The makeup of a startup in terms of both the talent involved and who does that is crucial. For instance, a paper published last year found that the so called second wave of recruits were crucial to the growth of a startup, whilst a recent Rotman study went a step back and delved into the initial founding team.
The key takeaway from both studies was that you need to get great talent into the startup in those early stages, which is perhaps not that surprising. A slightly pricklier topic was covered by a recent study from researchers at Imperial and INSEAD.
Who does what?
Rather than worry about the talent you get into your founding team, they looked at how roles were divided. Who would be CEO? Who would be CFO or COO? This may sound obvious, but in situations where equity stakes are equal, who becomes the ‘boss’ can often be a sensitive matter.
The paper found that found teams typically look at two distinct competence cues when divvying up roles in the team:
- the prior experience people have had, ie marketing experience renders someone a good fit for CMO responsibility
- the social status within the team, including such attributes as gender, ethnicity, prestige of prior organisational affiliations and educational achievements, could become markers of general ability and thus influence the division of labour.
Interestingly, when founders roles were correctly divided up according to their ‘status’, the success rate of the startup was higher. Rather less appetizing was the finding that this was even so when ‘status’ relied on outdated stereotypes.
For instance, white guys with a prominent firm on their CV were highly likely to be given the top job, whereas Asian females were much more likely to get lowly positions.
When startups conformed to this stereotype, their success rate rose, with the authors suggesting this being because such conformity resulted in less conflict within the team, and even provided a sense of legitimacy, which resulted in higher financial support.
Fitting into a box
Of course, people don’t always fit quite so nicely into a box like this, and the authors remind us that the CEO functions best when they fit the context of the broader institutional environment.
So, for instance, if the founders are primarily women, it makes sense for the CEO to be a woman. Or if the venture was attempting to break into the Chinese market, having someone with experience and knowledge of operating in China would be in pole position for the top job.
It hopefully goes without saying that having homogeneity amongst the founding team is seldom a good idea, but given that many teams are forged out of friendships, this is often an unrealistic ambition.
In such a scenario, the authors suggest that teams can overcome this by using more ambiguous titles such as co-founder rather than CEO or CFO, which unnecessarily limit someone’s responsibilities.
This kind of environment could also make it easier for positions to be reallocated as the needs of the company change, or if new skills are acquired from venture funds.
The researchers hope however, that their model will provide some assistance to founders who wish to give their companies some structure when they first form.
