Self-Selection of CEO
Picture this: You’re the founder of a company, and it’s time to hire a CEO. How do you pick the right one? Look at how they handle bonuses.
For instance, a candidate fights hard for a fixed salary but easily agrees to a variable one without fuss.
That’s a red flag. Their discount rate is colossal. In other words, he sees the company’s future as too bleak.
Why? Maybe he thinks your idea is too risky and he can’t figure out how to make it work. Or he might not fully understand your business yet but wouldn’t mind learning on your dime for a year or two.
By hiring him, you’d essentially be building two very different businesses. Get ready for clashes, conflicts, and an inevitable split.
To test your suspicions offer him a trade-off. Ask: “If we cut your salary by another $50K, what extra bonus would make up for it?”
If he says “$100K,” that’s one thing. But if it’s “$1M,” that’s a whole different story. This question quickly reveals his pH-nature, like litmus test.
This is even more important when choosing a co-founder.
Sincerely yours,
-Alexander
I write about creativity, freedom, and meaning.
As a business therapist, I help tech founders increase their company’s value by catalyzing the changes they’ve needed for a long time. Testimonials from some of my clients are here.
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