I’m not talking about the strategic mistake of thinking that an entire country’s infrastructure should be re-wired. I think that could be done. And I’m not talking about financial mistakes, like thinking it would cost $5 million per battery-changing station when in fact it cost more like $40 million. I’m not talking about sales mistakes like when my friend called to purchase a car, the sales person on the phone advised him not to because there wasn’t a battery-changing station in his town. Those sorts of mistakes happened, but they are all symptoms of the first mistake.
A month ago I wrote about the benefits of hiring your brother and promised an article about why you shouldn’t. This is that article.
Shai not only hired his brother, but also his sister. They are no longer the top executives, but it started the ball rolling. I don’t know what other key hires were the wrong one, but I know the results lower-down in the company. The results were poor hiring decisions all the way down. I saw that first-handed on a number of occasions, and I heard a tremendous amount of complaining about infighting and internal politics.
In any company, everything is the result of decisions people make and work people do. If you hire the wrong people, it’s all over. And if the CEO hires his close family members, everyone down the line gets the message that family is more important than efficiency.
In this blog post by Guy Kawasaki, the first hiring rule he mentions is to hire people better than yourself, and he describes precisely how it works when you don’t. You hire someone a bit worse than yourself, and they hire someone a bit worse than themselves, and so it goes down the line until someone is hiring bozos.
I’m not saying Shai’s brother and sister are not as good as he is, because they may very well be. However, it still sends the message from the top that people should hire people they like instead of doing an extensive search for the right person.
Hiring the right people is absolutely everything. When you have a revolutionary idea and need to grow from nothing to a thousand people in a year, hiring the wrong people is rapidly fatal, as we’ve seen. The company has blown through $750 million dollars and sold only 500 cars. It’s built only a handful of battery-switching stations.
I once sat with an investor and was talking to him about a company where I worked, and he said bluntly “We don’t invest in companies with brothers as co-founders.” A few months later, I understood why. The CEO of that company stepped down several months ago, as well.
Hiring your siblings is fine when it’s a family business, but it doesn’t work when it’s investor’s money you are spending or when you need to grow rapidly.
In addition to infecting your entire company The other problems with hiring your siblings are:
- Like-minded thinking. While it’s important to work together, when people think alike, there is no devil’s advocate. If your idea is as revolutionary as Better Place’s, you had better have the maximum number of people looking at things from all angles, and if you hire mostly like-minded people, they won’t.
- If people do disagree, they are a lot less likely to tell you. I mean, how likely is it that someone will tell the CEO that his sibling is not doing the job correctly? Exactly. So even if you did hire people with the right ideas, they don’t necessarily speak them.
- If you do speak up, your chances of being listened-to are slim. It’s a well-known fact that I am a huge fan of Shai Agassi’s and of Better Place. It’s well known that I am anti-car in general, but if I had a car, well, it would be one of these. A little over a year ago, I emailed Shai, laying out some of the symptoms of this problem, including numbers with the money that was being wasted in a particular department. He had the courtesy and grace to answer, but it wasn’t a high priority for him to go into any depth or get to the bottom of the problem, so we never met. I mean, the guy is super busy. But he also lives in a culture where people are telling him what he wants to hear, so why would he listen to some yahoo he’s never met when all of his sources say differently. (Reminds me of the scene in Gone with the Wind where Rhett Butler postulates that the South would lose the war.)
- One of the family members you hire is going to be the wrong one, and you will have to live with it. This is well known in every family business I know with more than 10 employees. Uncle Bob has always worked here and we can’t fire him because he’ll never get a job out in the real world. This is fine. FINE. It’s fine when it’s your family’s money sponsoring this venture. It’s fine when everyone knows that is the case and ignores Uncle Bob. It’s not fine when it’s investor’s money and nobody can point out Uncle Bob’s incompetence.
- Nobody ever gets fired. I’ve hired and managed dozens of people. I get it wrong 10-20% of the time and have to let someone go. I’ll be kind and say that if you hire 100 people, even with the most rigorous process, at least 5 of them are the wrong person. In an environment where politics is more important than competence, these 5% are never sent home. If you hired 100 people in the last year and they all worked out, you are fooling yourself.
- It messes up your family. I won’t go into detail on this one. I think everyone has seen or heard first-hand stories about this one.
The real shame, as I see it, is that Boards of Directors never seem to learn this lesson. I’ve even seen a case where someone wanted to hire a family member and the CEO said, “You need board approval for that,” and the board approved. The CEO shouldn’t have been spineless, but neither should the board.
I’m sorry to see Shai go. He’s brilliant and charismatic man.
At the same time I’m heartened. A lot of cleaning up has to be done at that organization for it to be successful, and the planet could use the kind of cleaning up that would come from a transition to electric cars. I’ve known for almost 2 years that Better Place wasn’t going down the best path. It’s my hope that they will now have the room to realize their potential.
I wish Evan Thornley the absolute best in completing Shai Agassi’s mission to do this insanely great thing.