13 Crucial Steps to Hire a CTO: Costs, Challenges
Discover a 13-step roadmap to hire the perfect CTO, understand costs and challenges, and learn why a fractional CTO might be your best choice.
Finding the right CTO is a complex and daunting exercise. It is not a straightforward hire.
You want a CTO who has strategic vision and tech skills but also aligns well with your company goals. Easier said than done!
The right hire will impact everything from product development to customer satisfaction, fostering innovation, operational efficiency, and financial growth.
Meanwhile, a poor fit can lead to misdirected tech initiatives and higher expenses, negatively impacting your financial performance.
How do you get it right? In this post, we’ll show you a proven 13-step roadmap to hire the perfect fit CTO. We’ll deep dive into the costs involved and the challenges you may face.
We’ll also explain why hiring a fractional CTO through Go Fractional might be your best bet.
Further Reading:
Find out
why you should hire a Fractional CTO
and how they can transform your company’s technology infrastructure.
Explore
what a Fractional CISO does, the benefits of hiring one, and where to find them.
When Should You Hire a CTO?
Deciding when to bring a CTO on board can be pivotal to your company's trajectory.
You need to bring in a CTO if you face any of these scenarios:
- You have a highly technical product, and you don’t have technical expertise.
- Your company needs a digital transformation involving a significant technology investment.
- Your software development team needs experienced technical leadership.
- You need expertise in assessing and implementing a new technology.
- You’re facing challenges in scaling technology infrastructure and integrating new solutions.
- Regulatory compliance regarding technology has become too intricate for you to handle.
It may also depend on which stage your company is in.
| Company Stage | You May Need to Hire a CTO When… | Early Stage/Startup | Your core product is tech-heavy, and your tech startup needs strategic technological leadership to develop and scale. |
|---|---|
| Growth Stage | Startup scaling challenges become complex. You need to hire dozens of engineers and an inspiring leader to attract the best tech talent and build a process to find and vet them. |
| Expansion Stage | You need to manage and integrate technology across new markets or product lines. You need to oversee large-scale technical operations and infrastructure. |
| Mature Company | You need a leader to drive tech transformation initiatives, pursue innovation, and explore new business models to stay relevant. |
Understanding these stages will help you bring in strategic leadership at the time when your company will benefit the most.
Now, what should you do to get the right tech visionary to lead your company's digital charge?
Read on.
A Proven Roadmap to Hiring a Qualified CTO: 13 Crucial Steps
The process of hiring a CTO is complex and nuanced, but you can navigate it successfully with a clear roadmap in hand.
Let’s go through the exact steps you need to take.
1. Define Your Business Objectives and Tech Requirements
The first step is to clearly define your business objectives and the tech capabilities that will drive that growth. You need a CTO whose vision aligns with your strategic direction.
So, pinpoint the areas where technology can amplify your business, such as streamlining operations, scaling product offerings, or breaking into new markets.
For example, if you want to dominate the fintech market, your ideal CTO is someone with a strong background in cybersecurity, regulatory compliance, and building or working with ledger systems.
Suppose your core business is developing a new app or software tool. You will need a CTO with a strong background in custom software development or app development, capable of guiding your software development team through the complexities of the process.
Defining your objectives and technology needs will also help you identify which type of CTO leadership best suits your unique needs.
The Four Types of CTO Personas
Broadly, there are four distinct CTO personas or archetypes, each offering specialized skill sets and perspectives:
- Customer Liaison: Acts as the bridge between the customers and your technical team and directly influences product development.
- Visionary Technology Innovator: Focuses on emerging technologies and collaborates with the CEO to shape the company’s long-term tech vision.
- Business Enabler or Strategist: Meticulously crafts the technology strategy to support the CEO's vision.
- Chief Operating Officer of IT: Optimizes tech operations for efficiency and ensures the robustness of the company’s technological infrastructure.
In a gist, clearly defined objectives will help you look for the right kind of CTO so that your tech leadership is perfectly tailored to your strategic vision.
2. Determine the Commitment You Need
Most companies initially lean towards the traditional notion of hiring a full-time CTO.
But thanks to today’s dynamic business landscape, many seasoned leaders prefer varied, project-based roles over full-time positions. This allows you to tap into their diverse expertise through part-time executive hires, like a fractional CTO, a freelance CTO, or an interim CTO.
You have to decide the commitment level based on the size of your business, budget constraints, and the intensity of the tech challenges ahead.
If you assume you need a full-time CTO without proper evaluation, you might miss the opportunity to capitalize on the flexibility and cost-effectiveness that, say, a fractional executive can offer.
And vice versa.
Here’s the difference between the two:
- A full-time CTO is a dedicated, permanent executive responsible for overseeing your company’s tech strategies with all the privileges of a standard C-suite employee. This means you incur a significant financial investment, including salary, benefits, bonuses, severance pay, and most likely a large amount of equity.
- On the other hand, a fractional CTO works part-time and can give you strategic guidance without the commitment of a full-time hire. You pay only for the services rendered without the traditional benefits package. They bring diverse experience and a fresh perspective, and you can scale up or down depending on your needs.
Where do you hire fractional CTOs from?
A company like Go Fractional can help you hire top fractional talent from a vast network of industry leaders hassle-free.
- Fractional CTO
- Advisor
- Fullstack
- Generative AI
Fractional CTO specializing in Generative AI, founder with 3 exits, expertise in medical and enterprise
Determining the level of commitment will ensure you get the leadership that aligns with your company’s operational dynamics and financial realities.
3. Define the CTO’s Responsibilities
The next logical step would be to define the responsibilities you need your CTO to take on and the skills required to realize these goals. A mismatch could lead to strategic missteps that fall short of your company's aspirations.
What Responsibilities Can a CTO Take On?
A CTO will typically play some or all of these roles:
- Oversee the development and delivery of products and features
- Reduce software development or app development time by making strategic decisions to optimize the engineering workflow
- Be accountable for internal tools and IT operations (In larger companies, this might be the CIO's role)
- Streamline DevOps processes to improve the efficiency of an engineering or development team to deliver features faster that scale efficiently in a secure environment
- Make strategic decisions about the tech stack to ensure project maintainability, scalability, and stability
- Lead a developer team in building a Minimum Viable Product (a.k.a. MVP development)
- Scale products efficiently and adapt to changing market demands
- Ensure rigorous quality assurance to maintain high standards in the software development process
- Track KPIs to measure and guide technology strategy and performance
- Detect security issues by maintaining a robust security posture
- Assist in funding and acquisition deals by providing technical due diligence and insight and headcount planning
- Manage the tech talent lifecycle and transition, including hiring, development, and succession planning
You must assess your candidate’s corresponding skills during the interview stage, weighing them against your business needs.
4. Determine the Ideal Experience Level and Background You Need
Aim to hire a CTO whose expertise aligns with the stage in which your company is in. Otherwise, it could stall your progress.
For instance, a tech startup entering the AI industry might benefit from a dynamic CTO who has successfully launched AI-driven products in a fast-paced startup environment.
However, an established multinational corporation needs a good CTO with experience in overseeing global IT operations, integrating diverse tech systems across different regions, and leading a huge development team.
Make sure your candidate’s experience level aligns with your company's current stage, future growth plans, customer and stakeholder interactions, and the technical expertise needed.
5. Craft a Clear Job Description
A vague job description can lead to a deluge of unsuitable candidates, wasting your time and resources.
To avoid this, your CTO job description should include:
- An overview of your company, its mission, values, and culture
- Detailed responsibilities
- Required background and work experience
- Desired skills and personal attributes, such as strategic vision, communication skills, and adaptability
- Clear expectations of the impact of the CTO role on the company
- Education requirements and certifications
- Salary range (salary transparency can increase the CTO candidate response rate)
This will get you a targeted pool of applicants who are both qualified and potentially aligned with your company’s vision.
6. Find Potential CTO Candidates
If you don't know where to find potential candidates or don't look in the right places, you may end up with a limited and misaligned set of candidates. This will prolong the hiring process and potentially lead to a compromise on quality.
So, what are the best avenues to find a CTO candidate?
These are a few methods you could try:
- Look for a senior software engineer/developer or a technical team lead in your company who’s capable of stepping up to the next level.
- Get referrals from your network.
- Reach out to established CTOs or engineering leaders.
- Outsource it to fractional executive talent providers like Go Fractional.
- Post your requirements on job portals like Angel.co or internal job boards via ATS such as Greenhouse or Lever.
- Get help from recruitment agencies or headhunters.
- Hire a fractional head of talent to help lead a search.
- Look for a technical director and similar profiles on social media (Linkedin, Twitter).
- Leverage CTO communities online and by attending events (CoFoundersLab, Indie Hackers, technology events like hackathons).
But remember that most of these routes can be time-consuming and complicated.
For instance:
- Hunting on job sites or LinkedIn means you must vet numerous candidates yourself.
- Referrals are great, but they may narrow your options too much.
- Your connections from industry conferences needn’t be actively looking for new jobs.
In contrast, talent providers like Go Fractional specialize in pre-vetting candidates for CTO roles, ensuring you find the perfect match.
- Fractional CTO
- Founder
- Fullstack
- Growth Engineering Leader
Sold company to Greenhouse, first mobile engineer at Compass, 3x founder / CTO
7. Conduct an Interview
If candidates are not interviewed thoroughly, you risk missing key insights about their leadership skills, problem-solving abilities, and cultural fit, which are critical for such a high-level role.
A well-structured interview process should include a mix of behavioral, situational, and technical questions.
You need to ask questions on:
- Leadership skills and team management
- Technical skills and software development architecture
- Cybersecurity and compliance
- Project management
- Quality assurance and issue detection
- Stakeholder, vendor management, and communication skills
- Budget management
- Cultural fit
What questions should you ask?
Explore the candidate’s technological prowess and decision-making skills using this curated list of Technical questions.
Also, assess their soft skills using these questions on Leadership Skills and Emotional Intelligence.
A well-executed interview will give you a more nuanced picture of a candidate, leading to a more confident hiring decision.
8. Run a Technical Assessment
Without this step, you’ll rely solely on resumes or LinkedIn profiles. Let's face it: that doesn't always tell the whole story when dealing with the real-world nitty-gritty of tech issues.
The screening tests should be tailored to your company's tech stack and the challenges your chief technology officer will likely encounter. Mix in tech, non-tech, case-based questions, and live coding sessions.
You’ll get a complete picture of each candidate's tech capabilities, helping you make a well-informed hiring decision.
Now, if you don’t have the bandwidth or if you don't have enough staff to screen the candidates, bring in a technical advisor or a trusted resource. You would need someone highly skilled with a proven track record – like a fractional CTO from GoFractional – to help with the search.
- Fractional CTO
- Mobile
- Fullstack
- Founder
Fractional CTO and Engineer who built core product features at Spotify
9. Do a Thorough Background Check
Always run a detailed background check before sealing the deal with your future chief technology officer.
These are a few steps you should take:
- Review LinkedIn profiles against resumes for consistency in employment history and achievements.
- Conduct in-depth reference checks with previous employers and other connections (back channel when possible) to gather insights on teamwork and leadership qualities.
- Reach out to industry contacts for informal feedback.
- Review published work or software development project contributions to evaluate reputation and work ethic.
Remember, background checks are crucial to safeguard your company, ensuring your chief technical officer is as trustworthy as they are talented.
10. Request a 30/60/90-Day Strategic Plan
Asking candidates to present a plan for their first 30, 60, or 90 days in your company will show you how they plan and prioritize for the short term. Without this step, you might miss out on understanding their operational and strategic mindset.
A 30/60/90-day plan should include:
- Initial assessment of operations
- Review of current technologies and processes
- Short-term goals, strategy, and implementation plans
- KPIs
- Priority projects and initiatives
- Risks and management approaches
- Resource and budget planning
- Feedback mechanisms
- Plan to integrate with the leadership, engineering or development team, and existing company processes
A well-crafted plan indicates the candidate's problem-solving skills and how they plan to navigate the initial months on the job. This lays the groundwork for what could be a successful CTO tenure.
On the other hand, an ill-made plan will reflect a poor grasp of how your company works, a misfit with your work culture, and ineffective decision-making.
This will help you make a more informed hiring decision and disqualify unsuitable candidates immediately.
11. Make an Offer
This stage involves presenting the selected candidate with a job offer. This has to be handled carefully, or else you could lose an ideal candidate to competing offers.
Craft an offer that's competitive and aligns with the candidate's expectations, encompassing salary, benefits, bonuses, and the role's growth potential.
A well-formulated offer is key to securing a top-tier chief technology officer, setting the stage for a mutually beneficial and productive partnership.
12. Close the Offer
Closing an offer is a critical step that many companies may overlook.
During this phase, have your team and board members send personalized emails to the candidate about how excited they are about the potential collaboration. Extending a lunch or dinner invitation can add a warm touch as well.
It demonstrates a welcoming company culture and reinforces the candidate's value and potential impact within the company.
This may significantly influence the candidate's decision and potentially seal the deal for you.
13. Sign a Contract
After the candidate accepts your offer, you need to formalize the agreement legally with a contract. This step must be managed carefully to avoid misunderstandings about the role or compensation.
Ensure the contract clearly outlines these elements:
- Job description and responsibilities
- Salary and compensation
- Bonus structure or profit-sharing (if applicable)
- Stock options or equity details (if applicable)
- Benefits (health insurance, retirement plans, etc.)
- Leave policies
- Confidentiality agreement
- Non-compete and non-solicitation clauses
- Intellectual property ownership
- Termination conditions and severance
- Relocation assistance (if applicable)
- Clauses related to work permits (for non-local hires)
- Expense reimbursement policy
- Work hours and flexibility options
Both parties then need to review the contract thoroughly, possibly with legal counsel.
A well-executed contract sets a solid foundation for a transparent working relationship, enabling the chief technology officer to integrate smoothly into your company.
Your next logical question could be:
What Is the Cost of Hiring a CTO?
The compensation package of a full-time CTO would include these elements (the percentages indicate their approximate contribution to the total):
- Base salary: 62.8%
- Bonus: 15.9%
- Social Security: 3.2%
- 401K/403B: 2.2%
- Disability: 1.6%
- Healthcare: 1.8%
- Pension: 2.8%
- Time Off: 9.7%
Source: Salary.com
The median base salary for full-time CTOs in the US, for instance, is around $200,000 a year.
But, this could vary by industry, company size, years of experience, and other factors.
Let’s see how the base salary and total compensation differ by company size:
| Company Size (No. of Employees) | Average Base Salary of a CTO in the US (2023) | Approx. Total Compensation (Assuming base salary is 62.8% of it) |
| 1-10 | $180,500 | $287,420 |
| 11-50 | $193,870 | $308,710 |
| 51-200 | $205,000 | $326,430 |
| 201-500 | $258,260 | $411,240 |
| 501-1000 | $286,260 | $455,830 |
| 1000+ | $244,200 | $388,850 |
Source for base salaries: BuiltIn
Apart from this, companies also offer equity or stock options, which is a huge portion of the package. Depending on your company's growth stage, the candidate’s seniority, and other factors, you will have to offer an equity-to-salary ratio of up to 75%. Based on the median salary of $200,000 that would mean an average equity package of $150,000.
If the company does well, the equity will usually increase 3x-5x over four years.
Here’s the typical ratio for venture capital-backed companies in different growth stages:
- Early stage startup (Seed): 57%
- Growth stage (Series A & B): 47%-54%
- Scaling stage (Series C+): 32%
Source: CTOCraft
And, this would be the equity-to-salary ratio based on the candidate’s seniority:
- VP: 75%
- Senior: 50%
- Junior: 20%
Source: Almanac.io
Besides, you’ll also have to factor in these one-time and recurring costs:
- Signing bonuses
- Recruitment fees or hiring costs
- Relocation expenses (if applicable)
- Training and onboarding costs
- Technology and equipment expenses
- Legal and contractual costs
- Severance package (if applicable)
- Ongoing professional development costs
What Are the Costs If You’re Hiring a Fractional CTO?
The costs would be significantly lower.
For example, at Go Fractional, we offer monthly retainers with prices ranging from $10,000 to $25,000 a month ($120,000 to $300,000 a year.) We charge the candidates 20% for all sales and administrative services.
This fee structure may vary based on time commitment, technical expertise, work experience, and other factors. But you won’t have to worry about any additional costs.
- Fractional CTO
- Compliance
- Security
- Product
Experienced CTO and CPO focused on entrepreneurial investment in tech advancements and delivering unique, innovative products.
Now, you must also know that a CTO hiring process comes with a few hurdles.
3 Common Challenges in Hiring Competent CTOs
Hiring a chief technology officer presents unique challenges, each significant in shaping the future of your company's technological direction.
- Hard to Find Quality Talent: Finding top-tier talent with the right technical skill set and visionary leadership can be tough. This could extend your search period and may require extra effort and resources.
- High Salaries: Full-time executives come with a hefty price tag. Budgeting for a full-time CTO position could mean reassessing financial priorities and making a significant investment in leadership.
- Trust Issues: Building trust with potential CTO candidates can be challenging when your company is a new startup or isn't widely recognized. You may need to sell the startup CTO role harder and put extra effort into showcasing your company's vision and growth potential.
What if you can rely on Go Fractional to solve all these issues?
We’ll tell you how.
Hire a Top-Notch Fractional CTO Easily Through Go Fractional
Through Go Fractional, you can easily discover top, pre-vetted fractional CTOs from our network of industry leaders - at a fraction of the cost of hiring a full-time chief technology officer.
Here’s how it works:
- You connect with us to start getting introduced to our candidates/members.
- We'll make recommendations based on your specific needs, including private members who aren't listed on the website.
- Schedule time and align with members on deliverables, timeline, price, and other details.
- Introduce the member to your team to ensure a cultural fit.
- Our members will share a detailed proposal outlining the engagement for you to review.
- After reviewing and approving the proposal, you can choose a start date, and we'll send contracts based on the details.
- We’ll send you one monthly invoice at a fixed price for each member. (Just one invoice, no matter how many members you work with.)
We'll continue to check in with you and the member once a month to make sure it's working well.
- Fractional CTO
- Fullstack
- Machine Learning
- Advisor
Founded Knock.com - pre-IPO, $2 billion valuation and raised ~$650 million, interested in CTO/chief architect roles
Hire Fractional CTOs to Turn Tech Potential into Business Success
Hiring a great CTO is not just about filling a high-ranking position. The process is complicated and has to be a blend of rigorous evaluation with strategic foresight.
While a full-time CTO is a default approach for many companies, choosing a fractional CTO through Go Fractional offers significant advantages. It gives you access to top-tier technology expertise and strategic flexibility while optimizing costs, making it a smart choice for your company's future.
So, if you’re ready to reap the benefits of hiring a fractional CTO, contact Go Fractional right away.
