Hiring employees for their personal networks will always put your company in second place

We often see companies that hire sales and business-development people partially because of their personal “network.” This is most common among early-stage startups, which consider the practice equivalent to taking on board a large and accessible pipeline. It’s instant, cheap, and might even include a couple of blue-chip logos you could only dream of.

Although it sounds like a perfect plan, you must be aware that hiring people because of their network validates the belief that their personal Rolodex is one of their strongest career assets. In other words, you basically shook hands on the fact that their loyalty will be to their personal network, which they will take with them from company to company — and not to you and your company.

This still sounds acceptable, because yours and their interests are allegedly aligned with both wanting the customers to be happy. But now comes the problem, which is related to the way tech startups work.

Tech startups, by definition, are companies in the process of learning their markets as they grow. Also, by definition, startups have much more ambitious goals than capacity, and constantly stretch their limits. This often comes with the price of occasionally making mistakes and slightly upsetting a customer or two. Biting off more than you can chew is often the only way startups can grow in the right way. Basically, what it usually means is selling things that are not necessarily fully developed yet.

Progressing this way is risky, of course. You risk upsetting customers if you don’t deliver on your promises. However, building everything to perfection before selling it is a definite way to kill your startup.

It’s like a pizza parlor, which has the ingredients for the product, the ovens, and a distribution method, but only starts making the pie after taking a customer’s order. The owners are confident in their ability to deliver on their promise. Imagine if they were to make every kind of pizza imaginable and then wait for orders. The place would close down very quickly. The same applies to a startup. The team has everything it takes to deliver on their promise, even if it means stretching their capacity and taking the risk.

The problem starts when the salespeople don’t want to risk jeopardizing their biggest asset (their Rolodex) for a risky attempt to deliver something that is not fully baked. The salesperson suddenly turns into the delivery and quality manager, and the company finds itself needing to sell the product twice, internally and externally. Remember, by expecting him to utilize his network, you put him in this position, not leaving him any choice.

A prospect that came from a salesperson’s personal Rolodex has two different lifetime values (LTVs), one for your company and another for the salesperson. The LTV for the salesperson does not even come close to that of your company. For the salesperson, this prospect is not only worth a lot of money in potential future sales commissions, but is also an asset that lifts his personal market value for future jobs (which you reenforced by hiring him on that basis).

As a result, the employee will not consider any single company to be worth his jeopardizing a lifetime asset, and will take very little risk while working for your company, forcing it to over-develop, over-customize and under-sell, just to pass the internal hurdle. As in the case of a pizza parlor, you might end up with a lot of cold and stale lines of code no one really wants, which is one of the leading reasons startups fail.

How to avoid the problem

Creating alignment of interests with employees who work towards a personal, success-based compensation structure is a complicated challenge. What’s often overlooked, however, is aligning your go-to-market and product-delivery tactics with your customer-facing teams. When employees are not aligned with the search for market demand and frequent iterations, they are at risk of losing trust in the company’s execution. What some parts of the company consider the best product-delivery practice, others might see as poor execution.