This article is an excerpt from the Shortform book guide to "The Hard Thing About Hard Things" by Ben Horowitz. Shortform has the world's best summaries and analyses of books you should be reading.
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What are the benefits of giving inflated job titles to your employees? Should you use deflated job titles instead?
As your company grows, deciding on job titles will become important. Inflating job titles is one way to attract talent to your company. On the other hand, deflating job titles gives new employees the chance to recalibrate when they join you.
Continue reading for more information about inflated and deflated job titles.
A small startup doesn’t need titles, especially inflated job titles, but as you grow, titles will become more important for a few reasons:
- Employees want them to polish their resume. If they look for a new job, they want to be known as “Head of Sales,” not as “Sales Ninja.”
- The team needs to know who does what in the company and what the org chart looks like. This also helps outside partners and customers interface with the right team members.
How Lofty Should Titles Be?
You have control over the names of the titles in your hierarchy. How you name these titles, and how they match up to competitors in the industry, is up to you.
On one hand, Marc Andreessen supports inflating titles. Like compensation, a title is part of a job offer, but a title is free. Therefore, give people inflated titles—a Director at another company might be Executive Vice President at yours. It’ll be one way to attract talent to your startup, especially if you can’t compete on compensation.
In contrast, Mark Zuckerberg at Facebook supports deflated titles—Vice Presidents at other companies have to join as Directors or Managers. The benefits:
- Every new employee recalibrates when they join, and then have to rise to their original title through merit. This feels more fair to the team.
- Business departments tend to have inflated titles above their engineering counterparts, and he wants to make product and engineering the core of the company.
- He wants the org chart to be clear and meaningful. How does a firm operate if there are a hundred VPs?
Of course, Facebook has tens of thousands of employees and faces problems that your startup may not.
Enforcing Performance at Titles
The Peter Principle suggests that people are promoted to their “level of incompetence.” At that point, they can’t be promoted further, and they stagnate at that role. This is largely unavoidable because you can’t predict ahead of time how well someone will handle the promotion. However, the Peter Principle causes a few problems:
- A poor performer at a level is demotivating to everyone else at that level. If there’s a bozo at the Vice President level, all the other VPs will wonder how he got that job and why he deserves the same level.
- Everyone below that level will use the worst performer to ask for promotions. All the directors will look to the worst VP in the company and ask for a promotion once they exceed his performance.
To avoid the Peter Principle, be deliberate about promoting people only after they have the skills required of the title. (Note: In The Hard Thing About Hard Things, Ben Horowitz doesn’t explicitly discuss how to rid a level of poor performers, but the natural solution is to demote people who once had promise but now don’t meet the title’s expectations.)
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Here's what you'll find in our full The Hard Thing About Hard Things summary :
- What it was like to head a company through the dotcom bubble and subsequent burst
- Why failing is normal
- How to build a good place to work