“We need to do something for Jennifer. She’s critical to the business and she’s been so loyal since we started. We can’t lose her,” said the Manager to her CEO.
“Well, we don’t have much money and our investors won’t let us increase the option pool. Give her a fancy title. Titles are cheap,” the CEO responded.
This is a very common conversation in the startup world. Even CEOs of more mature, middle market companies often find themselves in these situations. Whether it’s a long-time employee demanding a promotion, or the CEO’s efforts to keep everyone happy, inflating titles is an easy way out. In fact, I’d be willing to bet most of you have been on either side of a conversation just like the one above. I know I’ve used titles as a negotiating tool in the past. I get it. Cash is king. Equity is sacred. Titles? They’re cheap…at least in the short-term.
If you’re an entrepreneur, or work with a middle market company, handing out fancy titles can be enticing. You don’t have time to devote to this kind of personnel hassle. You’re already spinning a dozen plates. You’re working your tail off and have to process thousands of bytes of information in order to make quick decisions. The last thing you need to do is spend cycles trying to determine whether or not to give Jennifer a new title!
But inflating an employee’s title beyond their actual role—not to mention beyond their actual skillset and expertise—is not doing your company any favors. Over-inflated titles are a real problem that can cause a number of issues downstream. As you’ll see in the examples below, they can (and likely will) have a negative impact on the company, the employee, and even their future employers!
The “he’s in over his head” example: At some point the required role is going to catch up to the employee’s title. More often than not, they aren’t able to grow into the title. As the company grows and it’s needs evolve, more is expected, and the consequences become much greater.
If you’ve been around high-growth companies you’re very familiar with the hypothetical example I wrote about in Who’s Your Mike?. The short version is that “Mike” is a good friend and became your bookkeeper because you trusted him implicitly and he took it upon himself to learn QuickBooks. As the company grew, he was promoted to Controller and ultimately Chief Financial Officer (CFO) because that was the next logical step and it made him happy.
But as the company grew, so did Mike’s responsibilities. Mike struggled to keep up with the demands of being a CFO in a middle-market company. He’s overwhelmed. He is in over his head but he doesn’t want to admit this or let his buddy down, so he works harder. But his effort doesn’t mean that he can negotiate that $20 million bank line or lead the acquisition you need so badly. Eventually the wheels come off completely, the bubblegum and duct tape fall apart and the camel’s back is broken. Mike is exposed.
Ultimately, it’s not Mike’s fault. He never had the skills or experience to manage these kinds of responsibilities, no matter how hard-working, loyal, or trustworthy he was.
The “what do we do with (fill in the blank)?” example: This one may strike a familiar chord. Lauren started out as your Office Manager in the early days. She worked her tail off, got things done, and can even complete your sentences! She did a great job and became invaluable to you—you’re lucky to have her! Over the years, you leaned on Lauren, and she showed you utmost loyalty. As a reward, you ended up promoting her to Director of Operations and then to VP of Operations.
This title worked for a while–until it didn’t. As you grew from $1 million in annual revenue to $5 million and ultimately $10 to $20 million, you brought in talent to help take you to the next level. You brought in a VP of Sales, a VP of Technology and a VP of Finance. Now, as you prepare for the next stage of growth, your leadership includes five leaders, including Lauren.
But Lauren, if we’re honest, is not a peer to these new leaders who have the experience, skill-set, and maturity to scale your organization. This is new ground for Lauren. She’s been the hardest worker, the most knowledgeable, and your right-hand person for years. The new reality scares Lauren, so she doesn’t play nice in the proverbial sandbox. She makes up for her lack of confidence by protecting her turf. She uses her title within the organization to drive her own agenda. She either tries to outtalk everyone in leadership meetings or she passive-aggressively agrees with others in the meeting and then uses subterfuge to undermine everything later.
So what do we do with Lauren? You can move her around the organization, shifting her responsibilities so she doesn’t have to deal with people. But she’s still a challenge. And now she feels like she doesn’t have a role. Her new title has pushed her past her skill-set and she’s lost.
The “I can’t take a step backward” example: In Austin, overinflated titles are a fact of life for those of us who spend a lot of time working with high-growth, middle-market companies. I can’t even begin to tell you the number of Controllers who are running around with CFO titles. By itself, this may not seem like a huge issue. But when you actually need a CFO, a Controller isn’t going to cut it!
Hear me out on this one. Since we discussed CFOs above, I’ll focus on sales roles for this next example. Let’s say you promote Bob, who is your best, and perhaps your only, sales person, into a sales leadership position. (side note: we don’t have time to discuss why this move often fails but suffice it to say that this scenario often means your best sales person is no longer selling and is trying to manage instead. You’re asking a sales person, who may suck at managing, to be your VP of Sales). It may take you a while to realize that Bob is simply not cutting it as a sales leader.
Since Bob is struggling in his new role, you suggest that he take a step back, or that you bring in additional help to lead the sales department. But there’s a problem—Bob has now convinced himself that he is a VP of Sales. He is accustomed to a higher base salary and he enjoys the title, the power, and the prestige that come along with it.
He gets recruited away. Your company may even be glad to see him go. Now the headache of having an underqualified, maybe even inept VP of Sales, is someone else’s problem. But the new company is infatuated with the idea of stealing a “key leader” from a competitor. They may even overlook some things in the interview process because this is such an obvious hire. A sales leader from our biggest competitor! What could go wrong?!?!
Actually, a lot can go wrong. It may take 90 days or it may take six months, but eventually Bob will be exposed at his new company. If no one is completely honest with him, he may bounce around to several other early-stage companies. After a few moves, Bob’s resume starts to look tarnished and he may even begin to lose confidence. How ironic. Confidence was the very trait that made him a good salesperson in the first place! Now he’s lost.
OK. Now you are convinced that title inflation is a problem. But how else can you reward a loyal performer who has been with you since the early days? I suggest that you get creative and consider any one of the following options:
- If they insist on a new title, create an appropriate title that falls short of the C-Suite. Maybe your Controller becomes the Senior Controller, or your excellent Administrative Assistant is groomed to become your Chief of Staff.
- Offer other incentives–things like more vacation days or flexible work hours.
- Agree on a Development Plan that allows them to take courses, attend conferences, or join professional organizations that will enhance their prestige and their skill-set.
- Have your HR people create job descriptions for future C-level positions that you will eventually need as the company grows. If your Controller insists that he should be promoted to CFO, ask him to compare his skillset to the list of requirements in the CFO job description.
Please think twice before you decide to hand out titles. A new title may seem like a quick and easy fix, but it is important to consider the downstream effects and consequences. It may sound like hyperbole, but title inflation is real. It can have severe effects not only on your bottom line, but also on the employee’s future and even their future employer. You aren’t doing anyone any favors by promoting your best employees beyond their skillsets. Let them excel at what they’re good at! Loyalty alone is not a reason for promotion.