Ben Horowitz, the writer of this guest post, is co-founder and partner of Andreessen Horowitz. He was co-founder and CEO of Opsware (formerly Loudcloud), which was acquired by HP, and ran several product divisions at Netscape. He serves on the board of companies such as Capriza, Foursquare, Jawbone, Lytro, Magnet, NationBuilder, Okta, Rap Genius, SnapLogic and Tidemark. Follow him on his blog and on Twitter @bhorowitz. 

“I move onward, the only direction
Can’t be scared to fail in the search of perfection”
– Jay-Z, “On to the Next One”

As CEO, you know that you cannot build a world-class company unless you maintain a world-class team. But how do you know if an executive is world-class? Beyond that, if she was world-class when you hired her, will she stay world-class? If she doesn’t, will she become world-class again?

These are complex questions and are made more complex by the courting process. Every CEO sets out to hire the very best person in the world and then recruits aggressively to get him. If he says yes, she inevitably thinks she’s hit the jackpot. If I had a tattoo for every time I heard a CEO claim that she’d just hired “the best VP in the industry,” I’d be Lil’ Wayne.

So we begin with a strong bias that whomever we hired must be world-class even before performing one day of work. To make matters worse, executives who start off world-class often deteriorate over time. If you watch sports, you know that world-class athletes don’t stay world-class for long. One day, you are Terrell Owens and the next day you are Terrell Owens. While executives don’t age nearly as fast as athletes do, companies, markets and technology change 1,000 times faster than football. As a result, the executive who is spectacular in this year’s 100-person startup may be washed up in next year’s version when the company has 400 people and $100 million in revenue.

The Standard
The first thing to understand is that just because somebody interviewed well and referenced checked great does not mean she will perform superbly in your company. There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck.

You must hold your people to a high standard, but what is that standard? I discussed setting this standard in “Old People”. In addition, keep the following in mind:

• You did not know everything when you hired her. While it feels awkward, it is perfectly reasonable to change and raise your standards as you learn more about what’s needed and what’s competitive in your industry. 
• You must get leverage. Early on, it’s natural to spend a great deal of time integrating and orienting an executive. However, if find yourself as busy as you were with that function before you hired or promoted the executive, then she is below standard.
• As CEO, you can do very little employee development. One of the most depressing lessons of my career when I became CEO was that I could not develop the people who reported to me. The demands of the job made it such that the people who reported to me had to be 99% ready to perform.  Unlike when I ran a function or was a general manager, there was no time to develop raw talent. That can and must be done elsewhere in the company, but not at the executive level. If someone needs lots of training, she is below standard.

It is possible to take the standard setting too far. As I discussed in “The Scale Anticipation Fallacy”, it’s not necessary nor is it a good idea to evaluate an executive based on what her job will be two years from now. You can cross that bridge when you come to it. Evaluate her on how she performs right here and right now.

On Expectations and Loyalty
If you have a great and loyal executive, how do you communicate all this? How do you tell her that despite the massive effort and great job she is doing today, you might fire her next year if she doesn’t keep up with the changes in the business?

When I used to review executives, I would tell them: “You are doing a great job at your current job, but the plan says that we will have twice as many employees next year as we have right now. Therefore, you will have a new and very different job and I will have to re-evaluate you on that job. If it makes you feel better, that rule goes for everyone on the team including me.”

In giving this kind of direction, it’s important to point out to the executive that when the company doubles in size, she has a new job. This means that doing things that made her successful in her old job will not necessarily translate to success in the new job. In fact, the No. 1 way that executives fail is by continuing to do their old job rather than moving on to their new job.

Finally, what about being loyal to the team that got you here? If your current executive team helped you 10X your company, how can you dismiss them when they fall behind in running the behemoth they created? The answer is that your loyalty must go to your employees—the people who report to your executives. Your engineers, marketing people, sales people, finance and HR people who are doing the work. You owe them a world-class management team. That’s the priority. [Billboard.biz]