JOB SECURITY

What offers more security, a Fortune 500 company or a startup venture?

I have contended for a long time that in many cases it is the latter.

Over the years, we have conducted many searches for small, entrepreneurial companies at the CEO, COO and CTO level. There are two general categories of potential candidates: those who have worked for large corporations who may have industry or technical relevance, and those who have worked for other small ventures.

When considering individuals in the former group, the client always worries about culture shock. How can an individual who has worked for DuPont or Merck adjust to a small emerging specialty materials or biopharmaceutical environment? Those large companies have enormous support capabilities, from human resources to market research to facilities and equipment. At DuPont if you need a literature search done, you look in the company telephone directory and a professional (probably someone with a Master's in library science) does the work. At startup "X", you might look in the Yellow Pages for the nearest public library or perhaps do it yourself on the Internet.

That is why small companies prefer to hire individuals who have small company experience. This is true in other areas, as well. Take sports, for example. A major league baseball team fires its manager after a losing season. The team goes through a search process and many of the same names surface - recycled ex-major league managers. Why? Because one of the search criteria could be previous experience managing a major league baseball team. The fact that some of these potential candidates never had winning records is sometimes overlooked. The team selects the best of this group of ex-managers. Therefore, the most difficult thing is to get that first job.

This scenario happens over and over again in the corporate world. Many searches in startup companies are driven by venture capitalists. The founder has brought the company to a certain level - new, professional management is needed to move ahead, perhaps to prepare for an IPO. The company, many times, has an overabundance of vision and technology. What are needed now are process-related skills…in a word, leadership.

The position specification is prepared. It consists of many of the generic attributes desired: excellent verbal and written communication skills, superior intelligence, sound judgment, enthusiasm, flexibility, a strong work ethic, and dedication, to name a few. Then comes the qualifier, "experience in an entrepreneurial environment, a startup or new venture desired." Most small companies are willing to consider candidates from large corporate environments who show an entrepreneurial orientation. After all, the goal of a small company is to become large. In addition, large companies are many times potential customers and are in relevant business areas. However, the underlying preference is for people who have "done it before."

In all my years of interviewing, I have yet to encounter the candidate from a small company that went bankrupt who attributes the failure to him/herself. The universal reason seems to be that "we were undercapitalized." Therefore, if there is a strong preference for an individual from another venture, there is a possibility that the slate will be populated by individuals with less than outstanding records of achievement compared to the traditional measure of success.

How does this affect an individual considering a position with a small company? The conventional wisdom is that startup ventures are risky and offer less security than Fortune 500 companies. As stated, my own observations are to the contrary. Over the last few years, there have been many mergers, acquisitions, divestitures, changes in strategy, returns to core businesses, etc. Major companies such as Monsanto and Hoescht have decided to become life sciences companies and sell off or close all other businesses, many with billions of dollars in sales. Individuals have been "downsized" even though they have been rated as outstanding performers and their divisions have been extremely profitable, because the business didn't fit into the strategic direction of the parent company.

This almost never happens in a small company, usually, by definition. Ventures are generally focused and most employees are in the mainstream of the business. In addition, an individual who may be several levels from the top in a major corporation is now a member of the management team in this venture. Therefore, there are seldom any surprises. If business is off or if the company is having trouble raising money, you will know it, usually months in advance. On the other hand, I have spoken to numerous individuals in major companies who were shocked to read about their division's sale in the press.

If you join a startup and everything goes as planned, there are no problems. The salary should be competitive - maybe a bonus, maybe not - but there should be significant equity/stock options. Two years down the road the company has gone public, the stock is up, your options are worth a lot of money, you love the environment. No problem. Let's take the other side. There are problems in R&D, customer/clinical trials have been disappointing, it has been difficult to raise the next round of financing, and the company is still not close to an IPO. As already mentioned, these problems don't develop overnight. You can see them coming. In the meantime, since you are now in a small company you are almost certainly more visible then you were before. You have probably received many more calls from executive search consultants than you did previously. In fact, I have been told many times by prospective candidates that they are constantly tempted to "jump ship" by enticing proposals from other ventures. As explained above, small, emerging companies prefer individuals with entrepreneurial experience. Consequently, you most probably have more options. Your security is a function of your role, performance and reputation as opposed to the stature of your company. You have more control over your destiny.

So what should an individual do who has spent fifteen years at a major, world class company and has the opportunity to join a new venture in a leadership role? Consider it carefully. As a candidate told me recently, "You have only one shot at leaving General Electric." Consider all the obvious criteria: job satisfaction, ability to influence the company's success, compensation, location, family factors, personal chemistry with the rest of the management team, etc. But don't worry about security. It doesn't exist anymore, and if it did, you'd probably be more secure in a small venture.