Andrew Wilkinson

Andrew Wilkinson

29-09-2022

19:04

At Tiny, I've hired CEOs for 60+ companies and interviewed hundreds of others. After over a decade of trial and error (and I mean BIG errors), here’s our hiring process:

First, I want to drive something home. Hiring the right CEO matters. A TON. The right CEO can 10x your business with minimal effort from you. The wrong CEO is a nuclear bomb. They can ruin your business, take tremendous risk you’re responsible for, and even bankrupt you.

Don’t take it lightly…. One of our Golden Rules at Tiny: Hire 1 to hire 10. Never hire individual team members, always focus on making a single senior hire who can make every consecutive decision.

For example: Instead of hiring 10 sales people, hire a VP of sales who can go and build the team without your intervention. A CEO is the purest form of this rule. It’s hire 1 to hire 1,000…

Many people think of the CEO role in the wrong way. They think a CEO’s job is to be a bit of everything. Part sales person, part marketer, part finance person. Sure, they should UNDERSTAND all those things, but they shouldn’t DO those things.

A good CEO should be able to be run over by an ice cream truck and have the company continue to operate for months or years without any problem. In our opinion, a CEO should be a human router, feeding opportunities and talented people into a machine of their own design.

In our opinion, a CEO should DO NO ACTUAL DAY TO DAY WORK. A great CEO is a coach, not a player. At their best, maybe even just the owner of the team, who manages the coaches.

Even better: when a company has a truly exceptional CEO, the machine generates its own opportunities, talented people, and design improvements over time. A great CEO focuses on 4 core areas:

1. Setting the strategy of the business. (What do you want to achieve? What is the ultimate outcome and direction?) 2. Building and tweaking the machine that achieves this goal. (How does the business work? What goes in and what comes out? What is the process to get there?)

3. Putting the right people in the right seats within the machine, and swapping them in and out over time (Is this the right person for the job? Who do we need to add? Who isn’t working anymore?)

4. Creating incentives that pull the team together and make them want to perform. (How do we structure bonus and equity compensation in a way that pushes people towards a goal without second order consequences?)

I’ve observed 4 types of leaders: 1. Innovators - the inventor of the burrito 🌯 2. Remixers - the founder of Chipotle 🌶 3. Scalers - the person who rapidly grows it to 100+ locations 🏢 4. Optimizers - the person who dials in margin + process in a steady state 🔧

When hiring a CEO, you generally want #3 or #4.

You want them to tick 4 boxes: 1. Expert knowledge of best practices for the industry 2. Experience operating an adjacent or similar business 3. Has run a businesses that is at least double the size 4. A sterling reputation and good culture fit*

*This is VERY important, more on this later Here’s an example from our own portfolio… When we bought @AeroPress, we hired the former president of Sodastream: ✅ Under his tenure, Sodastream had grown to $200M in revenue ✅ The businesses were similar - CPG Beverage Hardware

✅ Focused on the right things (logistics, product innovation, ecommerce etc.) ✅ He was fun to talk to, personable, and references gushed about him. We also felt that he'd jive with the current team.

The MOST important screen is whether the candidate are ethical. As Warren Buffett says: “You’re looking for three things, generally, in a person. Intelligence, energy, and integrity. And if they don’t have the last one, don’t even bother with the first two.”

Chris and I would ask ourselves: “Would we let this person babysit our kids?” “Do we feel excited or drained after we leave a meeting with them?” “Does anything not add up? Is there any cognitive dissonance?”

“Would we feel comfortable giving them signing authority on our personal bank accounts?” In addition to this quick gut check, we ALWAYS run a background check. We have a firm that does this by: • Checking public court records

• Calling old co-workers the candidate didn't ask for references • Verifying all the facts (did they actually go to Harvard?)

We’ve been hit hard by not doing these checks. While it might seem a bit cumbersome I highly recommend using a background checking firm. The cost is about $10,000, but when it comes to a hire this important it’s a no brainer.

If your gut says yes, and the background check comes back positive, then that’s a strong signal you’re dealing with a good person. But that’s just the start of it… It doesn’t mean they’ll be a good CEO.

When you hire a CEO, think of it like boarding a ship whose destination is unknown. They are the captain. You’re leaving the bridge and hanging up your skipper's hat to go hang out in the first class lounge. This is why it’s critical you’re aligned with their plan.

I want to nod along with everything a CEO candidate says because I've learned it's impossible to give directives to a CEO. Ultimately, they are in charge, and as soon as you start second guessing/directing them, everything goes poorly. They are the captain now.

If they come in with a strategy, you have to let them execute and see the results play out, otherwise they'll resent you for getting in their way. You have to accept that you are a rider on an elephant: the elephant is going to go where it goes... CONTINUED BELOW (THREAD 2)

Believe it or not, you should do absolutely nothing once you hand them the reigns of your business other than quietly monitor from a distance. I know this feels unnatural. Isn’t this person your new thought partner?

Shouldn’t they value your expert feedback given you’re handing over your baby? While you may be able to find a CEO wants to include you and values your opinion, they will rarely change their mind based on it. This is why it’s key you choose someone who you already agree with.

Someone who makes you nod along. At the end of the day, to a person with a hammer everything looks like a nail. They will continue to use their hammer, whatever it is. Some CEOs favorite tool is marketing. Others it’s sales, finance, or operations.

It’s important that their tool is the right one for the job. And you can’t change their tool. If they have a hammer, they are going to look for nails to hammer. If you get in the way of them executing what they think is the right strategy, it WILL NOT GO WELL.

During a call with Warren Buffett’s business partner Charlie Munger, who has hired & fired 100s of CEOs, he told me: "I’ve never had any luck changing anyone’s mind in my whole life. People come to their own conclusions and they have to go and have those experiences themselves.”

In learning this, we've adapted the process so: • We hire the candidate with the most alignment to our own ideas/strategy/tactics

• We accept that sometimes our CEOs will test a failing idea we might disagree with but will ultimately learn from it, bounce back, and focus on the right things

Our last requirement is an underrated and overlooked quality we always look for: Scrappiness. • Does the person naturally keep forward momentum going when small obstacles get in the way? • Do they quickly figure out best practices?

• Do they default to yes before saying no? • Are they relentlessly pushing the ball forward? I'm sure I've missed like 50 other important points, but hopefully that's helpful. Feel free to reply with any questions and I’ll do my best to respond :-) Follow me at @awilkinson


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