guard in German. Bauchefuhl What?
Why is this dangerous? Is this a dangerous mindset
for hiring executives? That's a good question.
And maybe I forgot that to mention with your
first question as an answer because after 400 executive
searches and thousands of interviews, plus having studied
psychology beforehand, I cannot even trust my
gut feeling. So let's assume there's
already a solid job profile where
the company is. This has a distinction between technical
criteria and personality. Personality related aspects
upfront. So this is already existing. Right. What I
believe is that nobody would just conclude from gut
feeling hiring a CTO without having done a deep
dive in the technical competencies of this person. Yeah,
but we are all experts and that is quite superficial if
it comes to the evolution of the personality only by our
gut feeling. So they're required superficial and
required confident. But they've come if it comes to the technical, technical requirements
we always need experts, we need cases etc this is
the common case. But we should in at least invest
the same effort to get a deep understanding of the personality and
behavior and not only in the technical
expertise. And what I
often see is that there are several
HR questions referring to strength weaknesses
and the interpretation of the answers are based on several
biases that come from like what we call
shortcutting in psychology, stereotyping or
subjectivity. And that is what we mean if
we talk about gut feelings in fact that are
biases and I say personally I'm not
immune against them to be honest. I also need management
diagnostics and methodology to take a good decision
or to give a recommendation. Founders,
when did you first doubt your gut in a hiring decision?
Drop your story in the comments or DM us for example on threads
we're talking about here Dominic, because this is very
expensive. You've talked about the cost of a
failed exec hire could be up
to 28x their
salary in a startup. What does that actually
look like? Is there a story that shows the real world impact?
There are a lot of stories and studies about that. And
of course I'm not the one to examine
this study or evaluate it. I just trust
in studies that are there out there. And
you know you need to take into account different
aspects in terms of costs. It's that we have
internal external costs. Yeah. You have like
client retention costs often. Or reputation.
Yeah. And also in Germany we should not forget it. It's
severance pay. I think that's the term. Severance pay. Yeah,
severance pay. Right. Sorry for that. And of course cost of
recruiting, costs of onboarding the next employee. And if
we talk about real costs we also need to include
opportunity costs. Yeah. And that is those
costs that, that we, that we need to take into account
if there were someone who did the job right
like winning new clients, doing business development, especially in the
startup environment, being hands on. So what are the
missed out opportunities by hiring the wrong person? And then
it comes to a quite high number. And this is
what studies said. What I would indicate for you as
a startup founder is at least to have with a
senior executive on VP level and or
on C level. That is the real minimum. That's the other study
I could found. It's 250 or
240.250k euro for.
For small caps. Yeah. For a mishire. So that's the real
minimum we can state here.
I see.
What is a common personality trait in
startup founders that like clashes with
traditional corporate style execs and how do you
screen for it in advance? Mm,
mm, mm.
I think looking at backgrounds alone is not sufficient
in this case. I often See also VCs conclude that
candidates from a large cap won't perform well in a starboard
environment. While there is some correlation, we
shouldn't exclude these candidates too early in the process of the
recruitment. A candidate's personality might
enable them the candidate to adopt to a startup
setting. And the desire for change could come from a motivation to break free
from the constraints of established structures and processes in a
large cap. Right. So I guess
by traditional style you mean that we
talking about the manager of a large cap company who has the ability to
delegate while it's in the starter. They must do everything
themselves. Right. That's maybe what you mean by the question. And
also the behavioral and what we call in
Diagnostics feeling of power. Yeah. So
you, you would like to perceive this the boss of the pack,
so to say. Yeah. And this traditional
multivita is definitely a red flag. We have to figure
it out. But we need to do it in the interview phase and in the
assessment and not upfront. If we read a cv. Yeah.
Because we have a narrow niche to recruit in. Not everyone
is motivated to join a startup. But if someone is
motivated to join a startup coming from a mid cap or even large
cap, from a business unit manager position for example,
then we have to select is someone really
willing to invest is someone really willing to invest
in autonomy and is this person changing because a lack of,
a lack of autonomy. And this is a motivator and the selection
criteria at the same time. So we need to hire
for expertise. So we cannot exclude bigger cases.
Bigger, bigger, large gaps. But we also see
is this person motivated enough for the startup environment.
Mm.
When I was thinking about the questions I thought about something like the
emotional hangover. Founders often don't realize how
much their emotional, emotional energy goes into managing
a mis hire. What patterns do you see
in founder burnout linked to leadership
mismatch? Okay. I believe there are
multiple reasons for founder burnout. So it's not
a funny story. It's not. It's always multifactual. I think
that's the English expression what we psychologists say so. However
the intense engagement with a mishire is certainly
energy consuming. Often VCs tell
me that that a founder holds on to a non performing
colleague. And this is the most common pattern I, I
observe. It is better to hire slow,
carefully and to fire fast. To be honest it's not,
it's. That is the best way. And also
the, the main problem is and that is
also linked to the feeling we should not invest too
much feeling in like this family and friends set
up. It's a company and the VCs and the vessels are expecting
something from the founders. Yeah. To be a manager and
not to be the father of the family. We'll be back after short ad break.
Stay tuned to learn about the first VP dilemma
and resume versus readiness and much more.
Hey guys, welcome back to our interview with Dominic
Headhunter who had made more than 400 placements
of executives and we talked about how to get
external executives into startups and common mistakes.
Let's call this the first repeat dilemma. Meeting the first
vice president for startups hiring their like first
ever external vice president of sales, marketing,
operations or something. What's the single most
overlooked mistake you see in the Briefing or screening
phase. And it's a very good question.
In the first phase in the breathing so to say there
is a wish list of expertise criteria and also personality
traits like soft skills and this is the.
A volume style. Referring to the beginning of our talk.
Yeah. So this is a wish list. The first step for me is then
to challenge the startup's job profile and differ between
what is the mandatory criteria and what is nice to have
and what can be also then compensated by team members.
So let's hire for potential and not too much for
expertise in every field of the competence
profile as it becomes quite expensive. So what can
we. What is. What can be covered by personality and potential
and what is really a must have criteria. So that is the first step.
Yeah. And the. In the screening of
like sales candidates. Let's take this
example because it's the. The second role that I am recruiting,
at least in startups it's always head of business development or
cso. Yeah. The founders often
overvalue the network aspect so
candidates overestimate their network themselves.
And in addition candidates are not able to
reactivate the network for other products in most of the cases.
So example is if I am hiring a headhunter for my team.
Network is quite crucial, Joe. That is maybe what
we rely on and I think
it's also in technical companies the same story. But
my belief is I went for one third
rule, so to say one third of the customers remain with the
old company, one third follow the consultant
and one third turn away from both the company and the
consultant. And that is a realistic estimation of network.
So we should not focus too much on it, but more on
potential and capabilities. And the second problem,
especially with VPs or. Yeah, the first CSO
is that we tend to favor candidates with a high level
of, let's name it, extroversion and strong
communication skills. During the interviews, we assume that this
candidate will also succeed in acquiring new customers
because of the way he or she communicates. However, this is
a bias. We should not infer sales competence
from an observed presence in the meeting.
It requires much more. Such as resilience, such as influence.
Yeah. Which must be evaluated separately in the process
and later in the process. We cannot generalize from one trait
to another. At the end of the day the person might just be
extrovert but. And charismatic maybe, but not
have the ability to deliver results. So these are the
most common common observations I have.
Mm, I see
we've been talking about this. And your edge is empirical.
You apply management diagnostics to assess
behavior and fit can you walk us through a
specific test or signal you use that startups
wouldn't typically consider?
Yeah, most VCs nowadays at least consider
personality tests. But that is the problem. It's just a test like the
inside personality test that ranks personalities
in colors. Maybe you know that. Yeah
and it's an interesting indication but it's not valid enough
to predict behavior. And the tests are not
aligned to the specific situations, culture and challenges of the
vacancies. And the results are over all statements about personality.
So this is a frame what you shouldn't do. So the first problem
is that they are mostly descriptions of trades, self
descriptions which doesn't need help us forward.
The second problem is that yeah it's. It's
not aligned to the context of the role these self descriptions.
So if you looking for a good test, it's
not a test, it's a whole assessment that you should
have cognitive abilities, you should have personality traits and
then test this in an in depth
interview with an expert. So that would be the best
setup for a startup. I talked about the best setup for
startup here. I was wondering for our audience what's one
interview question you've used to uncover
leadership behavior, share it on LinkedIn and tag startup?
Curious question what the data didn't say.
Can you share a time when the CV and
diagnostics aligned but still the hire
didn't work out? What did you miss and what did you
learn? I also had failures especially
in the beginning of my career. Maybe
I underestimated the stakeholders in my first year for for example or
first years I just listened to the PE or the BC
owner and his or her
expectations from the future position holder in the
portfolio company. But I did not interview the management team
in order to get a holistic view of the situation, challenges
and also of the DNA of the company. That is something
I learned. So it is just one view. I need to really
deep dive and understand what is the challenge, what is the situation
and the DNA and in order to derive from that a
competence profile and then do assessments and the whole
executive search process. That was the main
failure I made. I would say you
talk about the executive search process founders
do already have like guesstimate
about what how long it takes to
hire somebody like an employee, like a like
a team lead. How long should founders actually
estimate between the first email
to you and the first working day of the new
VP or executive? Very good question. Let's
try to to find an appropriate answer. It is the first
step is that is our executive search process
which I won't deep dive here, but it's about 10
weeks that we need to have someone signed a
contract with the company. And then of course you have
notice periods to be taken into account. So
I would indicate on for notice period at least
three months to be very conservative in the estimation. So if
eight weeks plus three months, I would say
10 weeks. 10. Eight to 10 weeks plus three months. Yeah.
That's also something I would have in mind. If you say like 10
weeks, there's always somebody traveling, somebody on vacation and make it
three months at least. I do believe if you're talking
like a Chief Technology Officer for example, right now with
AI skills or somebody who will take over
as a CEO, I would say you can more than double it.
Sorry, sorry. The time you need if you're looking for
vp something like three month guesstimate. But if
you're looking for somebody like an external CTO
with crucial for example AI skill.
Exactly. Or even CEOs, how long
do you think you should take there? Maybe up to a year.
I would say the process is quite
the same with this, with this CEO or a CTO with a
vp. It's just like the availability we are
relying on. The availability depends on the what,
what, what month we are heading to like summer etc.
But the, the notice period is the crucial point.
And you know there are often like notice periods written down
for one year. But it's not that the
candidate will stick to that period written down agreement.
You can also talk to your employer and say
okay, I have a new opportunity. You will also save costs.
Yeah, let's, let's find an agreement like I can get out
here after six months. So we should manage to
have someone. Yeah. In a shorter period,
not one year. Because in one year a startup environment is,
is based on dynamics and pace. You can wait one year for a
CEO. Yeah. Yes, exactly.
That's always an issue.
You've done more than 400 searches.
I'm sure you recognize some patterns.
For hundreds of VC and PE backed firms.
What personality patterns or behaviors have you consistently
seen in the top performing startup leaders?
The first is simple and related to what
I just said. The pace and the dynamics of the VC and
PE universe. It is the ability to take a very
fast decision without having sufficient data.
You can quickly adapt after having taken the wrong decision
in this environment. But you cannot miss out chances and
opportunities and slow down the scaling by overthinking.
That is relevant for both mid caps and also
startups. That is one personality pattern
for very good performing leaders to take fast
decisions. And yeah,
the second I would say if I have to name it, is the ability
not to be a team player at every single
certain stages of scaling.
What I mean is that often the founder is the protector
of a harmonious environment in a startup
when it scales up. So co founders have a common
vision of course, and also perceive their startup as a family
and friends setup. But the investors don't invest
in family, they invest in business. And to see also
it is not the CEO's job to provide a
harmonious environment, but also to take sometimes
unpopular decisions in order to save the company's health.
So taking fast decision and unpopular decisions,
I think I don't like that idea to be honest. But
it's the truth.
I'm talking now a little bit about future you.
If your future self looked back at this
conversation 10 years from now, what would they say
about your mission to change how leadership hiring works
in startups? I would say it is
awareness. Awareness of the common mistakes in hiring
executives and maybe a formula how it can work out.
And yeah, in order to ensure performance of the company.
I still believe in our duck region, innovation
and discipline and that we have an
impact on the world's economy. So that is real my focus.
And if I have a footprint small or big in this
direction, I would be more than happy.
Dominik, thank you very much. It was a pleasure having you as
guests here. Hope to have you back soon. Thank you.
That's all folks. Find more news, streams,
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