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First they hate you, then they love you, then they hate you again /
What the f*ck do it take for a gangsta to win?—The Game
Conventional wisdom among smart technology entrepreneurs says not to hire people with Masters in Business Administration (MBAs) into startups.
Aaron Patzer, founder of Mint, expressed the sentiment well when he said, “When valuing a startup, add $500k for every engineer, and subtract $250k for every MBA.” My friend Peter Thiel once warned a young entrepreneur: “Never ever hire an MBA; they will ruin your company.” I chimed in myself with this Quora answer.
At Andreessen Horowitz, we believe that once everyone thinks that something is true, that might be a good time to do the opposite. So, with everyone convinced that MBAs are useless, I wonder: Is now the time to hire MBAs?
When considering this question, the first thing to understand is that MBAs have not always been the scourge of startup society. When I began my career in the late 80s and early 90s, MBAs ran most of the best new technology companies. Scott McNealy and Ed McCracken, Stanford MBAs, ran the two best new computer companies, Sun and Silicon Graphics, respectively. John Morgridge, Stanford MBA, ran Cisco, the best new networking company. Bill Campbell, Columbia MBA, ran a hot new consumer software company, Intuit, and Dave Duffield, Cornell MBA, ran the premier new enterprise software company, PeopleSoft.
So, what happened? How did startup world grow to loathe MBAs?
It turns out that the success of the MBAs from the late 80s and early 90s created an insatiable demand from startup companies and their backers to hire MBAs from top schools. With only a small number of top schools, the newly minted MBAs became the belles of the of the startup ball. Every Stanford and Harvard MBA received multiple offers from top startups and, not surprisingly, many MBAs developed a strong sense of entitlement and overconfidence.
They began to stroll into startups with insane lists of demands. They wanted lofty titles, they wanted to manage hundreds of people even though they had no management experience, and they wanted salaries that matched people with 10 years more experience. And the MBAs got what they wanted, which ironically precipitated their long and painful fall from the penthouse to the outhouse.
It turns out, as I pointed out in my Quora post, you can’t learn management exclusively from a class or a book. It takes real world practice. Many of the MBAs who got the big management positions turned out to be some of the worst managers that Silicon Valley has ever seen. While understandable, given their total lack of experience, the people assigned to work for them did not understand.
When these employees asked themselves how such incompetent imbeciles could acquire such important jobs, all evidence pointed back to an all too familiar culprit: The miserable, sorry, weak manager that you suffer under got his position not by merit, but by MBA.
To make matters worse, the entitlement bug spread through the MBA community like a social game with full access to the Facebook feed controls. It got so bad that at one point an MBA employee of mine asked for a promotion because most of his classmates at Stanford had been promoted, and he felt left out. Had I been a more experienced CEO, I would have fired him on the spot. Being young and naïve, I simply replied, “I’m sorry. You must have me confused with somebody who gives a crap.” In any case, the episode did not make me want to hire more MBAs.
Perhaps worst of all, many MBAs carried intense ambition for themselves, but no strong bond to the company’s mission. While everyone else in the company was “ride or die,” these MBAs could be seen carefully plotting their next career move. When you’re working 16 hours a day with a team of dedicated people driven towards achieving a nearly impossible goal, this does not sit well.
Finally, the MBA schools of the late 90s and early 2000s did a relatively poor job of preparing people for startups. MBAs learned how to analyze existing markets, but knew nothing about creating new markets. In general, the MBA education was geared towards attaining positions in large, established companies rather than new entrepreneurial ventures.
At this point, it’s probably not difficult to understand why MBAs carry little credibility in startup world. So why am I even asking the question?
I think we have thrown the babies out with the bathwater. More specifically, we’ve thrown the outstanding talent out with the bad behavior of an old, irrelevant sub group. Broad categorizations usually tend to be a bad idea when it comes to people and in this case, the trends that led to the negative characterization have reversed. In my observation, there are four key reasons to consider hiring today’s MBAs.
- The world largely beat the arrogance, overconfidence, and sense of entitlement out of the current crop of MBAs. Most now exhibit a level of humility and willingness to learn that was unheard of 10 years ago.
- The course material has become much more relevant. Innovative instructors like Tom Eisenmann and Alison Wagonfeld at Harvard explore the challenges of scaling new companies. Mark Leslie and Andy Rachleff at Stanford teach key lessons in building enterprise sales channels. Bob Sutton and Huggy Rao at Stanford teach novel approaches to incentives. Today’s MBAs bring some interesting knowledge and relevant skills to the table. This is in stark contrast to the old curriculum, which focused on big company problems.
- The kids are still smart. Even in the late 90s and early 2000s, you had to be extremely smart and ambitious to get into the Stanford or Harvard MBA programs. That’s still true today.
- A different perspective can be helpful. Engineers run most technology startups and that’s great. But it is important to recognize that engineers tend to look at the world from the product out. Having a few people in the company who see the world from the market in can be enlightening.
In the public equities market, everyone knows to buy low and sell high. However, the momentum of the day usually overwhelms that obvious strategy. In practice, public market investors pile into stocks as they become overvalued and abandon high quality companies at the first sign of trouble. Similarly, when it comes to hiring MBAs, technology companies have historically bought high and sold low. The current price is low.
[Just a reminder: Ben Horowitz will be our guest at the next PandoMonthly event on June 20. Watch for tickets, because they're sure to go fast.]
If you can recruit people who are talented, brilliant, natural leaders, it can make all the difference to your organization’s success–and your sanity as a leader. There is nothing that improves your chance of success more than having a strong, trusted team.
But even with the best intentions, you can choose badly. Particularly if you get really excited about a candidate and hire for the wrong reasons.
Here are 6 mistakes–some of which I’ve also made myself–that executives make when their misplaced enthusiasm for a candidate causes a superficial, rushed, and ultimately bad hiring decision.
1. Admire a past accomplishment too much
Very often a candidate will have an accomplishment in their past that is truly extraordinary. It’s more impressive than anything you’ve ever done and vastly overshadows the accomplishments of the other candidates. Wow! You’re Hired!
- Don’t: Hire the candidate based on this one grand accomplishment alone.
- Don’t: Assume this breakthrough will be repeated for you!
- Do: Make sure they are ahead of the pack on many of the other hiring needs too.
- Do: Make sure to get them to talk about how they will think, learn about, and do the specific things you need now–don’t assume brilliant success on the prior thing will automatically translate to brilliant success on what you need done.
Make sure you will love them just as much for other reasons—for the mainstream work they will do and for their personal contribution to your team. Don’t just hope for a repeat home run.
2. Put too much stock in advanced degrees
I know plenty of people with advanced degrees who are highly effective business leaders, but I know as many who are not. Advanced degrees alone are not proof of future business success. They are only proof that the person is capable of getting advanced degrees.
- Don’t: Say “Wow, look at all those masters and PhDs–you must (by definition) be better than all the other candidates that don’t have all those impressive degrees”.
- Do: Get them to talk about examples of what and how they have done the kind of things you need done.
- Do: Get them to give examples of how they personally conceived of and led business change, growth, or transformation.
3. Too much experience
One of my first hires was a telemarketing guy who had 22 years of experience being a telemarketing guy. I was so impressed! Oops.
- Don’t: Hire someone only because they have a huge amount of experience in the thing you need done. Remember, they might have so much experience in that job because they were never talented enough to get promoted. If you are hiring a deep expert you may be OK, but if you are hiring a leader be suspicious. You are always better off judging and hiring for smarts and future capability than past experience–because the problems and opportunities are always changing.
- Do: Look for advancement on a resume over experience. Judge the person’s ability to solve problems, learn, grow, and lead others, not just how much experience they have.
4. Fall in love with the person
OK, when after the interview you want to go out for drinks with the person even more than you want to work with them, make sure you are not mistaking how much you like the person as a potential friend, with making the right hiring decision.
- Don’t: Make this decision by yourself. You’re in love. You are not thinking clearly.
- Do: Get others’ help validating the person’s capabilities and fit for the job.
5. A great talker
Particularly in the case of sales and marketing people, remember these people are experts in selling. So they are selling themselves in their interview.
- Don’t: Get so mesmerized by a great pitch that you think the person is a star.
- Do: Press extra-hard on examples of their success. Look for proof points that were unambiguously accomplishments of theirs alone, and check their ability to explain them at a significant level of depth.
- Do: Ask them to describe a mistake or a failure they have overcome. A truly great candidate will always be enthusiastic to share a big lesson. A big talker will always resist showing any chip in the armor–or will give you an overly polished answer.
6. Failure to check references
This seems so obvious, but for all the rose-colored reasons listed above, I have seen executives not bother, or get too busy, or need to move too fast to check references. Then they get surprised and burned. In all the cases above, add to the DO list: check references!
A reference check adds a reality check to balance the things you fell in love with during the interviewprocess.
- Don’t: Ever not check references. If you skip this, don’t be surprised if you get surprised!
- Do: Always also check back channel references, not just the ones they give you.
The tricky part is that when you get a star sitting across the table from you, you indeed get pretty excited. And you get the feeling that it is a competitive situation so you will need to move quickly. Just remember, there are people who are not true stars who can get you as excited as the ones who are. Move quickly, but always dig deeper, and always check references.
Patty Azzarello is the author of Rise: 3 Practical Steps for Advancing Your Career, Standing Out as a Leader, and Liking Your Life, available now from 10 Speed Press.
[Image: Flickr user Jes]
