What's the cost of not hiring an interim CTO?

TL;DR. The financial performance could be impacted if the company depends on the effective use of technology.

Even shareholders can be impacted

Let's wait 6 months and save money

I was working as an advisor to the CEO of a company which operated in a very competitive market: top 3 competitors offered nearly equivalent software solutions and nearly identical pricing model.

The current CTO resigned for personal reasons. The company started a retained search to find a new CTO. The executive recruiter (correctly) suggested that the search would not be easy: 4-6 months at least.

I suggested to the CEO that hiring an interim / fractional CTO would be a prudent decision. The CEO elected to wait and save money.

During the first 3 months: the retained search produced no viable candidates.

By the end of the 6 month period, 2 candidates were identified. Both appeared to have the right background for success.

2 marquis customers were lost

The company had 4 "must win" customers in the sale pipeline for over 9 months. 2 of these customers wanted to speak with the CTO about the future product roadmap, release schedules, references from existing customers (not all were glowing references).

After learning that the CTO left, these customers chose competitor's solution.

Direct revenue loss: in the $ millions over a 3 year period.

Indirect revenue loss because of inability to reference marquis customers (whose actions and decisions are observed by other companies and industry analysts): in the $ millions over a 3 year period.

4 senior software engineers declined to accept the offers

When the current CTO left, there were 4 senior software engineers in final stages of interviewing.

The last step in the interview process was a friendly lunch with the CTO: why this is a great company to work for, how the company fosters an innovative engineering culture, and a preview of major software engineering projects where new hires would play an important role.

Lunch was never scheduled.

All 4 candidates elected to accept other offers.

Several software engineers resigned

2 engineers had pending promotions which were delayed as a result of CTO departure. These engineers were the first to resign. One of them was working on refactoring a critical component. The other engineer was working on infrastructure-as-a-service project intended to accelerate deployments.

Both projects had to be delayed.

Other engineers felt a leadership void and resigned because a very attractive offer from another company with a clear roadmap and great CTO was difficult to ignore.

These engineers chose certainty over uncertainty.

The major release - expected by industry analysts - was delayed

The major release had two goals.

Correct many bugs reported by customers that represented 20% of the company's annual revenue.

Launch a highly competitive new product targeting potential customers.

The release was delayed but launched 4 months later.

Customers that represented 10% of the company's annual revenue lost confidence and departed for a competitor's solution.

Industry analysts - predictably - downgraded the company stock. The stock lost over 60% in 10 months.

The major release was finally launched. But was it good enough?

The release - predictably - was rushed through the quality engineering process.

Customers reported more bugs than in any other prior release.

Within the next 2 quarters, the company lost more customers and the stock price was nearing 75% decline from the peak.

The new CTO accepted the offer but did not succeed

The combined pressure of declining revenues, declining stock price, growing attrition in the engineering organization, and inability to balance product management demands with engineering capacity caused the newly hired CTO to fail.

The new CTO simply did not have the necessary experience to succeed in a very difficult operating environment.

The new CTO (whom I highly respect) approached the CEO and resigned.

Back to square one

The CEO asked me to lead as an interim CTO.

The retained search company agreed to find a new candidate at no additional cost.

Software releases where "one item is fixed while 10 others are newly broken" are securely in the past.

The company gained 3 new marquis customers.

Year-over-year growth projections have been exceeded for the first time.

The stock continues to recover.