Do Job Titles Matter?

After 37 years in the tech industry, I have become cynical of job titles and companies who have an abundance of lofty job titles and minimal revenue. I often meet early stage software companies with a few dozen employees, yet their executive ranks are filled with a CEO, COO, EVP of Sales, CMO and CTO. My first question to them is what are they going to do when they reach a few hundred employees and the requirements of these “C” level positions have outstripped the experience and capacity of the current employees who hold these titles.

Unfortunately, too often the answer is firing that person, but it doesn’t need to be this way.

One of the challenges of a successful early stage company is that the skill and experience demands of that rapidly changing start-up is evolving faster than the capability of employees to keep up. First, a company is small and only requires smart people with a couple of years of experience. In three years, the successful company has grown and the same role requires someone with ten years of experience. Yet, it is not realistic to expect that employee to have gained eight years of experience in the past three years. The math just does not work.

In the enthusiasm of the early start-up phase, and often because of lack of money for large salaries, senior level titles are provided in lieu. Candidates think this is a great trade-off because they receive an impressive title on their resume early in their career. Unfortunately, they are not fooling anyone and this often backfires on them later.

Down the road, when their title has outgrown them, the company has two choices: change their title (which is often viewed as a demotion) or terminate their employment and replace them with someone more experienced. Under either scenario, both the company and the employee lose.

Advanced job titles also don’t help on a resume. Just because someone was a “C” level or VP in a start-up or early stage company, that doesn’t translate into a similar title in a larger organization. As a result, a young person will often go from an executive level title in a start-up to an individual contributor role or manager title when they advance into a bigger job in a bigger company to build out their skills or experience. (Danger Alert: Provided that is if their ego will let them accept the smaller title, even when it is a larger job with greater responsibility and more pay).

A company also devalues a job title and devalues their brand by over-titling. I worked with a client that had been purchased in a distress sale by a private equity firm and was in the middle of a turn-around. I was shocked when I discovered that the company, which had 3000 employees, had over 1000 people with job titles of Vice-President or higher, including five divisional presidents reporting to the CEO. Every time that I tell this story, people laugh with derision towards that company.

The problem with over-titling is not limited to start-ups. CEO’s of later stage companies regularly tell me they wish that hadn’t promoted someone into a “title” because it is now a blocker or unwanted issue that needs to be dealt with before the CEO can grow their organization.

So what is the answer. My belief is if you are an early stage company, limit your titles and get rid of your egos. You probably don’t want “ego” and “entitlement” as two words associated with the company culture that you are trying to build. Use simpler more descriptive titles such as Head of Sales, Head of Marketing or Head of Development when you are early stage, then transform to Director titles as you grow, and eventually create VP’s when your size warrants it.

Doing this may make it harder to hire today, but trust me, it will save a ton of pain and broken friendships down the road when you have to deal with the unearned title.