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July 13, 2011

Why You Should Eliminate Titles at Start-ups

There has been a recent dialog around a theme I'll call "hacking the corporation" - creating novel approaches to building young companies, particularly when they are in their formative start-up stage and pre-product market fit.  One of them, reinventing board meetings (or, "Why Board Meetings Suck"), has gotten some attention from leading thinkers like Steve Blank and Brad Feld.

I'd like to submit another item to add to the "hacking the corporation" punchlist:  elimnating titles.

At business school, I learned all about titles and hierarchies and the importance of organizational structure.  When I joined my first start-up after graduation, e-commerce leader Open Market, I found the operating philosophy of the founder jarring - he declared no one would have titles in the first few years.  If you needed a title for external reasons, our founder told us, we should feel free to make one up.  But we would avoid using labels internally.  In other words, there would be no "vice president" or "director" or other such hierarchical denominations.

Why?  Because a start-up is so fluid, roles changes, responsibilities evolve, and reporting structures move around fluidly. Titles represent friction, pure and simple, and the one thing you want to reduce in a start-up is friction.  By avoiding titles, you avoid early employees getting fixated on their role, who they report to, and what their scope of responsibility is - all things that rapidly change in a company's first year or two.

For example, one of my first bosses in the company later became a peer, and then later still reported to me.  Our headcount went from 0 to 200 in two years.  Our revenue grew from 0 to $60m in 3 years.  We went public only two years after the company was founded.  We were moving way too fast to get slowed down by titles and rigid hierarchies.  Over the course of my five year tenure, I ran a range of departments - product management, marketing, business development, professional services - all amidst a very fluid environment.  Around the time that we went public, we matured in such a way that we began to settle into a more stable organizational structure and, yes, had formal titles.  But during those formative first few years, avoiding titles provided a more nimble organization.

So when I co-founded Upromise, I instituted a similar policy:  no titles.  We had an open office structure and functional teams, but a fluid organizational environment and rapid growth.  One of our young team members changed jobs four times in her first year.  Only after the first year, as we settled into a more stable organizational structure and I recruited senior executives who were more obviously going to serve as my direct reports on the executive team did I begin to give out titles (CTO, CMO, CFO, etc.).  With the title policy, there was some early tension and discomfort (one young MBA kept referring to himself as a VP externally, although he was clearly playing an individual contributor role and was soon layered).  Often, when you are running your start-up experiments, you are not even sure of the right profile for employees or organization structure for optimal execution.  But you can establish role and process clarity without having to depend on titles.

I haven't been able to institute this systematically in our portfolio, but whenever young start-ups are formed, it's one of the first things I counsel the founder.  Don't let your founding team and early hires get too attached to titles and hieararchy.  In fact, in that formative first year, see if you can avoid them altogether.

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I agree that at young startups, hierarchies and titles don't make much sense INSIDE the organizations, as people wear and change hats often, and it's best to keep the team as flat as possible. But titles are still often needed when communicating with the "outside world", because people who don't know you but you need to deal with, will want to "bucket you" into a specific role. That's why at Netotiate I have 2 e-mails signatures, internal and external. In the internal one I'm a "team member" and on the external one I'm the CEO.

Good points! I haven't use a title in years. If I were forced to use one, I'd probably use my Twitter profile description...cash amplifier, balance sheet de-suckifier...just to make me sound cooler than I actually am. Nice post.

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“Desuckifier”?  Nice.
 

This is an interesting topic that is creating a lot of chatter at the moment.
I am still on the fence. I believe that writing titles on your pitch etc is a waste of time for a startup, with some exception to the industry. I have noticed more intrigue in titles when I was in an enterprise startup over a consumer startup.
I think if there are 2 founders - 1 business and 1 tech - then titles are irrelevant.
If however there are 6 founders from a range of backgrounds, I think titles might make it easier for 'outsiders' to grasp each persons role.
Thanks for the post and I like that you explained when and why you brought in titles.

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Thanks for the comment. Again, no titles doesn't mean no role clarity, in my mind. You stil need to negotiate and articulate that carefully. It just reduces friction.

I agree, but does it make sense -- to a certain extent -- to have titles, if only to differentiate between roles to the outside world? (You know, when pitching VCs, talking to media, etc.)

How did you handle:
1. How to tell a new employee who does what? Or who to go for what?
2. How to tell customers who to escalate to (titles are better since people leave)?

Its an interesting theory, and I'm tempted to try it, but I suspect it will create more confusion than provide clarity.

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For new employees, use words - not titles. Susan is head of product. Bob runs engineering. You don't have to say "director" or "VP". For external customers, in the first year or two, you are typically dealing with co-founders or a very small set of folks and can manage it from there.

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You can use words that don't require titles. "VP" is a loaded term. "Head of marketing" is harmless. VCs appreciate that new companies evolve rapidly in those early days.

Awesome post Jeff and I agree 100%! Titles = waste for all the reasons you've outlined.

How do you feel (as a VC) about quirky external titles? Is it too cheeky if a start-up refers to the CEO-type as Master Chief or the CTO-type as Cheif Nerd?

Agree completely. Especially as a startup, the outside world uses titles to gauge and determine 'who is this person and should I pay attention to them?'

Like it or not, when you're trying to nail down that big prospect/partner/investor meeting, titles absolutely DO matter.

But inside the company, they should be all but irrelevant and as Jeff's post suggests, things should be as fluid and non-heirarchical as possible.

This is so, so true! "Titles represent friction" gets right to the heart of the problem. The biggest red flag for me is a candidate who demands a title to join an early stage start up. You're not in it for the right reason.

One reason people get into the title trap is because the external world requires it. For example, if you are negotiating with an external company, that company often wants to know that you have the authority to negotiate the contract. So suddenly, the one person you have who is doing Sales (or Finance or whatever) becomes the VP of Sales, even though they are not VP caliber. But then you need to bring in a real VP of sales 9 months later and you have to take the title away from the first person.

I solve this by avoiding the standard titles of "VP" or "Director" or even "Chief" (as in C-Level.) Instead I use, "head of."
She's the head of Sales." Or, "He's the head of Finance." When you then need to bring in someone above that person, it just goes down a lot more smoothy when you can make the new person "VP of Sales" and the existing person, "Director of Sales."

Don't use the titles until you need to. Go with none, like Jeff suggests, internally. And use, "Head of" externally when needed.

Des Pieri
www.ChangeAgentDes.com

Jeff, this is a great topic. I think that your points are strongest at the earlier stages of company development than they are at the later stages of company development. As the company expands, the methodologies and roles need to be more "standardized" in order to scale up more easily and the people that are recruited to the expansion and growth stages of a company are somewhat more "institutional" and specialized than the people that are attracted to early stage companies and the specificity of title is more important to them as individuals. Also, the movement in titles feels rewarding to them. Desmond's point on avoiding standard titles is a good one and should work for a time as well.

Just so that I am clear, I think that your point is really good. I am pointing out that the optimal title structure changes over the company's development.

Scott Maxwell
OpenView Venture Partners

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I agree, Scott.  The use and form of titles definitely changes as the company evolves.  That’s why I’m a fan of keeping it flexible early.  Later in a company’s life – sometimes only 1-2 years in – the rigidity of titles is useful and important. 

It depends on who your customers are, I would expect.

If your customers are formal (healthcare, banks, large IT organizations, etc), then conventional sounding titles might make you more accessible to your customers. If you're doing something different, like serving indie musicians, then the cheekier title might make you more accessible to your customers.

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Even for staid institutions, I find identifying someone as "head of technology" is good enough in the first year. Most startups don't go through a security audit in their first year!

Great post. After 5 start-ups I couldn't agree more. One other salient point that jeff mentioned, and it is one I only discovered in my last start-up. The "open-office concept"; Cube walls that only go as high as the individuals shoulders. It creates a dynamic, hyper-communicative (is that a word?) environment. I would never go back to the walled jungle and neither would the team that rode the roller-coaster with me for those 6 years.

No Titles - No Walls!

Thank you very much, you taught me something new!
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Agreed.. Organizations which are young and more fluid need to have people span horizons across functions and roles both horizontally and vertically. Hierarchies do not come very helpful in these scenarios. I am rather in an opinion of not even splitting out different functions (viz: marketing, professional services, engineering) till they do not need an absolute and full time effort.

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Agreed. Everyone in the start-up structure needs to be comfortable wearing multiple hats.

Well, fun in theory to be different, but well run start-ups as fluid and innovative as can be still hire people who deliver a discipline. It is easy to attach a name to what is being delivered. Creates just enough structure to get things done. Rapid growing companies at this stage can certainly get caught up in top-heavy executive or management titles, like VP with no staff. Sounds like a bank.

thanks jeff, but in college I had to make the organizational structure and apply it instead, thank you input:) and I think what you convey is more correct:)

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