Today on The Startup Chat, Steli and Hiten talk about the idea of nurturing talent internally vs hiring proven talent externally.

When it comes to key positions that need to be filled at a company, founders are usually faced with the dilemma of nurturing talent within the company or hiring people with a proven track record.

This decision typically depends on the amount of work a company is willing to do; nurturing talent means the company needs to put in time, effort, and resources in training its own staff while hiring one can be a much quicker process.

In this episode, Steli and Hiten highlight the pros and cons of hiring proven talent from outside the company vs nurturing one from within. They also talk about reasons why some people aspire to management and leadership roles, what motivates people to do this and much more.

Time Stamped Show Notes:

00:34 – About today’s topic.

02:56 – Steli is always big on potential and talent who always want to nurture people.

05:56 – Hiten thinks the decision is all about context.

06:50 – What makes management more important.

08:13 – Why it’s rare to see a successful company without managers.

09:06 – What making decisions really depends on.

10:16 – Why homegrown talent usually have a cultural bias towards the company.

13:22 – The reason why people aspire to leadership roles.

14:00 – Steli talks about a blog post that examines the leadership role vs being an individual contributor.

15:44 – One key reason why people want to be managers.

18:58 – Why you should give a chance to someone who’s eager to learn.


  • Hiring a proven talent or nurturing one internally depends on the circumstances/situation of the company.
  • Not all internal talents want to take on leadership roles for various reasons.
  • The only way to prove if someone is serious about changing is to give them a chance.


Steli Efti: Hey everybody, this is Steli Efti.



Hiten Shah: And this is Hiten Shah.



Steli Efti: Today, what I’d love to talk to you about Hiten, is the idea of nurturing talent internally, versus hiring proven talent from externally. So, when you’re a startup, you put together a small team. Typically, in the early days it’s a group of incredibly entrepreneurial people, high risk takers. High buy towards action. Usually, maybe erring on the less experienced side of things. That’s the typical startup, I would say in many cases, but more generalist type of people. People that could just pick up work, fix things, get things done and get shit done. They don’t need to have a ten-year career in an area in order to tackle it and progress it, and move it forward. As the startup grows, there’s still, I think always going to be some value in having these super-entrepreneurial generalists as part of the team. But you start becoming more specialized, and you hire more people that have done a certain job for a few months or years, because your expectations are higher, and now you’re not a scrappy startup anymore. Now you’re a little business that’s growing. One thing in particular that I’m interested in, is the leadership perspective of this. You’ll have people inside of your team that have a lot of talent, a lot of potential, and have the desire to grow as leaders, but are totally unproven and have never managed people, have never grown a team, have never hired people. Then, on the flip side, you can nurture talent to become more, to grow into leadership roles within your company over time, and invest heavily in seeing if they can go from being a specialist or, not a specialist, but somebody that’s just doing … An individual contributor, to growing into a leader in the company or a manager in the company. You coach them into that transition. Or, if such ends, you just look for outside talent. People that are proven leaders or managers, that are maybe a year or two ahead of where you are, and you bring them in. Those people already know how to hire people, how to interview people, how to manage them, how to coach people and build a team. You benefit from the education and the development they’ve gotten somewhere else, and you just hire that in. I know there’s different school of thoughts and conflicting thinking on this, but we’ve never talked about this, and I’m super-curious about this subject. I’ll tell you in a second why, maybe just set the stage. So in general, I’ve always been a sucker for potential and talent, and I’ve always been excited about helping somebody grow as a person. So whenever there was somebody in my team that wanted to grow in a leadership position, that had the desire and the ambition, I’ve always leaned towards having a bias of pouring a lot of energy into that person to help them get there. I’d get a lot of fulfillment out of helping people getting there. But at the same time, having done this many, many, times now, I know that it’s not … Having somebody that’s a great individual contributor, and that has the desire to grow into a leadership role, and having me as a coach, these three components are not enough to make this work all the time. It’s a hit or miss. Sometimes it works because this person has leadership potential and management potential, because it’s not just a desire, but they’re really committed to it. In those cases, it’s an amazing experience to see, and to see how these people grow. But there’s been many cases where people wanted to grow, and I wanted to help them, and we worked together, and they failed, or they didn’t really do a good job, or they didn’t really learn fast enough, and I wasn’t able to help them get there. That’s a very costly exercise. It takes a lot of time and energy and resources out of other things that I could be investing my time an energy into. So I always felt like it was a hit or miss exercise, although I always tend to want to do it. At the same time, I’ve seen how incredibly valuable it could be when you find somebody that’s gone through this exercise on somebody else’s dime, and has grown in a way where they’re a year or two ahead. So the thing you’re trying to accomplish in terms of building a team or something, they just went through that exercise two years ago, and they succeeded, and they’re doing really, really, well. You bring them in, and it’s like these people are from the future. They come in, and they have such clarity on what to do, and how to do it, and who to hire, and who to bring in, and how to build a team. You see the amazing value that those sometime external people can bring to the table, that I’ve now gotten more and more used to looking for outside talent, not just for inside talent to grow in the company. We were recently in, I’d don’t even know what they’re called, a workshop session in Boston with a bunch of SaaS founders. One very experienced founder was like, “I don’t even bother training people to be managers anymore. I don’t know how to see if somebody’s going to be good a that or not. I go and I hire proven managers somewhere else, because trying to nurture someone else to be a manager, and then if they are not good at it, it costs much time and money. It’s such a deadly thing for your culture and your company, that I’m not even bothering anymore. I just go out and I hire proven people for management positions, and that’s the way I do it.” So I wanted to talk to you about this, and see your thoughts, your experiences nurturing leadership talent internally, versus hiring it externally. What’s your thoughts on that?



Hiten Shah: I think it’s all about context. When you’re small, you probably can’t even afford a senior manager or a manager that’s done it before. So you have to get away with learning it yourself, as a founder.



Steli Efti: Right.



Hiten Shah: One of the founders, or both the founders, or all of the founders, depending on how many there are and how you structure it, have I think … Have to become managers. In fact, all of them should, is my opinion. If you want the company to be really healthy, because then you have founders who have the most equity stake in the company, as an individual at least even in the long run, learning how to become managers. Not all of them might want to, so that is something to think through, obviously, but that’s actually a big question and a big point. At this point in startup land, in business, management is becoming more and more important. The reason I say that is, gone are the days of software where you just put something out there and it just works. Now you require the management of individuals in order to make it work, because there’s so much competition out there, and so much … The bar’s a lot higher on getting stuff done that people love, and that which will grow a business. So I’m taking it back to that Steli, because I want to start by saying if you’re a founder, if you’re the CEO and you’re running a business and you have other founders, having this discussion with everyone is important. Is management something you want to do, if you’ve never done it before. Is it something you want to learn or not? Because if you can have that conversation early, that’s going to determine a lot more about who’s managing and how you decide on whether you grow managers, so to speak, or you bring in managers. For me, the context is still, “it depends”. That seasoned founder, I have a ton of respect for him. I actually agree with what he’s saying in the sense that if I need management to happen tomorrow, all of a sudden in my company, which as been the case in a lot of companies, it’s very likely I either have to do it, my co-founders have to do it, or we bring in someone who can do it in that area. That’s definitely something where it’s very rare to see a company that has growth, is doing well, and doesn’t have managers. The other piece of that discussion we had, was do you have a flat structure where there are no managers? Whether it’s product managers, marketing managers, head of marketing, whatever. I’m pretty against thinking that a company can scale without proper hierarchy and structure. Not necessarily rigid, like a corporate structure, but just in time proper management layers. Or not even layers, but proper managers in a system of management earlier than later. So for me, I’d really love the idea if you can afford it, or if you feel like you need it tomorrow, to hire someone experienced. That’s my take on it. That being said, it really depends on the founders. In some companies the founders become the managers and they do a great job. Some companies, they don’t do a great job, and they try, and it just doesn’t work. They probably just should have brought in some level of managers earlier. And in other companies, I think there’s a deliberate conversation that happens between the founders of who’s willing to do it, and who is not. I think the worst thing to see in a company is a CEO who doesn’t want to be a manager, but is stuck in the position of CEO, as a founder, or whatever. That’s probably the most terrible spot someone can be in. I’m not saying you replace the CEO, or anything, I’m just saying the consciousness of who’s doing management, how does managing work at your company, are all important things. Then, of the flip side, when it comes to growing managers, if you start learning what management looks like. If you start really learning how your company should do it, and you get good at it as the founder or business owner, you then start being able to see it in other people. So I guess I’m a little bit more optimistic than that veteran founder by saying that there are people that I’ve seen really grow into it really well. And, it does take, I don’t like things that take time, but it takes years. So if you’re willing to spend that effort on somebody, or they’ve been in your company long enough, and you start testing them and putting them in those positions? Or, even within a few months you see that they can do it, you start giving them the opportunity? You will have someone who has started out with your culture as an individual contributor, a single, a person who’s individually doing work, to growing into a manager role, and they tend to have a much stronger cultural bias towards the company, and alignment with the culture. I really, highly value that. So when you can find those rare opportunities with people like that, I would be looking for them all the time. That doesn’t mean that you don’t bring in people from the outside that are already know how to do it.



Steli Efti: Yeah, I think there’s a ton of really interesting points here. One thing, regarding the discussion that we had, that I wanted to bring up in Boston that I didn’t, was the idea of no managers versus managers, structure and all that, is that in my observation, people will … In settings of when there’s a group of humans, there’s going to be some social roles that people will just assume, if they have a title or not. Oftentimes, somebody’s going to act like the leader of the group, even if that person doesn’t have the title. If in that group there’s no title for that. Just like sometimes depending on the situation, if you read the book, Tried, where he describes that sometimes people will take on a very harsh, dominant leadership role, or sometimes they’re going to take on a very nurturing leadership role. Both these energies that nurturing, that’s usually associated with the feminine side, and the dominance and aggressiveness that’s associated with the male side of things, these are not naturally just attached to a man or woman. That there’s a roomful of men, and depending on the situation or the crisis, some man might take on a very nurturing energy, versus somebody else takes a very aggressive, dominant energy. And in a roomful of women, the same thing will happen. It’s just human social dynamics. I feel like oftentimes in those company teams that I’ve seen, in teams where there’s not clear roles, people will still do the roles. They’ll just not have the title of that role. Somebody will assume responsibility. So I’m with you on the … I do believe that there needs to be some structure and some leadership for teams in growing companies to work really well. Now, the thing that I’m always conflicted about, and what I’ve experienced oftentimes and I’m curious about to hear from you, about this, is that I think that I’ve definitely seen that oftentimes people don’t know … People feel like they should want to become managers, because that is the way the world works. People go, “I want to be a really important part of this business. I want to have real impact in my life. Hence, probably I need to become a manager.” That’s a lot of times the reason or the motivation behind people thinking they should go into a leadership role is because they think they want to make more money, or they want to progress in their career, or they want to have maximum impact or influence, and they think that’s the only route to take. A lot of people that have that type of thinking are not necessarily … They don’t like managing people. They don’t like the job of being a manager. They don’t like the job of being somebody that has to do people management, but they think they want that position, because they think that’s the only position that is progressing them in their career and their life. I know even there was a company, I want to say it was Mars, but I don’t know if I’m wrong about this. But some kind of well known, high profile SaaS company, there was a whole blog post on having two career paths that you show to your employees that are equal in pay and in impact. One is like a people management path, and the other one is an individual contributor path. It’s like becoming a senior architect, versus being an engineering manager. Or having a career path where you can grow as an individual contributor, in influence and pay, in a similar, same way as a people manager, without having to become a people manager. And, how important it is to offer people two career paths in that way. I’ve seen a lot of people be terrible managers, but absolutely scream and shout that they want to get a chance to be a manager, because they want to grow, and because they want all these things. But it was clear from day one, this person doesn’t enjoy communication. This person doesn’t enjoy managing people. So the only reason they want this, is because they want to … Of course, they want to grow and change, but is this really a good investment for the company to do so? How do think about like … What’s the balance between spotting potential to nurture somebody into a management role, but also evaluating their motivation if they come to you and they say, “Hey, I want to grow in to a management role. This is my ambition in this business, or in the startup, help me do that.” How do you evaluate what their true motivations are, the reasons why they want to do this, and if those reasons are good or bad?



Hiten Shah: Oh man, it’s a tough one, because I think one of the key reasons behind this is like, “If I’m a manager, I’ll make more money.”



Steli Efti: Yeah.



Hiten Shah: That’s the most common reason why most people want to become managers, not because “I’d be good at it.”



Steli Efti: Yeah.



Hiten Shah: “Or I really want to stop writing code.” Or, there’s all these reasons. I think for me, I just dig in, hard, and say, “Hey, you want to be a manager? Why?” And then figure out what path makes sense for them, depending on that. Usually if it’s an engineer and they want to be a manager, it’s like well, there’s not actually that many engineering managers at most companies. There’s a lot more individual contributor type engineers. So then it’s like if your answer is you want to make more money, let me give you a path so you get more skills on engineering. Let’s say you go in to data science, or something that would give you a career path so that you make more money, but you’re still an individual contributor because you’re better at that. So to me, it’s about convincing somebody there’s still a path for what they want, even if it’s not management. You can tell usually, by telling them, “Let it not be me, but let me introduce you, or let’s have a manager come in here and tell you about what their day looks like. And, if that excites you, even though I think it probably doesn’t, we can consider it.” So those are the two tactics that I like to use, but I don’t think I have a generic answer. For me, it’s more of an approach, because there are a few different reasons why someone would want to be a manager. It’s not always just money.



Steli Efti: Yeah, the money part I think is easier to address. The part that is tough to address is when somebody says, “I know that I’m not the greatest people-manager right now, and I know that there’s some things about management that are intimidating to me or they don’t come natural to me, but that’s why I want it. I want to grow as a human. I want to grow as a person.” It sounds like a good reason, but it’s very unclear to me if this is the right reason. If this reason is going to be strong enough to sustain the pain of really changing as a human. Which is just in general, when people want to grow into a position that will require them to change as a person, I completely believe in change in humans. I’ve changed myself dramatically, so I completely believe in it. I love to see it, if it’s a positive transformational change, but I’ve also seen it enough times fail, that I know that just somebody rationally saying, “I’d like to change,” is not enough. “Oh, I’d like to lose weight.” That’s not enough. “I’d like to lose weight, and here’s a book about a diet.” Those two components are not enough to guarantee change. There’s a real commitment that needs to be so much stronger than the pain a person’s going to have to go through to change, that it’s hard to gauge. That’s the one reason for wanting to become a manager that’s for me, really tough to figure out. I’d have to spend a lot of time with the person, and understand how strong is that motivation, really. Is this like a nice idea, or is this a complete commitment that they have? It’s tough to tell, sometimes.



Hiten Shah: So I think the way I would say this is if someone’s really that adamant to learn, you teach them. I think a recommendation I was given in the workshop that we were in, in Boston, was The One-Minute Manager, that is a book.



Steli Efti: Yeah.



Hiten Shah: So you would start by having the person read that. “Okay, you want to learn? Read this.” If he can do the crap in here, do you know what I mean? Or read the equivalent book. The only reason I like that book is, it’s small and it’s short. Then go from there. So give them opportunities to really get into it, but don’t make your company depend on them being able to manage.



Steli Efti: I love that. All right, I think that we’re going to wrap this up on this end. If you guys have experiences nurturing people into management positions, hiring sole managers, the good and the bad, book recommendations, anything. We always love to hear from you. So shoot us an email at and or tweet at us. We just love to hear from you. The other day I was in a co-working space, and a lady knocked on the door, opened the door, and was like, “Are you Steli from the startup chat?” I was like, “Yes.”



Hiten Shah: .



Steli Efti: I’m at my laptop, working. She said, “Oh, I love the podcast. I listened to …” this that, and the other. We exchanged information. She’s a very successful founder, and runs a very interesting company. You know who you are, if you’re listening to this. We’re always excited to hear from you guys, so let us know. If you have any feedback or ideas, and make sure to go and give us a rating. Five stars and a review on iTunes. The more of those we get, the higher iTunes ranks us, so the more people get to discover the podcasts. Hopefully it’s going to be useful for, and valuable for everybody. All right, that’s it from us for this episode.



Hiten Shah: Bye.