The players offer their best protestations. "Some of my competitors say I'm just buying these executives," says David Beirne, the headhunter. "I laugh at that. It's not about money. Maslow's hierarchy of needs has already been satisfied." But it's simply difficult to imagine executives crossing the entrepreneurial Rubicon without the lure of such sums on the far side. Concedes Mandl, "If the equity piece had not been of significant value, then this would not have made sense."
Whatever the reasons Mandl and his ilk are changing jobs, the bigger question might be why anyone would want them to. Does hiring these executives make any sense?
At first blush, recruiting someone of Alex Mandl's stature would seem a bit like hiring Ken Griffey Jr. to bat cleanup for the Rotary Club softball team. Or getting Eric Clapton to play at your son's bar mitzvah. But then, we're living in accelerated times. This is the era of the superstart: companies, backed by a hot technology and investors with deep pockets, that promise to vault from obscurity into domination in a matter of years or even months, splashing into America's ever-willing IPO market. These superstarts, the logic goes, require superstar managers. Managers who can tame the start-up chaos. Managers who lend the enterprise credibility on Wall Street. Managers who won't be out of their depth as the company rapidly attains scale. If those managers happen to have spent their careers patiently working their way through the ranks of a colossal, steady-state organization, hey, no problem. Management is management, right?
"Poppycock," says Bill Unger, a general partner at Mayfield Fund, a leading Silicon Valley venture-capital firm. "That's absolute, utter trash."
Unger isn't shy about expressing his belief: corporate executives are singularly unfit to run the sort of early-stage companies Mayfield backs. "We might let somebody else hire them and let them decompress for a few years, then maybe hire them at their next job change." But generally, Unger says, "we've avoided them like the plague."
Even David Beirne, the headhunter who has done so much to lure executives into entrepreneurial roles, is sometimes dubious about his quarry's suitability for the job. "I think," he says, "there are very few who can make the transition successfully."
So what pitfalls await these crossover executives? For starters, they can feel like managers with nothing to manage. At a pip-squeak start-up, the tools of the professional manager's trade--issuing memos, instituting procedures--have little relevance and, indeed, can even be counterproductive. Notes Compaq émigré Ross Cooley, "A lot of the solutions that you bring from big companies can really be overkill at small ones." Furthermore, executives accustomed to slick presentations from their 200-employee technology staff must now plunge their hands deep into the gritty detail. For Malik Khan, a former Motorola executive who now runs tiny Sitara Networks, the comedown wasn't easy. At one point a colleague found him standing bewildered over a fax machine. Explains Khan, "I had not actually faxed a document myself before."
Another, less obvious challenge is more psychic than practical: the need to cope with sudden ego deprivation. "People who just months before would have given a king's ransom to kiss my ass wouldn't return my calls," says Joe Morrison, a former Mattel executive vice-president who now runs his own toy company. Even employees won't kowtow the way they used to. Says John Sculley, the former Apple Computer chief who now guides a handful of small high-tech start-ups: "The concept of 'boss' is very different. You have to prove yourself to your organization on a regular basis--that you are there because they want you to be the boss and because you're just another function in making the system work."
Added to those indignities are the terrible physical deprivations. "Like when you get into the backseat of your car and it doesn't go, because you don't have a driver anymore--the little things like that," says Joseph Nacchio. "Every time I have to drive into Manhattan to take a meeting instead of taking the helicopter, it really brings it home to me."
The problem, of course, is not that corporate executives are constitutionally incapable of driving themselves to work in the morning. Rather, it's that problems arise when, to satisfy their substantial ego requirements, they build cushy infrastructures their fledgling businesses cannot support, or insist on swinging for the fences in search of a commercial home run--both of which former Lotus boss Jim Manzi was accused of doing during his ill-starred sojourn at Nets Inc., which declared bankruptcy last May.
But what can most easily trip up the small-company neophyte, what's most likely to spell commercial disaster, is the failure to grasp a simple concept: cash flow. Says Joe Morrison: "At Mattel, money didn't really mean anything. It was very abstract. I don't think I ever saw a check." Hardly good preparation for life in a start-up, where a CEO often needs to worry about what hour a check will arrive. "In a big company, what you manage to is profits," says Bill Krause. "In a small company, what you manage to is cash." Krause was an executive defector before it was fashionable to be one, leaving a senior position at Hewlett-Packard in 1981 to run a four-person start-up called 3Com.
"None of these executives have ever had to manage cash," says Krause. "When I was at Hewlett-Packard, I could go around the world-- around the world--without a penny in my pocket. I'd arrive at the airport and get picked up by a minion, put in a car, and taken to a hotel, all without removing my wallet." That obliviousness to cash blindsided Krause during his early days at 3Com. The company raised its first round of venture capital in February 1981. It was supposed to last two years, but Krause made what he says is a classic big-company-man error: overestimating near-term customer demand. "You simply assume sales will automatically come," he says. "So you build up this huge organizational infrastructure, and you haven't sold anything yet!" He bulked up the company to 30 employees to contend with the expected gush of revenues. It didn't come. By Christmastime, the company's coffers were empty, and Krause and 3Com founder Robert Metcalfe had to plunder their personal bank accounts to meet payroll.
