The success rate for executive hires at high-growth SaaS companies can be surprisingly low – you’re often lucky if 50-60% of your management team works out long-term. In a recent conversation between HubSpot Chair and co-founder Brian Halligan and SaaStr Founder and CEO Jason Lemkin, they shared their advice on what actually works when hiring VPs and building your SaaS executive team.
If you missed part 1 of this interview, you can catch up on their conversation about the current state of SaaS, evolving board meeting formats, and how AI is reshaping the industry.
The Current State of Leadership Tenures in SaaS
Brian sets the stage frankly on how hiring has gone at HubSpot: “We’ve hired a lot of executives, but many haven’t worked out.”
If you have a SaaS company above 2 million in revenue, both Brian and Jason agree that at that point, all that matters is the management team. Nothing else matters. You may think competition matters, but a great head of engineering and product will outpace the competition. Or a great growth marketer paired with a great sales team will punch above their weight class. It can make all the difference.
HubSpot recently changed its interview process to try and help maximize tenure and employee retention at the executive level. They implemented a panel-style interview process and a scoring system of 1-4, with 4 being the highest. Recently, when it came down to the final 2 candidates for a marketing hire, one candidate scored all 3’s from the panelists and one candidate scored some 4’s and some 2’s.
“ We picked the guy who got all threes,” Brains explained. “He didn’t work out, and my lesson is we hired for a lack of strength. And I think you should hire for somebody spiky. There needs to be at least one person around the table who says, ‘I gave this person a four by hook or by crook. I’m going to make this person successful.’ And if it’s all threes, everyone’s like ‘ah somebody else will worry about them.’ It’s a bet.”
When Hiring Externally:
In addition to shrinking the panel size of executive interviews to just 4 people and using the 1-4 scoring system, Brian and HubSpot also recently tweaked its criteria in what they look for in candidates when hiring externally.
- Don’t overindex on logos. We’ve covered this on SaaStr.com many times in the past but Brian reminds us all to look for candidates from companies slightly ahead of you on the growth curve instead of massive tech giants.
- Be on the lookout for ‘unbendable’ or ‘uncoachable’ execs. Brian explains, “We had hires come in with playbooks of how they did it at Salesforce.com and we’re going to do it here. HubSpot’s got a unique culture, it runs pretty heavy on the tracks. It’s very much a first-principle thinking type of culture. If you’re too rigid, the immune system will push back pretty hard on you.”
- Figure out (as best you can) why this person wants to jump ship. Be wary of executives who were recently pushed out of peer companies and be intentional in trying to figure out why they’re leaving their current or last company. Brian adds ‘ We almost never hire somebody where we don’t know somebody else on the inside that we can really check to see what happened.’
Selling Your Company and M&A
HubSpot’s cofounders build the company to be a generational, anchor company in Boston. They didn’t build it to sell it. But — they never got a great M&A offer. Ever. Brian still made sure to keep Salesforce’s CEO and others updated on their progress though, just in case. To keep options open.
Betting Bigger on Internal Talent for Long-Term Sustainability:
“I just think homegrown talent is dramatically underrated,” Brain states. “As you look across HubSpot’s management team now, everybody’s been there at least 10 years. They grew up in their career with us. Our head of product, head of engineering, like pretty much everybody in leadership. A bunch of them we hired out of business school, or out of engineering school, and came up through our farm system.”
- Bet more on home-grown talent (if you can.) Internal promotions carry much lower risk than external hires.
- Lean into self-motivated talent. At the end of the day, the tenure of self-motivated internal employees outlasts hires that rely too much on an internal training system or program.
- In sales, the more SMB you are, the more you should lean on your bench. With SMBs in particular, internal promotions can work better due to more “at-bats” and learning opportunities on the front lines.
The 50/50 Rule
Jason recommends aiming to promote roughly 50% of executives internally and hire 50% externally for new DNA. If you go too far and only promote from within, it’s great for a while, but eventually, a group mentality can set in that is sometimes more sluggish than having a mix of new and current voices. Whereas if it’s all from outside, it’s too risky for the business.
A 50 / 50 executive balance helps maintain culture while bringing in fresh perspectives. While Brian agrees, he leans in more to the internal hires and uses a 75/25 rule. He explains: “ If you got somebody who’s killing it, lean in. ” Pure external hiring loses too much institutional knowledge while pure internal promotion can lead to too much groupthink.
Product Knowledge is Critical
So across departments, and putting aside whether an executive came up through an internal route or was hired externally, is there a ‘simple’ test you can run to see if an executive with ultimately work out in the long run?
See if learn the product.
“ A lot of VPs at Adobe that came from big logos never worked out,” Jason shared. “And the real reason is, and this is what I obsess about now, they never learned the product. They didn’t even try. They ran the playbook and the strategy meetings and, did the rah-rah with the team, probably better than I could but never, never learned the product.”
Brian doubled-down on having everyone know the product inside and out, executive or not. “One of the things we did is when we hired a new sales rep, their training wasn’t sales training. Their training was, ‘Hey, you’ve got to learn HubSpot.’ Start your own small business, buy a domain, build a website, put your contacts in there, sync your LinkedIn, and do an email marketing campaign. And then, the test was after the three weeks of training was in front of me. They had to present their business to me and show me their website. And all the reps viscerally understood the value and also understood where the buttons were and, really knew the product. I think that helped a lot.”
Key Takeaways
Executive hiring remains one of the hardest challenges in scaling a SaaS business. While there’s no perfect formula, focusing on internal talent development, ensuring deep product knowledge, and being highly selective with external hires can significantly improve your success rate.
