“If you are what you say you are, a superstar
Then have no fear, the camera’s here…”
- Lupe Fiasco, Superstar
I used to be confused about how decisions were made at my company. People were praised or judged seemingly without cause or relation to what I thought was important. It turned out the right mental model was understanding how leaders make decisions in the context that they’re incentivized to do so. Once you can approach issues from this mindset you’ll have a better understanding of how and why decisions are made, will be better able to make decisions for your own career and should be able to predict outcomes across your organization.
“That new HR person doesn’t add any value.”
“Yet another accountant when we’re a month behind on the roadmap?”
“At this point, we only need to hire engineers, everything else can wait.”
I’ve heard variants of these comments in every company I’ve worked for and it betrays a fundamental lack of understanding of how an organization is structured and the underlying incentives behind it.
There are only two types of jobs in a company, Stars and Guardians. Stars create value. Guardians preserve value. Value is direct. Value is what creates revenue and profit. Both Stars and Guardians are incredibly important to an organization, but have different incentives.
A Star generally has differentiated performance, i.e the top Star might create 10x more value than a lower performing individual. If a Star is doing a great job, you notice. A Star is generally considered higher status within a company. Star departments in tech companies are generally Product, Engineering, Sales and Marketing.
Guardians are different. Guardians preserve value for the company. If a Guardian does an excellent job, you shouldn’t notice their work. Nothing “blows up”. The things that happen are handled without any fuss. The company is protected. Guardians are generally considered lower status within a startup. Guardian departments in tech companies are typically Legal, Finance, Accounting, and HR.
The specifics of this vary within an organization and over time. Product and Engineers working on internal tooling are often perceived as more Guardian than Star. Technical Recruiters can be viewed as more Star than Guardian if they are bringing on Star positions. Finding the right balance of Stars and Guardians is important. When a company is just starting out, you need to have functionally all Stars, as there is no value to worry about. As a company grows, Guardians start to be hired, since there’s now value to protect. This is typically resented by Stars.
A Star job typically involves more risk than a Guardian job on multiple accounts. A Star’s performance is evaluated regularly, and, in a competent organization, poor performance leads to termination. You can see this in a Sales department, but applies to Star roles fairly uniformly. Further, if a company isn’t doing well, Star jobs are typically the first to be laid off, even if there is strong individual performance. This may be counter-intuitive, if a company isn’t creating enough value, why would they lay off the ones who are doing so? The reason for this is if a company is failing, the people who are supposed to be creating value are not. Further, these roles are typically higher profile and higher compensation, and thus are easier targets for an executive team trying to hit a P&L target.
As companies grow, Guardians gain more status, and accordingly compensation. The CFO of a company is typically the second highest paid person after the CEO. When you’ve created a lot of value, it’s important to keep that value. As companies get larger, what used to be acceptable risks when the stakes were low, become critically important to manage. The consequence of this is if you’re looking for higher compensation as a Guardian, you should consider working for a later stage, more well established company. As companies get larger, what once were considered Star positions can change into Guardian roles. Think of the risk/reward for running marketing for CocaUniProct or running engineering at a FAANG. Your main job is to not break anything.
You can be incredibly successful in a career as a Star or a Guardian. In particular, Guardians who join later stage startups can capture nearly all of the upside of a Star without the performance risk. My personal preference is for a Star role. I find them more fun and rewarding, and I enjoy the higher status that goes along with them. In these roles though, is embedded performance risk. Sales reps that don’t hit their quotas aren’t long for the world, regardless of other factors in the company. Conversely, Guardians will be around until the company is in real trouble. However, the Guardian role is important, particularly at the inflection point many startups hit. There are countless stories of startups imploding because their financials were blatantly wrong, or they took on immense legal risk in a silly manner. Either path can be rewarding and impactful, my recommendation is to consider the purposes and incentives underlying each and understand what your role is within a company.
Thanks to Brianna Mariolle, Julian Shapiro and Maddie Dixon for reading drafts and sharing their feedback.